How to start a lead broker business

Starting a lead broker business means building five things: buyers who will pay for leads, sellers who supply them, distribution technology that routes each lead in real time, a compliance process for consent records and calling rules, and enough working capital to pay sellers before buyers pay you. Written return terms connect all five.

What does a lead broker business need?

A lead brokerage buys leads from sellers and resells them to buyers (see what is a lead broker). To do that every day, it needs the pieces in this table in place before the first lead is sold.

How do you start a lead broker business, step by step?

1. 1

   Pick a vertical and define the lead

   Choose one vertical and write down what a sellable lead is: required fields, sub-types, states, and how recent it must be.

2. 2

   Form the business

   Choose a business structure, register it, get a tax ID and any licenses your state requires, and have contracts drafted.

3. 3

   Sign buyers

   Find buyers for the lead you defined and record their filters, caps, schedules, prices, return terms and payment terms.

4. 4

   Sign sellers

   Approve sellers whose leads match those filters, after reviewing their sources and consent language.

5. 5

   Set up distribution

   Build or license software, configure buyers and sellers, and test end to end.

6. 6

   Build the compliance process

   Decide how consent records are captured, stored and produced, and how sources are reviewed.

7. 7

   Plan cash flow

   Set payment terms on both sides, buyer credit limits and a return reserve.

8. 8

   Launch small and measure

   Run a test volume, review sold rate, returns and margin, then add volume.

The sections below explain each step in more detail.

Step 1 and 2: choose a vertical and form the business

Start with one vertical you can learn well. Each vertical has its own buyers, lead fields, return reasons and rules. For example, accident leads go to law firms and are subject to attorney advertising rules, while home improvement leads go to contractors and depend on project type and homeownership. Write a one-page lead definition before you talk to anyone: the fields, the qualifying answers, the states and the maximum lead age.

Business formation is the same as for other service businesses, in general terms:

1. Choose a business structure. The SBA’s guide to business structures and the IRS page on business structures explain the options and their tax treatment.
2. Register the business in your state and get a federal tax ID.
3. Check which licenses and permits apply where you operate, using the SBA’s licenses and permits guide.
4. Have a lawyer draft or review your buyer agreement, seller agreement and privacy policy.
5. Ask an insurance broker about coverage for a business that handles consumer data and resells leads.

How do you find buyers and sellers?

Sign buyers first

Buyers decide what is sellable, so sign them first. For each buyer, record the states and ZIP codes they serve, the sub-types they accept, the hours they can take leads, their daily caps, their price or bid range, their return reasons and window, and how they want leads delivered. Ask for references and check that the business is what it says it is.

Buyer types to approach include end buyers (law firms, contractors), aggregators and buying desks that resell to end buyers, and other brokers with demand you lack. See lead aggregators.

Then sign sellers

Look for lead generators and publishers whose leads match your buyers’ filters. Review each one before going live: where the traffic comes from, the landing pages and forms, the consent language, and sample leads. Give every seller a source ID so you can measure and cut sources separately. The buyer-side view of this review is in how to find a lead supplier.

What distribution technology does a lead broker need?

A brokerage runs on lead distribution software. You can license it or build it. Whichever you choose, it must:

• Accept leads from sellers by API, and run ping/post exchanges with buyers in real time.
• Apply routing rules: filters, priority, weighting, caps, schedules and fallback. See how lead routing rules work.
• Organize buyers into tiers with price floors, as described in what is a ping tree.
• Validate phone, email and address, and reject duplicates. See lead validation.
• Store the consent record with each lead and pass it to the buyer.
• Record returns and reverse them on both sides.
• Report sold rate, price, returns and margin by seller, source and buyer.

The full feature list and an evaluation checklist are in lead distribution software.

What compliance rules apply to a lead brokerage?

A broker does not usually make the calls, but its buyers do, and the leads it sells are only useful if the consent behind them holds up. The main rules, in general terms:

In practice, a compliance process for a brokerage covers these steps:

• Review every seller’s forms and consent language before going live, and again when they change.
• Require a consent record with every lead: the consent text shown, time stamp, IP address and page URL.
• Keep consent records for as long as your lawyer advises and be able to produce one for any lead on request. See consent record-keeping.
• Make sure the consent language covers the buyers the lead is sold to.
• Protect the personal data you hold; the FTC’s guide to protecting personal information is a starting point.
• Keep a record of each source’s ads and pages, so you can answer a complaint about a lead.

The TCPA compliance hub and TCPA for ping/post delivery cover these rules in more depth. This is general information, not legal advice.

How do you finance the gap between paying sellers and being paid by buyers?

Payment timing is a cash flow question, separate from whether each lead makes a margin. Sellers usually want to be paid soon after their leads sell. Buyers usually pay on invoice terms, some pay late, and some return leads after you have already paid the seller. The broker funds the difference. To plan for it:

1. Write down the payment terms you will give sellers and the terms you will get from buyers, and work out how many days of lead purchases you will be funding at any time.
2. Hold enough working capital to cover that period at your planned volume, plus a margin for a buyer who pays late.
3. Ask new buyers to prepay or pay a deposit until they have a payment record with you.
4. Set a credit limit for each buyer, and pause their leads when they reach it.
5. Hold a reserve for returns, so a return that arrives after you paid the seller does not come out of operating cash.
6. Raise volume only as fast as your working capital allows.

Talk to an accountant about the cash flow model and any financing before you launch. Seller-side terms are covered from the seller’s view in how to get paid for lead generation.

How should returns work?

Buyers return leads that are invalid: wrong number, duplicate, outside their filters, or not the person who filled in the form. Every return reduces what the buyer owes you, so your seller terms must let you pass it back. Set up returns this way:

1. List the return reasons you accept, in the same words, in buyer and seller agreements.
2. Set a return window for buyers that ends before the window you have with sellers, so you have time to pass returns through.
3. Require evidence for each return, such as call records or a validation result.
4. Track returns by seller, source and buyer, and act on any source or buyer whose rate rises.

The common causes are listed in why leads get returned.

How do you launch and measure?

Start with a small volume from a few sellers to a few buyers. Each week of the test, review:

• Sold rate by seller and source: the share of leads that a buyer accepted.
• Price per sold lead by buyer and state.
• Return rate by seller, source and buyer.
• Margin per sold lead after returns.
• Days to payment on the buyer side, compared with your seller terms.

Add sellers and buyers only when these numbers are stable. If you want to sell leads you produce yourself instead of brokering, start a lead generation business covers that path.

Common mistakes

• Signing sellers before buyers. Leads with nowhere to go go unsold, and sellers leave.
• Underfunding payment timing. A single late buyer can leave you unable to pay sellers.
• Mismatched return terms. If buyers can return leads for reasons your sellers did not agree to, the cost is yours.
• Accepting leads without consent records. A lead you cannot prove consent for may not be sellable.
• Too many verticals at once. Each vertical needs its own buyers, rules and lead definition.

Frequently asked questions

Related guides

• What is a lead broker: What brokers do and how they compare.
• Lead distribution software: Features to evaluate.
• TCPA compliance for lead generators: Consent rules for leads you sell.
• Sell to a broker or build a network: The seller’s side of the choice.
• Lead distribution explained: How supply and demand are matched.

Already generating leads on your own forms? Sell your leads instead.