How to Measure Internet Lead ROI for Your Agency
Published · Updated
Most agencies buy internet leads, track the bill in one place, track the sales somewhere else, and never actually put the two together. They have a gut feel about which lead source is making money — and that gut feel is wrong about 4 times out of 10.
In this guide:
- The 4 numbers that tell you if a lead source is profitable
- The formula for lead ROI
- The one number most agencies skip
- When to cut a lead source and when to keep it
Time to read: 8 minutes Best for: Owners deciding where to spend lead budget.
What are the 4 numbers I need to track?
These 4 numbers tell you everything about a lead source.
| Number | What it is | Typical range |
|---|---|---|
| Cost per lead (CPL) | What you pay for one lead | $8–$35 for P&C |
| Quote rate | Percent of leads you can quote | 40–65% (good) / 15–30% (weak) |
| Close rate | Percent of quotes that bind | 20–35% |
| Cost per policy (CPP) | CPL ÷ (quote rate × close rate) | Varies — see below |
Example. A $12 lead with a 50% quote rate and a 25% close rate: CPP = $12 ÷ (0.50 × 0.25) = $96 per bound policy
What does a healthy cost per policy look like?
It depends on your average policy premium and your commission rate.
Rough benchmark: your cost per policy should be under 25% of the first-year commission you earn on that policy.
Example. Average auto policy: $1,200 premium × 12% commission = $144 first-year agency commission. A healthy CPP on auto leads is under $36.
| Your CPP vs. first-year commission | What it means |
|---|---|
| Under 25% | 🟢 Healthy — keep spending |
| 25–50% | 🟡 Watch it — margin is thin |
| Above 50% | 🔴 You're working to fund the lead company |
What's the one number most agencies skip?
Cost per retained policy at 18 months.
Year-1 cost per policy looks fine on a lot of lead sources. But internet-lead policies don't stick as well as referrals or walk-ins — and some lead sources are much worse on retention than others.
Example. Two providers have the same year-1 cost per policy. Provider A's policies retain at 65%. Provider B's retain at 45%. After 18 months, Provider A costs roughly 30% less per retained customer than Provider B — even though year-1 numbers looked identical.
Most agencies don't track this because they can't — the data is spread across too many systems. Agency Edge does not measure retention by lead source either: its pay-back estimate applies your office's one lapse rate to every source, so make this comparison from your own renewal records.
How does Agency Edge measure ROI for me?
It connects three sources of data:
Then it matches leads to sales and lists every source on the Marketing ROI tab of the Leads page. Switch on the Close rate column to read conversion first; cost follows in Spend, Cost / policy, Net today, ROI and Pays back, with Cost per lead as another column you can switch on. Agency Edge does not record quotes by lead source, so its Close rate is leads converted ÷ leads billed — the quote rate and close rate above rolled into one number.
Full walkthrough: Read the ROI page. To set sources side by side, see comparing lead provider performance.
What's the formula for ROI?
ROI = (what you earned − what you spent) ÷ what you spent.
For a lead source, that's:
(first-year commission from all bound policies − lead spend − service cost) ÷ lead spend
A simple example
- You spent $5,000 on Northwind Leads in Q1
- You bound 25 policies from it
- First-year commission on those 25 policies: $20,000
- Rough service cost: $2,500
ROI = ($20,000 − $5,000 − $2,500) ÷ $5,000 = 2.5x (or a 250% return)
Rough benchmark. Year-1 ROI above 3x is strong. Below 2x and you're not really making money after service cost.
In Agency Edge, the ROI column is Net today ÷ spend, and Net today is office revenue on the first term − spend − producer commission. It takes off what you pay producers and has no service-cost line, so it will not match this formula to the dollar.
How long do I need to run a lead source before I can trust the numbers?
Minimum amounts to compare providers fairly:
- At least 300 leads from the provider
- At least 60 days of activity
- At least 10 bound policies traced back
Below those numbers, the result is noise. A provider you tested for 2 weeks with 50 leads told you nothing — quote rate on 50 leads is random.
Agency Edge shows every source's figures however few leads it has, so check the lead count before you act on a rate.
When should I cut a lead source?
Kill signals:
- Cost per policy is above 50% of first-year commission
- Quote rate is under 25% for 60+ days
- Retention at 18 months is under 40%
- Close rate is under 10% for even your best producer
Keep signals:
- CPP at or under 25% of first-year commission
- Quote rate above 45%
- Retention above 55% at 18 months
- Multiple producers close on it consistently
Frequently Asked Questions
How do I track lead spend by provider?
Spend comes in with your leads file when it has a cost column. To enter it by hand, open Settings › Revenue & spend › Lead & ad spend, press Edit on the Marketing Spend grid and type each month's amount; it replaces the uploaded cost for that provider and month. Most lead providers email a monthly invoice you can copy in.
What about shared leads vs. exclusive leads?
Track them as separate providers. Shared leads quote lower, close lower, and retain worse. Lumping them together hides the real picture.
Do I count referrals in ROI?
Yes — as a $0-cost provider. That way your paid channels are compared against organic. Referrals almost always have the best ROI. The comparison makes the gap visible. In Agency Edge a source shows on the Marketing ROI tab once it is set to Track marketing spend (in Manage sources, above the spend grid). With no spend entered its ROI reads as a dash, so compare it on Policies and Net today.
How do I measure ROI on paid search ads?
Much the same way as lead providers. Set the source to Track marketing spend, enter its spend each month, and record its sales under that source. It is listed as Other marketing, and a sale already matched to a lead stays on that lead provider's row. The math works the same.
My agency buys aged leads for $2 each. Do I track those differently?
Track them as their own provider. Aged leads have way lower quote rates (10–20%) and lower close rates, but at $2 a pop the math still sometimes works.
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