What can you afford to pay for a lead? Do the math before you run ads
“Is this campaign working?” is hard to answer without a number to compare against. Three figures from your own business give you that number.
Google and Meta will happily report clicks, impressions and likes. None of those pay the bills. The number that tells you whether ads are worth it is cost per lead: what you spend, on average, to get one phone call, form or booking request. To judge it, you need to know the most you can afford to pay. That's your break-even cost per lead.
The three numbers you need
- Average job value: what a typical customer pays you for one job.
- Gross margin: the share of that job you keep after materials, labour and other direct costs.
- Close rate: out of every ten leads, how many become paying jobs.
Then the math is two steps:
- Profit per job = average job value × gross margin
- Break-even cost per lead = profit per job × close rate
A worked example
Here's a fictional renovation company. The numbers are made up to show the method; yours will be different.
- Average job value
- $4,000
- Gross margin
- 30%
- Profit per job
- $1,200
- Close rate (1 in 4 leads)
- 25%
- Break-even cost per lead
- $300
If this company pays less than $300 for a lead, the ads make money on the first job. If it pays more, it's losing money on every lead until repeat work or referrals make up the difference.
Don't aim for break-even
Break-even is the ceiling, not the goal. Leave room for slow months, leads that go nowhere and the time it takes you to quote. Many owners set a target well under break-even and treat anything above it as a reason to change the campaign.
Count repeat customers, carefully
If a typical customer comes back or sends referrals, one lead is worth more than one job. You can raise your ceiling to reflect that, but only with real numbers from your own records. It's easy to talk yourself into paying too much for leads on the promise of future work that never arrives.
Use it to compare where your ads run
Search ads on Google reach people who are already looking for the service. Ads on Facebook and Instagram reach people before they're looking. They often produce different costs and different kinds of leads. Track cost per lead and close rate for each source. A cheap lead that never books is more expensive than it looks.
Want to try your own numbers? The calculator on our Paid Media page runs this same math as you type.