What's a good cost per lead for Facebook ads?

A good cost per lead is the one your business can afford, not a number from someone else's account. Work it out from what a sale is worth to you, your margin and how many leads become customers. Then judge your ads on what a customer costs you, not what a form fill costs you.

I get asked this all the time. The question is fair. The answers people find mostly are not.

Why the benchmark answer lets you down

When I tested what ChatGPT does with this question, it went looking for an industry benchmark table and quoted that back. I read the pages it leaned on. The most-cited one used US data in US dollars. Another never said what currency it was in. A third was built from one agency's own small client list and said outright that it did not track bookings.

None of that makes those pages useless. It makes them the wrong tool for this job. A benchmark tells you what other people paid for a form fill. It cannot tell you what you can afford to pay, because it does not know your prices, your margins or how well you close.

How to work out your own maximum cost per lead

You need three numbers from your own business. Not estimates from a forum. Your numbers.

1. Gross profit per job. What is left from an average sale after the cost of delivering it. Example: a $6,000 job that costs $4,200 to deliver leaves $1,800.
2. How much of that you will spend to win the job. This is a business decision, not an ads decision. Example: you decide a third of that profit, $600, is fair to win the job.
3. Lead to customer rate. Out of every lead that comes in, how many become paying customers. Example: 1 in 5, so 20%.

Multiply the profit per job by the share you are willing to spend. That is what you can pay for a customer. Multiply that by your lead to customer rate. That is the most you can pay for a lead.

Here is the maths with those example numbers, in Australian dollars. $1,800 profit, a third of it spent to win the job, is $600 you can pay for a customer. $600 at a 20% lead to customer rate is $120. That is the most you can pay for a lead. Leads coming in at $90 leave you room. Leads at $150 lose you money on every job, however good they feel. Your numbers will be different, so run your own.

If you do not know your lead to customer rate, stop here. That is the real problem, and no ad setting fixes it.

Judge the ads on what a customer costs, not what a lead costs

Cost per lead is the easiest number to see, so it gets all the attention. It is also the number that lies the most.

A cheap lead that never answers the phone is expensive. A lead that costs more but books and pays is cheap. I show why a more expensive lead can be the cheaper one in this video.

The only way to see the difference is to follow each lead past the form:

• Did we reach them?
• Did they book?
• Did they show up?
• Did they buy, and for how much?

Put those in your CRM and work out what each customer cost you. On the accounts I run, this is where most decisions change. Here's a simple example of how. Say Ad A brings in leads at $40 and Ad B at $75. Ad A looks like the winner. But 1 in 20 of Ad A's leads buys, and 1 in 5 of Ad B's does. That puts Ad A's customers at $800 each and Ad B's at $375. The expensive ad is the cheap one.

When a cheap cost per lead is a warning sign

A sudden drop in cost per lead feels like a win. From what I've seen, cheap leads often come with worse show rates. Check these before you celebrate:

• Contact rate fell. More people filling in the form, fewer picking up.
• The form got too easy. No qualifying questions means anyone can submit. The form should stop the wrong people before they get through.
• The ad stopped filtering. If the ad is vague about who it's for, the wrong people fill in the form. Lead quality is decided before the click.
• The offer drifted. A freebie or a discount pulls people who want the freebie.

If cost per lead drops and cost per customer rises, the ads got worse, not better.

Why cost per lead moves, and what to do about it

People want one cause. There are too many moving parts to pin it on one with any confidence: the ads, the offer, the season, the auction, your follow-up.

The fix is the same either way. Keep launching, testing and improving new ads. Judge each ad over four days, not daily, and don't fiddle with budgets in between. I go through this in this video on why cost per lead goes up.

What to do this week

• Write down your gross profit per job and your lead to customer rate. If you cannot, fix that first.
• Work out your maximum cost per lead with the formula above.
• Add booked and sold stages to your CRM so every lead can be traced past the form.
• Review your ads on what a customer costs. Use cost per lead as a smoke alarm, not a scoreboard.

FAQ

Is there one good cost per lead for Facebook ads?

No. A good cost per lead is the one your numbers can carry. Two businesses in the same industry can have very different ceilings because what a sale is worth, their margins and their close rates are different.

Why is my cost per lead going up?

There are too many moving parts to blame one cause with confidence. What fixes it is the same either way: keep launching and testing new ads, judge them over four days, and check what a customer costs, not just a lead.

Should I judge my ads on cost per lead?

Not on its own. Cost per lead tells you what the form fill cost. It says nothing about whether that person answered the phone, booked or bought. Judge ads on what a customer costs you, and use cost per lead as an early warning only.

Are industry benchmarks for cost per lead worth looking at?

Only as rough context. Check where the data comes from, what currency it is in, how many accounts it covers and whether it measures anything past the form. Most published benchmarks stop at the lead.

How do I work out my maximum cost per lead?

Take the gross profit on an average job. Decide how much of it you will spend to win the job. Multiply that by the share of leads that become paying customers. That number is your ceiling.