Lead Generation Companies. Are They Worth It?

Posted on May 05, 2021

Drewbie Wilson



If you own a business or work in sales for any length of time, you will be pitched by a lead generation company. Before we get into lead generation companies and if they’re a worthwhile investment. Let’s talk a little bit about why lead generation services are important.

lead generation for businesses and teams

First, lead generation is the lifeblood of any sales team!

You have to have people to sell your product or service too if you want to make money and keep the doors of your business open and the commission checks rolling in, which is why every business needs to generate leads. It is also the reason lead generation companies exist in the first place. Along the way, people who understood marketing and learned how to sell could separate themselves from an individual business and create a business of their own using their marketing skillset as the deliverable.

How A Good Lead Generation Company Provides Leads Generation Services

Lead generation companies have typically mastered one or more of the primary platforms for creating qualified leads in your industry or vertical. Depending on your potential client, the audiences you need to market to could be primarily on a specific platform. For example, many companies in the business-to-consumer space are leveraging Facebook and Instagram to sell their products to generate new leads. On the other hand, business-to-business companies might use LinkedIn and YouTube to reach out to their target clients based on the type of conversations and content shared on those platforms.

Lead generation services happen in many ways. At their simplest, it includes organic traffic and paid advertising to generate sales leads.

Organic traffic coming in from anything you are doing to get your message out doesn’t cost money. This might include social media profiles, word of mouth referral campaigns, etc.

Paid traffic is just what it sounds like, which is when you are using a paid service to promote your product or service. These typically include newspaper, radio, television, and, more recently, social media advertising on platforms like Google, Facebook, Instagram, YouTube, and Pinterest.

A crucial part of running a successful business is tracking the sales and revenue generated back to the different sources you are using to generate traffic and exposure. By monitoring your KPI’s, or Key Performance Indicators, like lead source, closing ratios, and ROI (return of investment), you can figure out which parts of your marketing machine are working effectively. Understanding your numbers and increasing your marketing ROI could be a make or break for your business.

For example, you could be running a million-dollar-per-year business, making most people assume you are doing great. However, if it costs you $100,000 per month to generate $1,000,000 per year in making sales, you are losing a HUGE amount of money each month. That’s why you need to understand inbound lead generation and the value of quality marketing for your business.

What is ROAS, and why is it essential to lead generation services within your business?

ROAS, or Return on Ad Spend, is a critical KPI when building your lead generation machine. As you can see in the above example, spending $100k per month for marketing to net around $80k per month is creating a $20k per month deficit. At that rate, I suspect the business in this example is going to be in trouble before they know it, especially if they’re not paying attention to the P&Ls.

When you’re investigating lead generation companies and if they’re worth it, you may want to discuss their case studies and previous client successes in your industry. Understand that lead generation is never a guarantee. Just because a campaign worked for company A in their market, it does NOT mean that the same campaign will work for company B.

You will want to look for a lead generation company with a strong history of success in your industry or vertical.

When you are spending money to grow your business in any marketing area, it’s essential to understand a few parts of the process.

#1 – Where are you marketing?

If you’re using social media platforms like Facebook, Google, or YouTube, and especially when you’re using them all simultaneously, you need to have a system in place for tracking those inbound sales leads. Typically for these platforms, you would use a pixel or a short snippet of website coding to track visitor details and forward them to your CRM tool.

Many businesses use unique promo codes to better track high-quality leads source information for those other avenues such as billboards, television, mailers, and radio spots. The issue becomes that not all sales reps ask for it, and sometimes qualify leads will forget to mention it. These variables are another reason you need to have a system in place for determining your lead sources.

#2 – How much are you spending on each campaign?

It might seem obvious, but if you want to calculate the return on your investments for marketing, you need to track your spending habits. Each month you should be reviewing your campaign budgets and which campaigns deliver the best ROI. If you’re spending money on Facebook or Google, you need to know how much you’re paying with each company.

What is your average daily spend?

How many people saw your marketing?

How much is each dollar spent generating in return?

How many leads are you looking for?

A quality lead generation company will have reports on this for you at the end of each month. It would be best to closely monitor sales and lead sources to go over the ROAS for each campaign with your marketing company. They should clearly explain each metric and how effective each dollar spent was for your market.

#3 – What is the ACTUAL cost of your marketing?

So, we’ve talked about the ad campaigns’ costs, but we haven’t discussed the hard cost of marketing and were determining if the lead generation company you’ve hired is worth keeping around for another month.

Typically, lead generation companies will have a hard cost for their team on top of the advertising platform’s cost. There are a few ways these companies will set that expense up.

  • Monthly Retainer Model: The most common billing method for lead generation companies is a monthly retainer. This cost can vary depending on the niche and skillset of the company. The expected cost to hire a company using this model is $1000 to $5,000 per month. Many will have a sliding scale based on the amount of ad spend dollars. The more you spend on ads, the more work is required to maintain the accounts for stability and ROI.
  • % of Ad Spend: Some companies will take a percentage of your total ad spend allowance for themselves and use the remainder towards the platform itself. Common practice is 10-30% of the ad spend budget is given to the company, and the rest is spent on ads.
  • Pay Per Lead: On occasion, you will run into companies that offer pay-per-lead opportunities. Typically, these companies are confident in their ability to deliver, and so they will sell you the leads, and you only pay for the ones you take delivery on. These companies will have a tracking system where you can let them know which exclusive leads you’ve marketed or wish to return because they do not meet your set criteria.
  • Performance-Based: When working with a performance-based lead generation company, you will have a contract stating that for each lead that the company brings you that purchased your services, you agree to give up a percentage of the total sale amount as commission to the lead generation company. These kinds of arrangements can be lucrative for both parties if structured correctly. Make sure you read the fine print and understand the system.

When you know how much you are spending from start to finish for your leads, you can get a solid calculation of your marketing’s hard cost.

If you’re getting a $1.50 return for every dollar spent on marketing, then you can trust that the investment makes sense financially and for the business. If you track the numbers and recognize a trend of losing money, you can make changes to correct it.

How do you determine either the lead generation companies worth it?

So how do you determine if it’s a good lead generation company?

You look at the metrics, consider the results, decide if the company is making you money or costing you money each month.

If they win, you win.

If they lose, then you know it’s time to get rid of them and move on.

To learn more about marketing and building a machine for your business that generates leads 24/7, head over to www.jointheapex.com and find out how thousands of business owners and entrepreneurs are scaling their business while becoming the most elite version of themselves.

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