How much can you pay for a lead? The formula for the right cost per lead

In short

A good rule of thumb: a new customer from advertising should cost roughly 10% of the deal value. So target cost per lead = deal value × close rate × 10%. On a ₪5,000 deal, when 2 out of 10 leads close, the target is about ₪100 per lead, and a reasonable range is ₪80–120.

Why “how much does a lead cost” is the wrong question

A ₪80 lead can be too expensive, and a ₪600 lead can be a bargain. The price alone says nothing. What matters is how much the deal the lead brings is worth, and what share of leads actually become customers.

So before you look at the Meta or Google report, you need one number that comes from your business: how much it’s worth paying for a lead.

The formula: deal value × close rate × 10%

Target cost per lead = average deal value × share of leads that close × 10%.

Deal value: how much a customer pays you in an average deal.
Close rate: out of 10 leads from advertising, how many become paying customers. Measure this on leads from advertising, not on all enquiries to the business.
10%: the share of the deal value that’s reasonable to spend on advertising to win a customer. A range of 8%–12% is considered healthy. For comparison, companies spend on average 7.7% of their revenue on marketing (Gartner CMO Spend Survey, 2025).

Example

(Illustrative numbers.) An insurance agency with an average deal of ₪5,000, where 2 out of 10 leads from advertising close.

Figure	Value
Average deal value	₪5,000
Close rate	20% (2 out of 10)
Target cost per customer (10%)	₪500
Target cost per lead	₪100
Reasonable range (8%–12%)	₪80–120

Five leads at ₪100 bring one customer at ₪500, that is 10% of the deal. That way most of the money stays with you, and there’s room for weak months and cost swings.

What about the break-even point?

Break-even is the price at which all the profit from the customer goes to advertising: profit per deal (after direct costs) × close rate. In the example, if a ₪5,000 deal leaves ₪2,000 profit, break-even is ₪400 per lead. That’s 4 times the target, and that’s exactly the point: the target should be far from break-even, not close to it. A ₪350 lead “doesn’t lose money” on paper, but leaves the business almost nothing.

Common calculation mistakes

Aiming for break-even. “We can pay up to ₪400” isn’t a target. That’s where all the profit goes to advertising.
Using the whole business’s close rate. Referral leads close much better than advertising leads. If you use the overall rate, the target will come out too high.
Forgetting about time. In industries with a long sales cycle, last month’s close rate isn’t final yet. Measure on leads that have had enough time.
Trusting the platform’s “leads”. A duplicate lead, a wrong number or someone who doesn’t remember leaving their details all count as a lead in the report. The calculation should be done on real leads from the CRM.

Turning the number into campaign decisions

The number you calculated isn’t just for the report. It sets how the campaign is managed day to day:

A cost target in the platform. You can set the target as Target CPA in Google or a cost-per-result goal in Meta, so the algorithm aims for it.
A stop rule set in advance. For example: an ad that has spent twice the target without a single lead is stopped. That way the decision doesn’t depend on how you feel that day.
Measure by the week, not by the day. Cost per lead jumps from day to day. Decide by an average over several days, and by real leads.

What to do when leads cost more than the target

There are three ways to bring the numbers back to target, and you usually work on all of them in parallel:

Lower the cost per lead: audiences, ads and a landing page that convert better.
Raise the close rate: get back to leads within minutes, not hours, and screen out irrelevant leads in advance.
Raise the deal value: packages, upsells and repeat customers.

A small improvement in each of the three adds up to a big change in the bottom line. To check your numbers, use the “what is a new customer worth to you” calculator on the homepage.

Want to know where you stand? We’ll check the numbers against your account, free of charge.

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Frequently asked questions

What’s the difference between CPL and CPA?

CPL is the cost per lead, that is, per enquiry. CPA is the cost per final action, usually a paying customer. In lead-gen businesses CPA equals CPL divided by the close rate.

What’s a reasonable cost per lead in Israel?

There’s no single number. Cost per lead depends on the industry, the competition and the quality of the page, and ranges from tens of shekels in cheap categories to hundreds of shekels in categories like insurance, finance and real estate. The important question is whether a customer from advertising costs you roughly 10% of the deal value.

How often should you update the calculation?

At least once a quarter, and right away when something changes: price, deal value or close rate.

Sources

Gartner 2025 CMO Spend Survey

Pini Smolanski

Founder of SMOLANSKI Media. 14 years in advertising management, 10 of them at Israel’s leading media and advertising agencies.