Google just released a new tutorial on bidding strategies. This is a great tutorial for anyone looking to learn more about how to maximize budget and profits. To view the tutorial visit Google AdWords Bidding Strategies tutorial.
One thing they did not show was how to figure out the value of a Lead. Here is some of my math:
Factors you must Know: How many leads you are getting, What percentage of the leads you are getting become NEW business, Average sale amount per NEW business,
Example: 100 leads, 40% close, $250 average Ticket sale,
Math: 40% x 100 Leads= 40 new customers x $250 average ticket sale= $10,000 NEW business / 100 leads = $100 value per lead
So as long as your CPA or Cost per lead does NOT exceed $100, you are in the black. Of course if you want to take it a step further you can replace Average Ticket Sale with Profit per ticket sale and find out the exact number for profitability not just breaking even on Revenue.
Hope this helps!