Question #1 - Do you have any references?
There are a couple ways to answer this.
The first is to be brutally honest. Let them know that you're a start up, but that that doesn't mean you don't know what you're doing, it's just the reason they are getting the absolutely incredible price on your services that they are.
Second, you talk to them about confidentiality, how important it is in this business. It would inappropriate for you to let them know what a possible competitor was doing, or had even used your services.
Third, follow that up with - the best reference I can give you is me. Pull up Google and enter your location and search for the terms related to your business. For example, if you provide business fanpages in Oakland, are you on page one at the top for those keywords?
Entrenching yourself, and your website, securely in the local places scheme of things is the best reference you could give. Even better if you can rank for several different versions of the keywords. You're the business that's above the line, perhaps several times. Your site, your business blog, your review of your business site, etc. all need to be what pops up when they search those terms.
Do the work to get them there before you try selling the selfsame service to others.
Question #2 - Why should I pay you a monthly fee for lead capture, why not just a commission on the sales generated by the leads?
Now you could just say that's not your business model, or policy, but that's a highly unsatisfactory answer.
Much better to approach from this angle - your business is what you are an expert at, not selling widgets, not knowing what widgets do, not even knowing what they cost or if they're useful.
That is the clients business.
You have no idea whether widgets are popular, you don't need to know that because that's his business not yours. Although he can hire you to improve popularity because that might be part of what you offer.
You have no idea whether he has sales people who can close the deal, perhaps they're rank amateurs, or worse, bored family members, again, the responsibility of his business, not yours.
Your job, the service you offer him, is to help him improve the results he's getting with his business model.
There is no reason for you to risk the work you provide on his behalf on factors that are part of his business model.
You're not hiring on to become a salesman for him, your job is to provide his salespeople with greater traffic and opportunity, and their job to close the sales.
It's about boundaries and how each of you, the business owner, his staff, and you, are each there for a particular reason, what they do best. And to get the best results, it's important for everyone to play the part suited to them.
But in the case of both these questions, be polite, be respectful, but firm.
And the hardest truth of all...not everyone is meant to be your customer.
It the deal doesn't work for you, move on.
Say goodbye with a smile.