Launching a new funnel or offer can be tricky. If you’re Facebook Ad budget is too small, the daily Ad spend might be lower than the average cost required to produce a single lead. So you nickel-and-dime your money away. If necessary, set the daily Ad spend higher as a test burst. This will give the Facebook algorithm a fighting chance to produce a result.

Let’s say you’re a real estate or mortgage broker looking to generate leads thru pay-per-click Ads like Facebook; or perhaps you’re a similar local business trying to do the same.

Let’s also assume that you’ve completed a value proposition step to uncover your offer’s unique selling proposition and specific target audience. (if not, don’t proceed with Ads)

You excitedly prepare to run Facebook Ads, and you’re diggin’ deep into your pocket to invest $1,000/month in Ad spend.

Your ultimate goal: to generate leads.

You want prospects to get in touch or form-fill their name, email and phone number so you can follow-up with them and convert the lead into a conversation… and hopefully, a sale.

So here’s the three key performance indicators to track in this scenario:

  1. Average cost per lead (CPL); and
  2. Lead response rate; and
  3. Average client conversion rate (close rate)

Cost per lead is pretty self explanatory: It’s how much you spend divided by the number of prospects that form-fill.

Assuming you can even generate the lead in the first place, the lead response rate would be the percentage of leads that now reply to your follow-up text, email or call. 

And obviously, your close rate will depend on how good you—or your team—is at getting the prospect to say ‘yes’ to your offer. As you know, not all salespeople are created equal.

But here’s the problem that few mention regarding the $1,000 per month Ad spend budget.

Take residential real estate for example.

It’s not uncommon, depending on location, for average-cost-per-lead (CPL) to be around $35.

(perhaps more in competitive high-end home markets)

Depending on how good the salesperson is, the average client conversion rate is 5% – 10% (the close rate on who became clients)

Now it’s basic math.

If you divide $35 per lead into $1,000/month, you get 28.5 leads who filled your contact form.

Let’s assume that your lead response rate is good: at 55%.

That means, that of the 28.5 leads that form-filled… 15.7 of them (aka, 28.5 x .55) responded to your follow-up attempt.

Now, we just noted how not all salespeople are created equal.

If your salesperson has a 5% close rate on those 15.7 engaged leads, that (15.7 x .05) equates to 0.785 clients. That’s not even one full person.

Logically, if your salesperson has a 10% close rate on those same engaged leads, it’s 1.57 clients per month. Which might be enough if you sell higher ticket services.

In a nutshell, be careful with Ad budgets that are too small because the daily Ad spend might be lower than the average cost required to produce a single lead.

Warning: this entire analysis assumes that you can even generate the leads at these rates; or that you know what your cost-per-lead is to begin with.

If you run a business where the close rate is high, or where your offer has a strong value proposition, then you might be okay with a $1,000 per month budget.

But if you’re in residential real estate, with a $1000/month Ad budget… well, you can see with a $1,000/month ad spend… you might not even end-up with a client in some markets, when considering the lead response rate and conversion rate variables mentioned above.

[Note: and this is just one channel—Facebook] 

Imagine what happens when you consider a second channel like Google? You still have the same hurdles there as well.

Here’s what you can do in this instance—accelerate the budget. 

In other words, the monthly budget doesn’t get spread across a full month. Instead, pick a per-day budget that allows a chance to produce a result. And spend the monthly budget in two weeks or less.

If you don’t know the benchmarks because perhaps it’s a new funnel, then you must closely monitor the Ad, the landing page and the offer… or you’ll get crushed in the Ad auction.

As one example, the cost-per-click for the keyword “accident attorney” using Keyword Planner in Google Ads: $189/click.

Imagine paying $189/click just to get a prospect to see your landing page. 

Not a lead or phone call. No, just a click to see your page.

Repeat: if you don’t have a converting funnel, nor know the conversion benchmarks for your offer, here’s three methods to consider.

Otherwise, it’s basic math: if you’re spending $33/day… for 30 days (aka $1,000/month Ad budget)… you can clearly see that if the cost-per-lead benchmark is $35/lead… you’re barely allocating enough budget in a single day to produce a result.

If you’re a real estate or mortgage broker, most likely a minimum Ad budget of $1,200 to $2,000 per month in Facebook will get you over this hurdle. That doesn’t include the digital agency’s management fee.

As if your brain wasn’t hurting by now, here’s one final item to consider in this process.

Speed to Lead

MIT conducted a study to show speed of response by the company outweighs both time of day and day-of-week in its effect on contact and qualification ratios.

Bottom line: 10-minute response times or less is ideal. 

Even a 1hr response is considered slow.

If you’re a luxury real estate or healthcare company, get in touch for free consultation.