I know I’ve got some hardened Pay Per Lead veterans out there, but today’s post is more for the newbies.
Or, if you’re considering going into another niche, this post can be for you, too.
When people land clients in a vertical they know nothing about, they’re tempted to prove their worth by offering a “free trial of 100 leads”.
Trust me, that’s the worst thing you can do.
To be frank, free trials suck. And here’s why:
- You haven’t generated leads in this space before, so you can’t expect miracles.
- Clients don’t appreciate free leads, even if they’re good.
In fact, by offering clients “free leads”, you’ve fallen into something I call the “Free Trials Trap”.
What Is “The Free Trials Trap”?
See, if you give out your skills for free, that’s what people will naturally come to expect.
Anyone is happy to exploit free labour, especially if they make a nice, fat profit in the process.
But the minute you ask to be paid? The work will dry right up.
And it’s the same for lead generators.
When you offer free trials to clients, you’re giving out this message: “I need you more than you need me”.
You’ll do all the grunt work, you’ll use years of accumulated skill…
… and worst of all…
You’ll do it for free.
Only to have the prospect say they’re not interested when it comes to signing the contract.
Or, of course, it could go the other way.
If you offer a client 100 free leads in a new niche, and the leads aren’t great, the client will feel just as hacked off as they would be paying for the leads.
‘Cus, when you’re trying to get new clients, you don’t want to admit you’re a novice. Chances are, you’ll cite past successes (in a niche you’re familiar with), and promise leads of a similar grade.
That’s a classic case of overpromising and under-delivering, and it never goes down well. If you’re looking to build a name for your agency, handing out crap leads for free won’t do you any favours.
Clients Need Skin In The Game
Unfortunately, some clients won’t work free leads as hard as they should.
As they’re not paying for anything, they’ve got nothing to lose. If the leads don’t work out, they won’t hire you again. If they do, then the business has made a tonne of money, and you’ll be out of pocket.
So, to charge clients for leads, you need to minimise your overall risk.
How Does Flexx Digital Charge Clients For Leads?
Flexx Digital works with something called the “front-end” model – if we’ve got enough experience in the vertical.
The front-end model works like this:
The client will confirm the number of leads they are looking to buy for the following week, i.e. 100. You will then invoice them for the total amount of the leads at the agreed price.
In this model, the client is paying for the leads upfront. I usually ask the client to put the money in my account by Friday. I’ll then switch on all ads and funnels by Monday morning.
No money? No ads.
You’ll then spend the week generating the leads.
By the end of the week, the client should have the rest of your leads in their CRM system. If they’re satisfied with the contact and conversion rates so far, confirm with the client how many leads they want for the next week.
Rinse, wash and repeat.
If the client wants 210 leads/week @$20 a lead, you know you need to be generating around 30 leads a day.
You need to make sure that you’re generating leads below the invoice price ($20).
If you generate leads above the invoice price, you still need to give them to the client. You’ll also have to absorb the additional costs.
Let Me Give You An Example Of The Front-End Model:
My offer would be: 30 leads a day, 7 days a week @ $20/lead.
You can generate leads @ $10/lead = $300/day in advertising costs.
You will then sell these leads to the client @ $20/lead = Total Revenue = $600
Profit = Total Revenue – Advertising Costs = $600 – $300 = $300 profit/day
Do this over 30 days/month, and you will be clearing $9,000 profit per month.
BUT
If your cost per lead is higher, you get a different calculation:
My offer would be: 30 leads a day, 7 days a week @ $20/lead.
You can generate leads @ $25/lead = $750/day in advertising costs
You will then sell these leads to the client @ $20/lead = Total Revenue = $600
Profit = Total Revenue – Advertising Costs = $600 – $750 = $150 loss/day
Do this over 30 days/month, and you will be losing $4500 per month.
The front end model is an extremely profitable way of doing business and very easy to scale. However, because of the risks, I do recommend that you have experience generating leads in the niche first.
Remember, though the profits initially sound enormous, you need to take into account your company overheads – staff salaries, office rental, business insurance, etc. A $9,000 profit a month can soon go if you’re not making these margins consistently.
This is why, for beginners, I recommend the hybrid model.
What Is The Hybrid Model?
This model is preferred by Pay Per Lead beginners as the risk is much smaller.
What I do recommend, however, is honesty. If you’re new to a niche, you need to tell the client. That way, expectations won’t be too high, and you’ll limit the opportunity to crash and burn.
(But if you have experience in other niches, prove this, and you’ll find the client will be quite happy to give your leads a try).
So, with this model, you ask the client to pick up the advertising spend. You’re still responsible for building the funnels and running the ads, but you don’t have to shell out from your own wallet.
If, for example, your client is paying $5000 per week for advertising spend, it’s up to you to generate as many high-quality leads as possible for that amount of money.
When the client receives the leads, their sales team will try to convert them. For every lead they convert, you’ll get paid an agreed fee.
Clients love this kind of deal because they know they’re getting plenty of bang for their buck.
Say that a $25 lead is worth $3000 once converted into a customer. The client agrees to pay you 10% per converted lead. That means you’ll get paid $300 per lead.
And 10% is pretty low – I wouldn’t recommend going any lower. I’ve worked with the hybrid model on several occasions and, sometimes, I get paid up to 25% of the worth of the converted lead. It’s all about good negotiation.
That said, don’t push too hard. Clients also have to pay for their overheads, and they’ve already shelled out for advertising spend. So, anything between 10%-25% commission is a fair deal.
As I said before, clients love deals like this because they’re only going to pay for converted leads on top of their ad spend. If they’re selling a high-ticket service like solar panel installation, a converted lead could mean thousands of pounds for the company.
Meanwhile, you’ve had the ads paid for. As long as you’ve got good creative and a solid sales funnel, you should end up with some profit.
Conclusion
So, to recap, don’t spend any money outright until you’ve got the experience.
Negotiate a hybrid deal, and minimise the risk for both parties. Flexx Digital use this model whenever we enter a new market, and it’s been extremely profitable for us.
Got any more questions about charging new clients for leads? Write them in the comments box below!
