Do you want to start a local lead generation business from scratch? If you have the knack for providing practical and actionable steps to help businesses generate leads through sales and marketing, this would be the ideal business model for you.
Building a lead generation business is a great way for anyone who is willing to find better leads for local businesses to service. This guide will discuss everything you need to know about setting up your next local lead generation business.
What is a Local Lead Generation Business?
Basically, a local lead generation business helps other companies find new customers within a specific geographical area. It is a form of marketing that is focused on finding leads for a business that would be interested in their product or service.
In other words, a local lead generation business would offer unique strategies to businesses that get potential customers naturally interested in engaging with the company and eventually warm them up to making a purchase.
For instance, if a home service business (like plumbers, electricians, etc.) wants more enquiries for their services, they could engage with a marketing agency that offers lead generation as a service to help with marketing their business online.
Why Start a Local Lead Generation Business?
In general, lead generation businesses can be particularly appealing if you’re already in the sales or marketing space—or even just enjoy networking and meeting new people on a regular basis.
Most business owners are focused on running the daily operations and dedicate little time to winning new business and engaging with prospects.
However, for any business to survive, they have a constant need for leads and enquiries so they can fill up their sales pipeline.
This is where a lead generation business can come in handy. Here are seven reasons why you should start a local lead generation business:
- Lead generation is a high-value service. This means that you can charge premium rates for your services and still make good money.
- You can start a lead generation business from scratch without any investment or experience. You don’t have to have an office, hire employees, or buy any expensive equipment apart from a computer and an internet connection!
- Lead generation is also scalable; you can hire staff as soon as your business starts growing. This allows you to quickly take on more clients without worrying about having enough capacity in-house. And if the workload gets too much for one person (or the team), then it’s easy to outsource some of those jobs, such as data entry or email outreach campaigns.
- There is continuous demand for leads from local business owners. This is more so in the digital space. If you can crack the code to generate leads for a particular industry online, you’re in for the win.
- It’s a very profitable business model since the running costs are low. Though there may be some startup costs, the operating costs are relatively low, resulting in higher profit margins.
- Generate revenue on a recurring basis. This is applicable if you choose the monthly retainer model (see below).
- It can be fulfilling to watch other businesses grow with more customers using the process that you implemented.
Is lead generation business profitable?
This ultimately depends on the business model that you choose for the lead generation agency. In general, however, a lead generation business can be very profitable if you manage to build systems and processes to run the operations.
In other words, if you can offer a system that consistently generates qualified prospects for businesses every month, you can charge a monthly retainer with minimal running costs, making this business very profitable.
The initial cost of setting up could be high, but once you’ve cracked the code, you will find the business generating revenue and very high margins.
There are 250+ successful lead generation companies listed just on Clutch with more than 10 employees. This is a good indication that lead generation businesses can be lucrative and scalable.
Businesses that require local lead generation services
Ideally, you would need a set of clients who are in fact looking for leads and one that is willing to pay a good amount for them.
This is where you compare the customer acquisition cost (CAC) against the lifetime value (LTV). In other words, the LTV:CAC ratio (the higher the better).
Industries with a high LTV:CAC ratio are the ones you should ideally target since they would be willing to pay higher amounts to acquire leads.
Some examples of industries or businesses that require local lead generation services include:
- Recruitment agencies
- Home services (plumbing, landscaping, HVAC contractors)
- Real estate agents
- Auto dealers
- Medical professionals
- Corporate service providers (accounting, company registrations, secretarial services, etc.)
Steps to start a local lead generation business
1. Identifying the target audience
This step involves identifying which industry is most likely going to require lead generation services. There are several profitable niches for lead generation that you can target and thereby personalize your offering accordingly.
The following are some of the questions you could ask yourself to pick a niche:
- How much do you know about the market?
- Can you help them increase their revenues?
- Does it make sense to enter this particular market at this time?
- Which industries are paying the most for leads?
- Which geographic location do you want to focus on initially and not spread yourself too thin?
Once you’ve identified a niche that you’re comfortable serving, the next step is to dig deep into the details.
2. Researching the market
The initial setup of a lead generation business can seem quite overwhelming since there are many factors to consider prior to starting up. Below are some of the questions you might want to ask:
- Do you have the right tools/tech stack in place to offer lead generation services to the target clients? These would vary across industries. For example, a call tracking software may be required for a service-based business, while a restaurant may require a reservation system.
- How much should you charge per lead generated? This varies across industries and their willingness to pay for leads. It also depends on how much effort goes into generating each one and how much time it takes (e.g., if someone asks for a lot of information upfront).
- What is the average conversion rate? If the average order values are higher, the leads are going to take a longer time to convert, and the reverse is true. So you need to charge the clients accordingly.
- Is the demand for leads seasonal? Snow removal service companies require leads generated only during winter. So ideally, you would look for a business that has a continuous demand.
3. Establish client relationships
Once you’ve identified the types of businesses you’re going to target, it’s time to engage and develop relationships with them.
So, how do you find them? You could advertise your services, but why would anyone pay for something if they don’t even know if it works?
Instead, focus on building relationships with clients who are already in your niche. There are a few ways to make that happen:
- Ask for referrals from other people in the industry (and give them a discount).
- Find out what conferences or events the target clients go to and attend those yourself. If there aren’t any relevant ones around, look into starting one up!
- Establishing credibility by writing articles about what you do (or interviewing other experts) can help get your name out there, so when someone needs help finding an expert in your area of expertise, they think of you first! A great place to start is LinkedIn and Facebook Groups which have dedicated groups where business owners engage and discuss their problems.
4. Select an appropriate pricing model
Now that you’ve determined how much a lead is worth and what services will be offered, you can now finalize the pricing structure.
The most important factor to consider when pricing your services would be the LTV:CAC ratio. The higher the ration, the more value businesses will find in your services, and hence you can charge a higher price.
You have 2 options for pricing the lead generation services:
- Monthly retainer: This is a popular model where businesses pay a fixed fee for you to generate leads on a continuous basis. The terms you agree to will matter specifically relating to the number of leads, ad spend, lead quality, payment terms, cancellation policy, etc. The billing is quite straightforward here as they pay a fixed fee for your services.
- Cost per lead: Another common way to charge businesses is by the number of leads delivered. The terms will include a flat rate per lead based on the cost the business is willing to incur to acquire a new customer. This, however, would necessitate constant monitoring and can be complicated in terms of billing and so on.
5. Gather your marketing assets
Once the services and pricing are sorted, the next step is to get the word out. Consider building a funnel or creating a website showcasing your services. Your website should be designed with the goal of quickly converting visitors into leads.
You could consider creating an e-book (or other lead magnets) that will entice people to sign up to your mailing list. These can then be shared across relevant groups on Facebook and LinkedIn groups where the potential clients meet online and engage. It’s a great way to showcase authority and build credibility too.
The other option is to create case studies of past customers showcasing how you helped other similar businesses achieve great results. This can be documented as a long form article or recorded as a video demo.
You can also work on making your website rank for organic search results for your lead’s queries (eg., “plumbers in Manhattan”).
Make sure you install all the tracking mechanisms in place so you can analyze and measure which campaigns work best and optimize accordingly.
6. Nurture your leads and turn them into paying customers
If you don’t plan on spending any money on your marketing campaign, then this step won’t apply to you. However, if you are going to spend any money on paid advertising, then nurturing leads is an important part of the process.
When a lead submits information through your landing page or form and they have not yet become a customer, you should consider nurturing them so they are more likely to convert into an actual paying customer.
You can do this by sending out automated email campaigns that explain what happens after someone fills out the form or landing page form and why they should become a customer today!
Use marketing automation tools like Keap or ActiveCampaign to nurture the leads and convert them into paying clients.
7. Monitor and optimize results
While building the funnels and landing pages, you need to ensure that the key metrics are tracked, such as cost per action (signups) and conversion rates across various campaigns.
After you’ve launched your first campaign, it’s time to check the results. You should be able to see how many leads have been generated by your campaigns and their conversion rates (the percentage of visitors who fill out a contact form or request more information).
The next step is analyzing these results so that you can understand which channels are performing better than others and make them a priority.
If a certain lead generation channel isn’t performing well, it’s best to stop using it immediately (or reduce the ad spend on it) so that you can focus on other areas that are working better for you.
You should also monitor each campaign’s customer acquisition costs (CAC). This will help ensure that your ROI remains high while keeping your spending under control.
Does this sound interesting to you?
Lead generation is a great way to get started in the world of entrepreneurship. It’s a low-cost entry point for you to get your business off the ground and generate leads for yourself or even other businesses.
We’ve gone through all the steps you need to start a local lead generation business from scratch, including picking out a niche and location, developing client relationships, setting up pricing models, and more.
We hope this article has given you some ideas about what steps would work best for your business model.