The Lead Generation Business Model Explained (Pros & Cons)

Heard of the lead generation business model and wondering what it is?

Then you’re in the right place. In this guide, we’ll explain the lead generation business model, some of its pros and cons, and even the 6 steps to get started — from choosing a niche to driving traffic and getting paid.

First thing’s first!

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What is the Lead Generation Business Model?

The lead generation business model refers to a business that makes money by generating leads for other businesses.

Take HomeAdvisor, for example.

This website makes its money by generating leads for contractors all over the nation… and those contractors agree to pay HomeAdvisor for those leads.

If we click “Join Our Pro Network”, for instance, we can create a business listing for our local area and start generating leads right away… for a price.

That’s one example of a lead generation business — albeit a really big one.

Funny enough, I actually recently had a personal experience with another lead generation business that you’re probably familiar with — Kelley Blue Book. I wanted to sell my car quickly for cash and so I Google searched for “sell my car for cash” and clicked on this result…

I then entered some information about my vehicle, received a cash offer within a few minutes via email, and — here’s where the magic happened — I also received the contact information for local businesses that were willing to buy my car. Sure enough, Kelley Blue Book was getting paid to tell me about those specific dealerships.

I sold my car for a good price, Kelley Blue Book got paid for the lead, and the dealership will surely make some money off the deal when they sell — win, win, win.

That’s how lead generation businesses work.

At its most macro level, then, creating a lead generation business consists of finding clients (people who’ll pay you to generate leads for their business) and then being able to generate leads for those clients.

If you’re capable of those two things, then you can reap the benefits that a lead generation business has to offer… and they are plentiful.

Let’s talk about some pros and cons.

Pros & Cons

No business model is perfect.

And so too the lead generation business model comes equipped with advantages and drawbacks — but if you’re capable of finding clients and generating leads for those clients, then the pros certainly outweigh the cons.

Here’s an overview…

Pros of the Lead Generation Business Model

The pros of the lead generation business model include…

• Promote Other People’s Stuff — Since you’re generating leads for other businesses, you don’t need to create your own products or services to sell. You only have to worry about driving traffic and generating leads.
• Low Costs — The cost of starting a lead generation business is super low. You just need a website and some high-converting sales funnels to get started. You might need to spend a bit of money on advertising, but if your business is effective, then your income should pay for those costs.
• Relatively Passive — Once it’s up and running, a lead generation business can create pretty passive income. You’ll need to consistently work on driving traffic (through paid and organic methods) but the more work you put in, the more passive the business (and its income) becomes.
• Flexible — To build a lead generation business, you don’t need to work 9-5 or go into an office. You can do it from the comfort of your sofa and work whenever you want.
• Scalable — The lead generation business model is extremely scalable. So long as you have clients who want the leads, then driving more traffic and generating more leads will keep resulting in more income.
• Tons of Opportunity — There is a lot of opportunity in the lead generation industry, not just at the nationwide level, but also at the local level. There are even tons of businesses in your city that will pay for you to help them generate leads.

Cons of the Lead Generation Business Model

The drawbacks of the lead generation business model include…

• Can Take Some Time — As you learn the ropes, the lead generation business model can take some time to get off the ground. You’ll likely have to experiment with the best ways to drive traffic and generate leads for clients before nailing your sales funnels. That can cost time and money. So don’t expect to get rich overnight.
• Technical Issues — If a technical problem happens with the site, you’ll have to fix it yourself or get it fixed. The longer your site is down, the more money you’re losing. But if you use a builder like ClickFunnels, then you can just reach out to support if a technical problem occurs and we’ll help you solve it!
• Negotiating — As the owner of your business, you’ll also have to negotiate with clients to determine a fair price for the leads you send their way. How much are they going to pay per lead? Or are they going to just pay you a monthly retainer? You’ll have to have the confidence and resilience to make good deals.

The Costs of Starting a Lead Generation Business

If you’re thinking of starting a lead generation business, one of the first things that comes to mind is, “But how much is it going to cost me?”

Fortunately, the cost of starting a lead generation business is really quite low. Once you’ve got started, your highest costs will probably be advertising to drive traffic and leads for your clients (breaking even should be considered a win during the early stages).

Here’s a more detailed breakdown of the costs…

• Domain Name — This shouldn’t cost you more than $100 per year (but probably a lot less than that). There’s no need to go for a super expensive domain name when you’re getting started. Just find one that fits your niche and is affordable for your budget. You can always change it down the road.
• Email Service Provider — An email service provider, like Mailchimp or Klaviyo, will allow you to build an email list, create triggered emails, send campaigns, and lots more. These are very important if you’re going to be in the lead-gen business. Most ESPs have free plans to get started and can cost around $20 or $100 per month depending on the plan you choose.
• Website / Sales Funnels — Obviously, you’ll also need to build a website as well as sales funnels that convert traffic into leads like clockwork. Fortunately, we’ve mastered the conversion process at ClickFunnels and created sales funnel templates that are proven to work… for any industry. You can build a website and sales funnels with ClickFunnels. And it’s free to get started! After 14 days, it’s $97 per month.
• Traffic — Since it takes time to build up your organic traffic, the bulk of your budget will likely go toward advertising in the beginning. Expect to spend at least a few hundred dollars every month when starting out.

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Local vs. Nationwide

Before you build a lead generation business, you have a lot of decisions to make — and we’ll discuss those decisions in more detail in the step below.

But one of those decisions is whether you’re going to generate leads for local businesses… or for businesses all around the nation.

The benefit of generating leads for local businesses, of course, is that there’s less competition and you can rely on pre-existing relationships you might have with those business owners to find clients.

The downside is that your scalability will be limited by how many local businesses you can get on board and how much local traffic you can drive to your website.

For nationwide lead generation businesses, the opposite is true. Finding clients is more competitive (depending on your niche) and scalability is virtually infinite.

If you’re unsure, then you might consider starting at the local level and working your way up — that might be a little less daunting. Or you can dive head-first into building a nationwide lead-gen business and accept that there’ll be a steep learning curve.

The choice is yours!

Steps to Build a Lead Generation Business

Let’s get to the nitty-gritty.

We’re going to walk you through the practical steps you need to take to build a lead generation business. These will help you understand how to get started, how to find clients, how to drive traffic, and how to scale!

Step 1. Choose a Niche

As when you build anything — a house, a barn, or a business — the foundation matters most.

And choosing a niche for your lead generation business is like choosing the foundation that the rest of your business will be built upon — it’ll determine how much clients are willing to pay for leads, how much traffic you’ll be able to drive, and how easy (or hard) it’ll be to grow.

So this isn’t a decision you should rush.

Start by listing out industries that you’re relatively familiar with. For example…

• Cars
• Motorcycles
• Insurance
• Real Estate
• Construction
• Law

Then choose one of those industries that is particularly appealing to you and ask yourself, “What specifically could I help people with?”

If you chose real estate, for instance, do you want to…

• Help homebuyers find an agent
• Help sellers find an agent
• Help homebuyers find a mortgage lender
• Help landlords find a property management company

Effective Agents is a lead generation website that finds seller and buyer leads for real estate agents…

Every industry has a lot of needs — your job is to find the overlap between what people need and what businesses offer.

Choosing a niche (rather than just an industry) will help you get more specific with how you’re going to help your clients, drive more targeted traffic, and generate more high-quality leads.

Step 2. Decide What You’ll Charge

The next step is to decide what you’re going to charge your clients for leads.

You have a few different options…

Pay Per Lead — The first option and probably the easiest one to get started with is to have your clients pay per lead that you generate for them. How much they pay will depend on your industry as well as your client’s budget. Here’s the average cost per lead by industry according to Popupsmart…

Industry	Cost per Lead on Average
Finance	$160
Technology	$208
Healthcare	$162
Manufacturing	$136
Travel & Tourism	$106
Retail	$34
Education	$55
Telecom	$45
Marketing	$99
Consumer Products	$105
Media & Publishing	$108
Non-Profits	$31
Business Services	$132

Retainer — Another option is to have your clients pay a flat monthly retainer for being listed on your website. This is hard to sell, though, if you’re just getting started and don’t have a track record of generating consistent leads for your clients.

Membership — Finally, you could create a membership program where clients pay anywhere from $50 to $200 per month to keep their listing on your website. This works if you’re serving small businesses rather than large corporations.

Additionally, you can either negotiate these contracts in person (probably a good way to start) or you can get sign-ups straight through a sales funnel on your website (good once you’ve got a decent amount of traffic flowing).

The easiest way to figure out what you should charge, though, is to go look up other lead generation sites in your industry or niche and see what they charge their clients — something similar will probably work for you.

Step 3. Find Clients

Now before you start building a website and sales funnels — that’s the next step — we recommend finding a few clients who’ll help you get off the ground.

The easiest way to find your first few clients is to reach out to people you know in the industry, tell them about what you’re doing, and ask them to sign up.

If you ask them to pay per lead you generate for them, that’ll probably be easier than selling a monthly retainer or a membership (to start).

As for creating a consistent flow of clients who’ll pay for the leads that your business is generating, there are few things you’ll need to do…

• Create a Sales Funnel — With the lead-gen business model, you don’t just need to generate leads for your clients, you need to generate leads for your business as well. That means creating a sales funnel intended to draw potential clients into your ecosystem who’ll pay for leads. You can start building that sales funnel for free with ClickFunnels.
• Marketing — You’ll also need to do some marketing to acquire new clients/members. That includes advertising as well as organic marketing.
• Sales — Finally, you’ll need to make some consistent efforts in the sales department. This is the main way you’ll find new clients. Do cold outreach to businesses via cold call or email (we highly recommend using LinkedIn for this!).

Step 4. Build a Sales Funnels

Let’s recap.

You’ve chosen a niche, decided what you’re going to charge, and found a few starting clients. Now it’s time to build your website and sales funnels.

Prepare your decision-making muscles… because you’re about to use them a lot.

Here are bare-minimum elements you’ll need to get your business up and running…

• Sales Funnel — The first thing you need is a sales funnel, a series of pages that are built to convert traffic into leads for your clients. The easiest way to figure out what this sales funnel should look like is to go look at other lead-gen sales funnels in your industry and take notes! Map your plan out on paper first. Then ClickFunnels makes the technical side of building your sales funnel super easy.

• Lead Tracking — The next step is to ensure you have a method in place for tracking which leads go to which clients. This is important so that you can get paid for every single lead you generate for your clients!
• Lead Delivery — So that your clients can reach out to leads immediately, you should have an automated lead-delivery system that sends contact info to your clients right after the lead opts in.
• Client Portal — You might also want some sort of client portal on your website where clients can view how many leads you’ve generated for them, how much they currently owe you, and any other pertinent information.

Once you’ve got some traction, you might consider building out a more in-depth website, adding a sales funnel for finding clients, and maybe even adding a blog.

But start small. And then grow when it’s time to grow.

Step 5. Drive Traffic (Organic & Paid)

Here’s a super important question.

How are you going to generate leads for your clients?

Well, you already have a sales funnel (see the last step) that’s built to convert visitors into leads… so now we need to worry about driving traffic to your sales funnel.

There are basically two different high-level strategies you can use…

• You can pay for traffic.
• You can work for traffic.

Paying for traffic involves things like running Google ads and Facebook ads. Working for traffic includes publishing content and improving your site’s SEO.

We recommend getting in the habit of running ads to get your site off the ground and, in the meantime, working on your SEO — that’ll take a while to build up but it’ll pay back tenfold once it’s driving traffic. You can learn more about SEO over here.

And click the link below to learn some of the best traffic-driving hacks, 100% for free.

Learn How To Drive an Endless Stream of Traffic to Your Sales Funnels (free training)!

Step 6. Get Paid

Who doesn’t love payday?!

You’ve found some clients, built a sales funnel, and generated leads for those clients. Now it’s the end of the month and it’s time to send some invoices and get paid.

If your clients have agreed to pay per lead, then you simply need to figure out how many leads you sent them to determine what they owe — the math is even easier if they pay a membership or retainer fee.

And that’s it.

Send your invoices, get paid, and do it all again next month!

Final Thoughts

The lead generation business model is an exciting opportunity for entrepreneurs who want to build a business that is flexible, passive (once it gets up and running), and low-budget.

And now you have all the knowledge you need to get started!

There’ll be a lot more to learn along the way — don’t doubt that.

But the above steps are as good a starting place as any for your entrepreneurial journey. If you’re ready for the next steps, then click the link below and we’ll teach you how to drive traffic (a critical skill to have for building a lead-gen business)!

Learn How To Drive an Endless Stream of Traffic to Your Sales Funnels (free training)!