The cost per funded deal only means anything against what a funded deal pays. The calculation is three numbers long, and it is the one thing every broker running ads should be able to do from memory.
| Value | Where it comes from | |
|---|---|---|
| Cost per funded deal | $1,500 | High end of the $1,000 to $1,500 clients report at $60 a lead |
| Average deal size | $60,000 | Clients report $60,000 to $65,000 on these leads |
| Commission | 10 points, $6,000 | A typical rate; yours may be higher or lower |
| Return on the first deal | 4x | $6,000 back on $1,500 spent |
| Renewals | Not counted | Every one is commission on spend already returned |
Run it at your own numbers
- Use your real cost per funded deal over several months, not your best month. If you do not know it, that is the first problem, and the six numbers are how you get it.
- Use your real average funded deal, which is decided more by industry mix than by anything the floor does.
- Use the points you bank after any ISO or rep split, not the headline.
- Multiply, divide, and the result is how many times the spend came back on the first deal. Anything above 2x is a working channel. Anything below 1x is a channel to fix or stop.
Where the ceiling actually sits
The calculation is also how you decide the most you are willing to pay for a deal. Some brokers push cost per funded deal to $2,500 on larger files and it still works. Some clients are happy to break even on the first deal and make the whole margin on renewals, because what they are buying is a customer rather than a commission. Both are defensible; what decides between them is risk tolerance and how the business is run, and the calculation is what makes it a decision rather than a hope.
Questions brokers ask
What return should I expect on MCA ad spend?
At the benchmark numbers, about 4x on the first deal: a $1,500 cost per funded deal against $6,000 of commission on a $60,000 deal at ten points. Renewals are on top of that and are not counted in the 4x.
How do I calculate return on a funded deal?
Average deal size times your points gives commission per deal; divide that by your cost per funded deal. $60,000 at 10% is $6,000, divided by $1,500 is 4x. Use your banked points and your real average deal, not the headline figures.
What is the most I should pay per funded deal?
It depends on your deal size, your points and your appetite. At $6,000 of commission, $2,500 is still a 2.4x return and some brokers run there on larger files. Some accept break-even on the first deal for the renewals. The calculation tells you where you are; the tolerance is yours.
Does the return calculation include renewals?
No, and that is deliberate. The 4x is on the initial deal only. Every renewal is commission on a customer whose acquisition cost was already returned, which is why some brokers accept a lower first-deal return than others.
Why do most brokers not know these numbers?
Because cost per funded deal by source is rarely tracked, and Ads Manager offers a hundred other numbers to look at instead. Without the three inputs the calculation cannot be done, and without the calculation nobody knows whether the advertising works.
Reference
Run it with your own numbersYour cost per lead, your funded rate, your average advance, your points.
Alex Makowski
Founder, Infinite Bookings
Runs the lead generation operation behind Infinite Bookings — paid traffic, the funding application, and the delivery pipeline that puts records into brokers’ CRMs.
Reachable directly at alex@infinitebookings.com or 732-609-7182.