If you can’t profitably generate leads for your business, then you don’t really have a business.
People don’t know how much a new customer is worth to them.
How much does it cost you to get a new client? How much would a single client generate in new revenue dollars? Can you improve your return on investment (ROI)?
Second, let’s consider predictability.
Can you confidently say, “if I invest $X.XX then I can reliably expect Y-number of leads”?
A good marketing strategy should be using everything at your disposal including social media, your website, referral network, and paid advertising. The problem is that the results from these channels are often not as profitable as they could be.
Because many law practices haven’t taken the time to look at their metrics and make the needed calculations for a better ROI.
You need to gather some basic sales information to get started.
- The amount it costs to acquire new leads over the past year.
- How many leads you received and what percentage turned into paying clients.
- Amount of revenue generated by those customers.
- Retention rates of those clients for the past few years.
Once you have those numbers, you can use them to calculate your cost per customer.
How much are you willing to pay for a new lead?
You need to have a good idea how many leads it takes to generate one paying client. The number of newly acquired paying clients divided by the total number leads is your closing ratio.
That way, you will know precisely how much you are willing to pay for a lead.
For example, we typically find across the board that our personal injury attorneys have a lead closing ratio of 15% – 20%. Of course there are outliers with much higher closing ratios, but let’s just call it 20%.
That means for every 10 leads that come in, these attorneys are closing about 2 new cases for their firm.
In order to really know how much you might be willing to pay for a new lead, you need to also calculate how much a new personal injury case is worth.
We asked our personal injury lawyers on average, how much a new personal injury case was worth to them. The resounding answer was a minimum of $10,000 per case.
Of course again, there are outlier cases with much higher payouts that could reach millions, but for our example let’s just say a new case is worth $10,000.
So how much would you be willing to pay per lead if you got a 5X return on that investment? What about a 10X ROI?
Cost of Getting Cases for Your Personal Injury Law Firm
Let’s look at this simplified example as a whole. Law Firm XYZ operates a practice specializing in personal injury law. Over the course of any given month, they generate 40 leads at a cost of $250 per lead through Google PPC. They close 8 new cases that month, averaging out to about $10,000 per case. This means that their cost to generate all 40 leads was $10,000 and they generated $80,000 worth of cases, equalling an 8X ROI and a 7X profitability.
Of course this is a conservative example, and ROI could skyrocket based on the firm’s closing ratio.
Customer Lifetime Value
The great thing is that most clients are worth even more if you have high retention rates. Let’s go back to the previous example.
Law Firm XYZ has a retention rate of 25% over the past five years. They can predict then based on that data, that 2 of those 8 clients will be repeat clients in the future. If that’s the case then the total revenue generated by those 40 leads by the end of Year 2 is $90,000.
$70,000 for Year 1 (8 cases x $8,750 profit after marketing costs)
$10,000 x 2 clients for Year 2 (25% retention, no additional marketing costs).
We could (and should) incorporate average retention rates for 3 years, 4 years etc. and extrapolate how much each client is worth over their lifetime, but we will keep this simple.
If we take the $90,000 generated by Year 2, then we can see that each new case is worth an average of $11,250. (Remember, we only took this out 2 years. In reality, they would be worth much more.)
Balancing Lead Costs Against Customer Value
Law Firm XYZ can now predict that on a monthly basis, they can reliably spend $10,000 to generate $80,000.
Where is the break-even point?
That depends on their operating costs. By looking at their Income Statement, Law Firm XYZ can calculate how much they must generate to reach an acceptable profit margin.
Then they must determine how many cases they would like to procure and how much they are willing to spend to get them.
Would you be willing to spend an average of $1,000 to generate a $10,000 case? That would be a no-brainer business decision.
Finding the Best Marketing Tools to Profitably Generate Personal Injury Leads
Most online law firm marketing strategies involve a number of channels:
- Pay Per Click (PPC)
- Search Engine Optimization
- Content Marketing
- Social Media Marketing
Google AdWords (PPC) will cost more but generate immediate results. SEO and content marketing require a smaller monetary investment but results can take months. Retargeting helps retain clients (think of that lifetime value we discussed earlier).
Knowing which channel will profitably generate leads for your law firm will require the knowledge of an online marketing professional. They can help you create a strategic marketing plan that fulfills your goals and gives you the best ROI.
Cloudburst Marketing builds high-converting websites, and landing pages for dialed PPC campaigns that profitably generate leads predictably for your law firm. We can also guide you on the most lucrative marketing channels for increasing your marketing ROI, and closing ratios. Contact us for a free 15 minute discovery call to learn more.