How to calculate ROI or return on investment on motor vehicle accident leads

This is going to be a pretty short blog post, because it’s pretty easy to calculate your return on investment for car accident leads or really any other personal injury leads that you’re buying or working on. Here’s what you do, step by step:

  1. Calculate Your Total Spend: First things first, you need to know what you spent. To do this, you take the total amount of leads you paid for and multiply that by the price you’re paying per lead to get your total marketing spend with that company (or advertising platform, or TV commercial, etc). Most firms will do this on a monthly basis. You look at any given lead source — let’s say you’re using PinPoint Legal Marketing (because you’re such a smart and marketing savvy attorney… wink wink), you would look at all of the leads that you paid for in that calendar month. To keep numbers simple, let’s just say you’re paying $200 per lead and you got 100 leads in the last month, giving you a total spend that month for that company/channel/ad of $20,000 – $200 x 100. 
  2. Know Your Cost Per Signed Case: Next, you take that $20,000 and let’s say out of those 100 leads generated, you converted 20 leads, which is roughly average for quality car accident leads that are being worked properly. From there, you want to calculate your next key number – cost per signed case. In this instance, you’re cost per signed case is $1,000 – $20,000 spent divided by 20 cases = $1,000 per case. 
  3. Estimate Your Average Revenue Per Case: This can be a bit tricky since case values vary so much, but you should know an approximate target settlement range for each case you sign. For ease of explanation, we’ll use the averages here. Depending on where you look, the average car accident case in the United States is somewhere in the neighborhood of $15,000 to $20,000, maybe; let’s call it $15,000. So, let’s say your average fee is a third, so your average case nets the firm $5,000 before any other costs are factored in. 
  4. Calculating Your Total Return On Investment: Finally, you’ll put it all together…for this example we’d say we got 20 cases that had an average gross revenue of $5000 apiece. You then take your 20 cases, and you multiply that by $5,000, giving you $100,000 in gross profit. So, you’ve invested $20,000 and you made back $100,000. Obviously, that’s not going to take into account your intake staff that makes the calls, your attorneys that are working on the case, your paralegals that are helping you, your rent, your expert witnesses, etc, etc, etc. That’s why and depending on the industry, and depending on who you ask, most people will say in order to keep a marketing campaign going, you need to be getting at least 3 to 1, sometimes 4 to 1 on your money.

If you’re converting about 20% of the leads, at these numbers, you should be doing quite well and there should be plenty of profit left over. Keep in mind, these are using averages – again, case values swing wildly, intake matters a lot, and not all car accident leads are created equal. 

Simple Way of Calculating ROI

The real simple formula for calculating ROI is you take the total amount of money that you spent and you look at the total number of cases that you signed and you look at what the estimated case value is for the cases that you signed. So, out of 100 leads, let’s say you signed 20. You averaged $5,000 per case in revenue. Keep in mind, some months you may get one great case and the average revenue per case might be $10,000-$20,000 and you’re doing great, some months might be all soft tissue cases and you might barely get to 3-1 on your money. But you look at the total spend, the total number of cases, and the total amount of money that you expect to make on the cases that you signed… and there’s your ROI.

This formula can really be carried over to any other form of advertising that your law firm is doing. For things like personal injury leads or workers comp leads, generally the cost per lead and the fee that the firm is going to take in per case are probably going to drop down a little bit, so the numbers might look a bit different, but the concepts and formula don’t change. It’s still the same, it’s still ROI, and the ratio you’re still looking for is still generally 3 to 1 or 4 to 1 on your money.

So, if you’re getting that, usually you’re profitable, it’s paying for all of the other expenses that are involved in running the business, and there’s some money to put in the bank at the end of the month. Generally, anything over 4 to 1, you’re doing pretty well. And if you’re not doing well while getting 4 to 1 or 5 to 1 on your money, you’re may want to start looking into why the costs of running your practice are so high.