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Value of a lead: what a lead is worth and what you can pay for one

A lead is worth the average value of a job multiplied by the share of leads that become jobs. Say a roof job is worth $9,000 and 1 in 8 leads becomes a job: a lead is worth up to about $1,100 in revenue. What you can pay for it is lower, since the job has its own costs. About 170 searches a month in the US look for "value of a lead," and about 70 for "average cost per lead by industry."

The formula

Three numbers give you the value of a lead:

1. Average job value. The money one customer brings in. For a repeat service, use the first year.
2. Close rate. The share of leads that become paying customers. Count all the leads you receive, not only the ones you answered.
3. Margin. The share of the job value that is left after the job's own costs, such as crew, materials and travel.

Revenue per lead is the job value times the close rate. Break-even price is revenue per lead times the margin. That is the most you can pay without losing money on the lead. No buyer should pay it. A buyer who wants to keep half of the profit pays half.

Worked examples by trade

Every job value, close rate and margin below is a made-up example with round numbers, not a result.

The table shows why a single price does not fit all trades. A $60 lead is cheap for a roofer and uses up the whole break-even of a plumbing repair. It also shows that value follows job size and close rate, not demand. US monthly searches are about 1,000 for roofing leads and about 720 for HVAC leads, yet in this example HVAC has the higher revenue per lead. The lead terms for every trade are on the markets page.

Why average cost per lead by industry misleads

An average cost per lead by industry can blend three things that matter:

• Mixed lead types. Calls, forms and booked appointments are averaged together, though a call can be worth more than a form.
• Mixed exclusivity. A shared lead and an exclusive lead have very different close rates, but they sit in the same average.
• Different job sizes. Within one industry, a repair and a full replacement can differ a lot. A single average covers both.

An average tells you what others paid, not what you can afford. Use it only as a sanity check on your own number from the formula. If your own number says a lead is worth $60 and sellers ask for $120, the market is not for you at that price. If it says $340, a seller offering leads at $120 is a good deal until the leads prove otherwise.

What moves the value of a lead

• Exclusivity. One buyer can close more often than three. On the pay per lead page, a worked example shows that the cost per job can be close even when the price per lead is not.
• Speed. A lead that reaches you in a minute can be worth more than the same one at the end of the day.
• Lead type. A call from someone who is ready can be worth more than a form from someone who is browsing. The page on searches that show buying intent covers the first kind.
• Area. A lead outside your service area has a value of zero, whatever the price.
• Wrong-audience searches. Part of the paid traffic behind a lead may never have been a buyer, and every such click raises the cost of a real lead. In one freight factoring market, 272 of 1,569 searches looked relevant but came from the wrong audience, and negative keywords for search ads take that spend out.
• Repeat business. For services a customer buys again, such as lawn care or pest control, the first job understates the value. Use the first-year value.

Mistakes in valuing a lead

• Mixing up revenue and price. The "up to about $1,100" for a roof lead is revenue. Paying anything close to it leaves no profit.
• Using the close rate of your best month. Take a year, or the last 50 leads at least.
• Counting only answered leads. Leads you never reached still cost money, so they belong in the close rate.
• Ignoring the cost of the sale. If an estimator spends half a day on each lead, that time comes out of the margin.
• Valuing every lead at the same price. A lead from an urgent call and a lead from a price-shopping form are not equal.

What to do with it

• Work out your own numbers for each service you sell, using the last 50 leads or more.
• Set the highest price you will pay per lead, and keep half the break-even figure as your margin of safety.
• Compare sellers on cost per job, not on price per lead.
• Review the number every quarter, since job values and close rates move.
• For homes and repair trades, see the page on home service leads.

FAQ

How do you calculate the value of a lead?

Multiply the average job value by the share of leads that become jobs. That gives revenue per lead. Multiply it again by your margin to get the break-even price.

What is the average cost per lead by industry?

There is no single honest figure. Averages blend calls and forms, shared and exclusive leads, and small and large jobs. Work out what a lead is worth to your business, then judge each price against that number.

Is a more expensive lead a better lead?

Not by itself. An exclusive lead from someone who called may cost more and close more often, so its cost per job can be lower. Judge it by cost per job after a month of real leads.

Should lifetime value be counted?

For services a customer buys repeatedly, yes, within a year or two. Beyond that the figure becomes a guess, and a lead price should not rest on a guess.

For lead sellers and buyers who want the search demand behind each trade in a market, see Querytally for lead generation and the sample files.

Checked by a person and delivered within 24 hours, with a link and a search number behind every row.