Cost per lead vs cost per funded deal: which number matters?
Short answer
Cost per funded deal matters more. It is your total marketing spend divided by the deals that actually fund. A cheap lead that never answers raises it. A pricier full credit application that funds lowers it. Subprime Kings tracks the path from ad to app to funded deal for this reason.
How do I work out cost per funded deal?
Cost per funded deal = total spend ÷ funded deals
Total spend should include lead costs, ad spend, agency or service fees, and any listing sites, for the same period.
A simple example
These numbers are made up to show the math. They are not a promise or a typical result. Store B's figures leave out any service fee, so add yours.
| Store A: bought leads | Store B: own credit apps | |
|---|---|---|
| Leads in a month | 1,000 at $2 = $2,000 | 100 apps from $3,000 of ads |
| Real conversations | 60 | 50 |
| Funded deals | 4 | 8 |
| Cost per lead | $2 | $30 |
| Cost per funded deal | $500 | $375 |
Store A "wins" on cost per lead and loses on cost per deal. It also spent far more rep hours dialing.
What about opportunity cost?
Every hour on a dead lead is an hour not spent on a real buyer. Jacques West, founder of Subprime Kings:
"There's not only a cost per funded deal, but there's also an opportunity cost per funded deal." Jacques West
He also points out that sending lenders weak paperwork can hurt your look-to-book ratio, which matters for future approvals.
What should I track every week?
- Spend by source
- Applications by source
- Contact rate and appointments set
- Shows, approvals and funded deals
- Gross per funded deal
The blog post on pipeline metrics that predict closed deals goes deeper.
Quick answers
How do you calculate cost per funded deal?
Divide total marketing spend for a period, including leads, ads, fees and listing sites, by the number of deals that funded in that period.
Is a low cost per lead good?
Not by itself. A low cost per lead can hide a high cost per funded deal if few of those leads answer, qualify or fund.