Many residential remodeling and home improvement contractors evaluate their lead generation partner's performance based on set rate and ROI, and these are important metrics to review. But perhaps an even more vital metric to be tracking is Net Sales per Lead Issued, or NSLI.
The leading contracting firms in the industry monitor this number closely, and here's why you should, too.
This metric can give you a great deal of useful information for improving not only your lead-generation activities but also insights into your lead-setting and sales processes.
The formula for figuring out NSLI is fairly easy.
1) Find your total net sales revenue number;
2) Divide it by the number of leads you received.
Here's an example: In January, you received 20 leads from your lead generation partner and closed $100,000 in sales on those leads. The net sales per lead issued in this example would be $5,000. These numbers are, of course, only for example, so don't be alarmed if your real numbers look really different. More on benchmarking later.
You are very busy running your home improvement business, you need a simple and accurate measure of the return on your investment in lead generation partners.
Let's look at two examples:
If you pay the low price of only $10 per lead and receive a huge number of 500 leads, you might assume that this looks like a great deal.
But if you stop your measurement there, then you might miss that you only closed one sale from that $5,000 investment in leads, and it happened to be worth only $2,500 - so by using NSLI, you can see that your "great deal" actually lost $2,500.
However, let's say in our second example, you paid a higher price of $100 per lead and received only 50 leads; you might look at that and say that's a terrible ROI. But if those 50 leads were all pre-qualified and exclusive, and you closed 25 of them for an average ticket of $2500 - well, your $5,000 investment actually earned you over $62,000 in revenue!
Plus, in example 1 your sales team did significantly more work - calling old or recycled leads, or uninterested consumers who have likely had hundreds of phone calls, texts and emails already.
They had to connect with 500 consumers instead of just the 50 pre-qualified leads in example 2. When you consider the cost of your sales efforts, your loss in example 1 would be even greater.
Focusing on total revenue rather than fixed or close rates, NSLI offers a quick way to pinpoint process bottlenecks post-lead acquisition.
Relying only on appointment-to-sale ratios may steer sales teams towards seemingly easier-to-close leads but who may end up being price-sensitive or indecisive prospects. This could lead to potentially neglecting more challenging but valuable opportunities.
Once NSLI's importance is understood by the team, sales reps will tend to focus more closely on leads that seem challenging but also may provide a greater reward and begin to treat each lead as a prized asset.
When this happens, sales effort increases, and reps try harder to reschedule missed appointments and to maximize every interaction. By incentivizing lead focus, NSLI helps shift sales behavior.
NSLI also serves as a tool for capturing essential insights into individual reps' performance, for example, identifying those consistently achieving higher sales prices or excelling in upselling.
Figuring out the benchmarks for NSLI is not one-size-fits-all - it’s all about your specific business, and you’ll have to take some time to figure out what makes sense.
Factors such as the nature of your product, its pricing, where your leads come from, and their quality will influence the most sensible benchmarks for your contracting business.
The first crucial step is to start gathering data to help you build an overall picture of your lead-to-sale system. As you get more precise information over time, the puzzle pieces will start to come into focus. Your tailored benchmarks will become clear, and you’ll know where to direct your salespeople’s focus and efforts.
Lead generation partners like HomeBuddy can help you optimize your NSLI for your business. They work with hundreds of contractors in the Home Services industry, and with their in-depth reporting tools, they can help you understand your NSLI metrics.