I have already gotten quite a few inquiries about the spreadsheets that I mentioned in my most recent post. I thought that because of this, I would follow up with some screen shots using the business case I described in the post. After all, the picture is worth a 1000 words.

To summarize the business case once again:
- Buyer buys about 30,000 leads per month
- Due to their vast footprint, open filters and buying power, they were able to procure one of the best prices I have seen in the industry. Prices would vary across lead providers, this is not an actual average, but just a number I am using for illustrative purposes. But this is in the right ballpark. Using $5 per lead.
- Average Loan size: $230,000
- 1.5% gross fee income per loan
- Assumed a 50% operating margin
- Funding Ratio of 0.25%. Also not an actual figure, but in the same ballpark
Scenario I displays the actual picture, Scenario II demonstrates the numbers if the funding ratio was 1% instead of 0.25%, an improvement of just 0.75%.

See what happens between net profits (Profit, less lead costs, per loan)? Profit increased by $1500 per loan by just ¾ point increase in funding ratios taking the average cost per funded loan from $2000 to $500 per loan! Now, let’s take a look at the ROI on the numbers taken across an entire month.

This is really where the difference becomes staggering. By just a ¾ point increase in conversion ratios, their ROI went from bleeding money to a 245% return. It was a difference between losing $100k per month with a $5 lead to netting almost half-a-million dollars per month. But what this demonstrates is how little leverage price plays in the equation. This is a $5 lead, but this company was still losing money because they did not manage their process well enough. They had not idea what their “Return” was on their investment, they just wanted to get the cheapest lead possible. Hopefully this helps illustrate my point a little further. Price is irrelevant until you match it against your return on that price.

Please note, this is a working spreadsheet. You can plug in your actual figures and see not only where you are now, but where you can be with just a little bit of optimization. If you are interested in a copy of this, please drop me a note to my gmail and I’ll be sure you get a copy and that you know how to use it.

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