A contractor put it like this: tired of paying $40 and up per lead and barely booking jobs.
That complaint is everywhere, and the advice underneath it is always the same. Answer faster. Follow up more. Which is real advice, and it's also the answer to a different question than the one he asked.
He's asking whether the math works. So let's do the math. It's three numbers and a piece of paper.
I already wrote about what a shared lead actually is and what people say happened when they tried to cancel. This isn't that. This is just the arithmetic, which almost nobody puts in writing, probably because it doesn't sell anything.
The equation
What a job costs you in lead spend is this: what you pay per lead, divided by the share of them that turn into work.
That's it. Cost per lead, divided by close rate, equals cost per job. Everything else is noise.
So at $40 a lead and a 10 percent close rate, every job costs you $400 in lead spend. At a 20 percent close rate, $200. At 5 percent, $800.
Now hold that next to what a job pays you and you have your answer. Not an opinion about lead companies. An answer.
Why the close rate is so low
Here's where the shared part bites.
If the same request goes to four contractors, you're not closing the job, you're closing a race. Four of you call. The homeowner talks to two, maybe three. Even if you're the best of the four, you're in a coin flip at best, and you paid full price for the entry.
That's the mechanism behind the low numbers people report. Not that the leads are fake, though some clearly are. It's that four guys paid $40 for the same job and three of them got nothing.
It also explains the other complaint you see constantly, which is people not answering their phone. Put yourself on their side. They filled out one form and six numbers they don't recognize started calling within ten minutes. By call four they stop picking up. Everybody after that paid $40 for a voicemail.
So the real close rate isn't your close rate. It's your close rate multiplied by your odds of being one of the first two to reach them.
Run your own numbers, right now
Don't use my numbers. Yours.
- What did you spend on leads last month? Total. Including the ones you disputed and lost.
- How many jobs came out of it? Actual booked and completed work, not estimates given.
- Divide. That's your cost per job.
- Now compare it to your average job profit. Not revenue. What's left after materials and your time.
If cost per job is under about 10 percent of what the job leaves you, that's a decent channel and you should probably buy more of them. If it's north of 30 percent, you're running a business for somebody else's benefit.
Most guys who do this exercise for the first time are surprised, and not in the good direction. Mostly because nobody counts the leads that went nowhere. You remember the three jobs you won. You don't remember the forty bucks, forty more times.
The three numbers people fudge
When guys run this and it comes out fine, it's usually because one of three numbers got rounded in a friendly direction.
First, they count estimates as closes. An estimate isn't a job. It's another free hour you gave away. Only count work you actually did and got paid for.
Second, they use revenue instead of profit. A $4,000 job that leaves you $700 after material and labor is a $700 job for this purpose. Lead cost comes out of the $700, not the $4,000.
Third, they forget the credits. If you spent $600 and got $80 back in disputed leads, your real spend was $520, and you should use that. Be as honest in your own favor as you are against it.
Get those three right and the number you end up with is the truth, and it's usually within a few percent no matter how you slice it.
The trap in the middle
There's a bad zone where the math sort of works and it keeps you stuck.
Cost per job comes out to 20 percent of profit. Painful, not fatal. Enough work comes in that you can't quit it, and not enough money is left over to build anything else. So you renew, and next year you're in exactly the same spot with a year less runway.
That's the real cost, and it doesn't show up on the invoice. Rented lead flow doesn't compound. Two years of spend leaves you with the jobs you did and nothing else. No profile, no rankings, no list of people who know your name.
Compare that to two years of asking every customer for a review. That's free, it's slower, and at the end of it you own something that keeps working when you stop paying.
What the same money buys somewhere else
Say you're spending $600 a month on leads. That's $7,200 a year.
For that money you could have a site, a Google profile somebody actually maintains, and pages for the specific jobs you want, with change left over. My middle tier is $749 a month and it covers two cities and eight posts a month, which is roughly the same monthly number as a moderate lead habit.
I'm not going to pretend that's a straight swap. It isn't. Bought leads produce calls in week one and owned marketing does not. If your calendar is empty right now, buying leads is the correct move and anybody telling you otherwise has never had an empty calendar.
The honest comparison is this: leads are rent, marketing is a mortgage. Rent solves this month. It never stops.
When I'd keep buying them
There are real cases. First year in business with no reputation yet. A new service line nobody knows you do. A slow season you need to fill. A market where you genuinely answer faster than everyone, because then the shared part hurts you less and the math gets good.
The thing I'd change isn't whether you buy them. It's that you buy them with a number in your head instead of a feeling. Know your cost per job. Check it monthly. The day it crosses your line, you cancel without a two week argument with yourself, because you decided the line back when you were calm.
And run the arithmetic before you sign anything, not after. Everybody who's angry about this ran it after.
One last thing on the record keeping, because it's the piece people skip. A note on your phone is enough. Date, what the lead cost, did it turn into a job. Ten seconds each. Do that for 60 days and you'll have a better read on your own business than any dashboard anybody's going to show you.
If you want a second set of eyes on your numbers, send me what you spent last month and how many jobs it turned into. I'll tell you if it's working, and if it is, I'll tell you to keep doing it.