01CPL, CPA and CAC: three names, one question
Cost per lead is ad spend divided by enquiries. Cost per acquisition is what Google Ads calls the same sum for whatever you have told it to count as a conversion, which is why CPA and CPL are often the same number. Cost per customer, or CAC, divides spend by the people who actually paid you.
Only the last one tells you whether the ads pay for themselves. A £40 lead is cheap if one in three buys and expensive if one in twenty does. That is why the first tab asks for customers as well as leads.
02The most you can afford per lead
Work backwards from the customer. Job value times margin is the profit a customer brings. Times your close rate, that is the profit each lead is worth: the most you can pay for one before the ads lose money. Then decide how much of it you are willing to spend. All of it is break-even; half of it keeps half.
A clearly hypothetical example: a £2,400 job at a 40% margin makes £960. One lead in four becomes a customer, so a lead is worth £240. Spending half of that sets a target of £120 per lead and £480 per customer. The same method is walked through step by step in our guide to how much UK businesses should spend on PPC.
03From cost per lead to cost per click
Multiply the affordable cost per lead by your landing page conversion rate and you get the most a click can cost. At £240 per lead and one click in ten converting, you can pay up to £24 a click and break even, or £12 to hit the target.
This is the most useful number to hold against Keyword Planner's bid estimates before launching. If clicks in your market cost more than your break-even CPC, the fix is rarely a bigger budget. It is a page that converts more of the clicks you already buy, a better close rate, or a higher-value offer. Improving any one of them raises every number above it.
04Why cheap leads can be expensive
Cost per lead is the easiest number to push down and the easiest to fool yourself with. Broader keywords, softer offers and "free quote" forms all lower CPL by attracting people less likely to buy. If the close rate falls faster than the CPL, the cost per customer goes up while the dashboard looks better.
The other trap is counting the wrong thing. If the account records button clicks, page views or "contact us" visits as leads, every number on this page is flattered. Check what is actually counted as a conversion before trusting any CPL, including your own.