Strategy
What a lead is actually worth to your business
Published 2026-02-14 · By Launch & Found
Most owners buy leads without knowing what one is worth to them. Here is the arithmetic, a worked example, and the number that tells you whether any channel is paying.
Ask most owners what a lead is worth and you get a shrug, or a number they heard from someone else in the trade. That is a problem, because every marketing decision you will ever make is downstream of it. Without it you cannot tell a good quote from a bad one, you cannot tell whether last month worked, and you cannot argue with anyone selling you leads.
The arithmetic is short. You can do it on the back of an invoice.
The only three numbers you need
Your average job value. Not the big one you remember. Add up last year's revenue, divide by the number of jobs. The number that comes out is usually lower than the one in your head, and that gap is the whole reason this exercise is worth doing.
Your close rate on quoted work. Of the people who ask you for a price, how many say yes? Most trades land somewhere between one in three and one in two. If you have never counted, count for a month before you trust it.
Your gross margin. What is left after materials and labour on the job, before overhead. This is the part that matters, because revenue you spend on doing the work cannot also be spent on getting it.
Turning that into a cost per lead
A lead is not a job. It is a chance at one. So its value is the value of a job multiplied by the odds of winning it.
Take a renovator with a $9,000 average job, a 35% close rate, and a 40% gross margin:
- A won job leaves $3,600 in gross profit.
- Each lead has a 35% chance of becoming one.
- So a lead is worth $1,260 in gross profit.
That $1,260 is your ceiling — spend that per lead and you break even before overhead. What you actually want is a target, and the usual one is a third of it or less. For this renovator, anything under about $420 a lead is working, and $150 a lead is very good.
Run yours:
| Trade | Average job | Close rate | Margin | Gross profit per lead | Healthy target |
|---|---|---|---|---|---|
| Renovation | $9,000 | 35% | 40% | $1,260 | under $420 |
| Roofing | $12,000 | 30% | 35% | $1,260 | under $420 |
| HVAC install | $6,500 | 40% | 35% | $910 | under $300 |
| Plumbing service | $600 | 60% | 45% | $162 | under $55 |
| Landscaping | $4,000 | 45% | 40% | $720 | under $240 |
Those are worked examples, not benchmarks. Use the shape, put your own numbers in it.
The reason a plumber and a roofer cannot use the same marketing playbook is sitting in that last column. One can pay $400 for a lead and still be well ahead. The other is underwater at $60.
What the number actually changes
Once you have it, three arguments end.
Whether a channel is worth keeping. Divide what you spent by the leads it produced. Compare it to your target. That is the entire review. No dashboard required.
Whether a shared-lead service is a rip-off. It depends on your number, not on the price. A $150 lead sold to four contractors is dreadful for the plumber and defensible for the roofer.
How fast you need to answer the phone. This one surprises people. If a lead is worth $1,260 in gross profit and you lose half of them by replying tomorrow instead of in five minutes, the delay is not a service problem. It is the most expensive line item in the business, and it does not appear anywhere in your books.
A contractor answering a call on site, which is where most leads are won or lost.
The mistake almost everyone makes
They use revenue instead of gross profit.
A $9,000 job is not $9,000 of value. If $5,400 of it walks out the door as materials and labour, then paying $800 for the lead that produced it is not a 9% cost of sale, it is 22% of what you actually kept. Marketing budgets built on revenue look comfortable right up to the point the year ends and nothing is left.
Use margin. It is a smaller number and it will make you more careful, which is the point.
Do this once a quarter
Your close rate moves. Your average job value moves, usually up, and usually faster than the price you are willing to pay for a lead. An owner working from numbers they calculated two years ago is often turning down channels they could now easily afford.
Fifteen minutes, four times a year. It is the highest-paid quarter hour in the business.
Common questions
What if I have never tracked my close rate?
Start with a month of counting quotes sent against jobs won. Until then, assume one in three — it is the safest place to be wrong, because it makes you conservative on what you will pay for a lead.
Should I include repeat customers in the average job value?
Not in this calculation. You are working out what a new lead is worth, and repeat work did not come from a lead. Track lifetime value separately; it is a real number and it is usually the argument for spending more, not less.
My leads are all referrals. Does this still apply?
Yes, and it is the strongest reason to do it. Referrals feel free, which is why most owners never notice how few of them there are, or that the number has been flat for three years. Knowing what a lead is worth is how you decide whether to build a second channel before you need one.
Is a cheaper lead always better?
No. A $60 lead that closes at 5% is worse than a $400 lead that closes at 40%. Cost per lead is the input. Cost per job is the number that pays you, and the two rank channels differently more often than you would expect.
Want the phone to actually ring?
That is the whole job. See how we do it, or tell us about your business.