Breaking Down the Numbers in Buying Medical Billing Leads
In this third part of our series on buying medical billing leads, we’ll dig into the numbers to assess whether purchasing these leads is a worthwhile investment. Previously, we covered typical close rates and lead conversion metrics. For most billing companies purchasing leads, close rates tend to be around 2-3%, with a high end of 5% if processes are optimized.
When running the numbers, this close rate translates to a customer acquisition cost (CAC) of around $4,000 on average. If you’re doing well, this can be reduced to around $2,500, but it generally falls within this range. Is this CAC good or bad, and how does it stack up against other medical billing marketing strategies?
Average Client Value from Purchased Medical Billing Leads
The size of clients obtained through purchasing medical billing leads tends to be relatively small. These clients are often solo or part-time healthcare providers with contracts averaging around $500 to $1,000 per month. Occasionally, a higher-value client may come through with an annual value between $25,000 and $35,000, but larger deals are rare.
With smaller contracts, the customer lifetime value (CLV) typically averages between $7,000 and $10,000. These figures are drawn not only from our experience but also from feedback from current medical billing companies using purchased leads. If you’re seeing smaller CLVs, it’s essential to evaluate your ROI on these leads carefully.
Evaluating Return on Investment (ROI) for Purchased Medical Billing Leads
Let’s walk through the basic ROI for purchased leads. If you’re spending $4,000 in CAC to obtain a client with a $7,000 CLV, that’s a modest 2X return, or 200% ROI. At best, this can range between 100% and 300% ROI—meaning a breakeven point after about two years.
In reality, the ROI can be lower than it seems because there are ramp-up costs. It often takes a couple of months to onboard a new client, during which you’re incurring costs without revenue. By the six-month mark, the client should be cashflow positive, but it typically takes a full year to recoup the initial marketing investment. The result is an effective ROI closer to 100%, which is considered poor by medical billing marketing standards.
Customer Acquisition Cost Relative to Client Lifetime Value
The relative size of purchased medical billing leads also affects whether the acquisition cost makes sense. With smaller clients averaging a CLV under $10,000, a CAC of $4,000 is high. For comparison, some companies with higher CACs may spend $5,000 to $10,000 to acquire clients, but they’re securing contracts worth $50,000 to $100,000+ over the client’s lifetime. For those companies, the investment pays off significantly due to the larger revenue from each client.
Additionally, clients obtained through purchased leads generally have a shorter retention rate. Smaller or part-time providers often have lower commitment levels and a higher churn rate. In contrast, clients obtained through other channels typically stay longer and have a CLV exceeding $100,000, providing a better ROI on higher CACs.
When Buying Medical Billing Leads Might Be Right for You
So, does buying medical billing leads ever make sense? For most established billing companies targeting larger, high-value clients (e.g., $50,000–$100,000 annually or more), it’s probably not the best approach. However, for newer billing companies looking to gain initial clients, establish references, or gain experience, buying leads can be a viable short-term solution.
In particular, purchasing leads can work well for startups needing quick wins and are less concerned with the client’s specialty or size. The process is fast: you start receiving leads immediately and can close deals quickly. For newcomers seeking experience, this can be a good temporary strategy to check off those first milestones.
For more established businesses, however, the ROI of buying leads may not justify the cost, and exploring alternative marketing channels might be a better path to long-term growth.
