Cost Per Funded Deal: The Metro Broker Maths

Key takeaways

• Cost per funded deal = total acquisition spend / settlements attributable to it.
• Unpaid time is a real cost. Cost the hours or the number is fiction.
• Attribution needs a lag: this month's settlements came from spend two to six months ago.
• Three levers move it - conversion rate, average loan size, and channel mix.

How do you calculate cost per funded deal?

Take a period long enough to cover your sales cycle - a quarter is usually the minimum, because a home loan enquiry rarely settles in the month it arrives. Then divide.

Cost per funded deal = (lead spend + advertising + acquisition-related salaries and contractors + software attributable to acquisition) / number of loans settled from that cohort.

The two things brokers leave out are the two biggest. The first is time: the hours you and your staff spend on enquiries that never settle are the largest single input, and they are invisible because nobody invoices you for them. The second is the lag - dividing this month's spend by this month's settlements measures nothing at all when the cycle is three months long.

A worked example

Illustrative only - the point is the method, and your own inputs will differ substantially by market and channel.

Remove your own time and the same business reports $1,167 - a 36% understatement, and the reason so many brokers believe a channel is profitable when it is quietly consuming the only resource they cannot buy more of.

Which lever should you pull first?

Conversion rate, almost always. It is the only lever that improves the numerator and the denominator at once: the same spend produces more settlements, and less of your time is spent on enquiries that were never going to proceed.

• Conversion - faster response, better qualification before the appointment, and a follow-up sequence that survives past two attempts.
• Average loan size - a niche with larger loans lifts revenue per deal without touching cost per deal. This is the quiet argument for specialising.
• Channel mix - shift spend from channels that generate contacts to channels that generate appointments.

Compare the result against revenue per deal - upfront plus the present value of trail - before deciding whether a number is good or bad. $1,800 is comfortable on a $750,000 loan and ruinous on a $180,000 one.

Frequently asked questions

What is a good cost per funded deal for a mortgage broker?

There is no universal benchmark, because it depends entirely on your average loan size and commission structure. The useful test is the ratio: your cost per funded deal against your revenue per funded deal including the present value of trail. Track the ratio over time rather than chasing someone else's dollar figure.

Should I include my own time as a cost?

Yes. It is usually the single largest input, and excluding it makes unprofitable channels look profitable. Cost it at a realistic hourly rate for the work - what you would have to pay someone to do it, or what you could otherwise earn in that hour.

How do I attribute settlements to spend when the cycle is months long?

Tag the source on the enquiry record when it arrives and report on the enquiry cohort, not the settlement month. Then compare a cohort's eventual settlements against the spend in the period the cohort arrived.

Does trail commission change the calculation?

It changes the revenue side, not the cost side. Value trail as a present value rather than a face amount, and remember that clawback and refinance attrition both reduce what you actually receive.

Related reading

• Why Shared Leads Stopped Converting
• Referral Dependency: A Fragile Pipeline
• Speed to Lead: Why the First Five Minutes Decide the Deal

Sources

• Quarterly mortgage broker market share reporting — MFAA
• Moneysmart - working with a mortgage broker — ASIC