The highest cost per lead you can afford is the profit from a job, multiplied by the share of leads that turn into a quote, and the share of quotes you win. That is the most you can pay for one lead before you lose money on it. The numbers come from your own books, not from a seller’s brochure.
Prices quoted online for leads vary widely and nearly all come from businesses that sell them. So this page gives you a worksheet instead of a figure.
Start from the job, not the lead
A lead has no value until it becomes paid work. A cheap lead that never gets quoted costs you more than an expensive one that turns into a job. So start at the signed job and work backwards.
The four numbers you need
- Average job value. What a typical signed job brings in, before costs.
- Margin. The share of that you keep after materials, subcontractors and labour. Use the gross figure you already know from your books. Ask your accountant which costs belong in it.
- Quote rate. Of the leads you receive, how many end up with a written quote. Many do not, because the number is dead, the job is out of area, or the homeowner stops answering.
- Win rate. Of the quotes you send, how many get signed.
Write them down. If you are guessing, mark the guess. We cover what to do about that further down.
Worked example with made-up round numbers
These figures are an example only. They are not data and they are not typical of any trade. Swap in your own.
| Step | Example | Maths |
|---|---|---|
| Average job value | $40,000 | |
| Margin | 20% | $40,000 x 0.20 = $8,000 profit per job |
| Win rate | 1 in 4 quotes | $8,000 x 0.25 = $2,000 per quote |
| Quote rate | 1 in 2 leads | $2,000 x 0.50 = $1,000 per lead |
In this example, $1,000 is the break-even price for a lead. Pay that and you make nothing. Pay half and you keep half. You also need to cover your own time, so you would want to sit well below the ceiling.
Your own numbers
Fill in the gaps from your books:
- Average job value $______ x margin ____% = profit per job $______
- Profit per job x win rate ____% = value per quote $______
- Value per quote x quote rate ____% = break-even cost per lead $______
Write the answer somewhere you will see it when a seller rings. Any price near that line is a price that leaves you working for nothing.
Cost per lead, per quote, per signed job: which one to watch
Three costs, and the last one is the only one that pays the bills.
- Cost per lead. What you paid divided by the leads you received.
- Cost per quote. What you paid divided by the quotes you sent.
- Cost per signed job. What you paid divided by the jobs you won.
Using the example above, if you paid $100 for every lead: $100 per lead, $200 per quote (half the leads reach a quote), and $800 per signed job (you win one quote in four). Compare that last number with the $8,000 profit per job.
Why a cheap lead can cost more
Take two made-up sellers.
| Seller A | Seller B | |
|---|---|---|
| Price per lead | $40 | $120 |
| Leads that reach a quote | 1 in 5 | 2 in 3 |
| Quotes you win | 1 in 5 | 1 in 3 |
| Cost per signed job | $1,000 | about $540 |
Seller A looks cheaper by a long way, but costs nearly twice as much for each job you win. Part of this is quality. Part is how many other businesses got the same homeowner, which pulls down both the quote rate and the win rate. See what to ask before you buy leads.
Count your own time too
The worksheet above counts only cash. Every lead also costs you time: ringing, a site visit, writing the quote. Put a number on it.
A made-up example: each lead takes 20 minutes on the phone, half of them get a two-hour visit and quote, and you value your time at $80 an hour. That is about $27 of phone time and $80 of quoting time per lead on average, so roughly $107 of your time on every lead before you pay anyone. Take it off the ceiling. In the first example, a $1,000 ceiling becomes about $890.
This is also why a lead that never answers is not free even when a seller replaces it. You have already spent the phone time.
What to do when you do not know your win rate
- Count back through your last 20 quotes. Even a rough count beats a guess.
- Use a cautious number. If you are unsure, use a lower win rate than you hope for.
- Separate warm and cold. Referral quotes usually win more often than quotes to strangers. Do not use your referral rate for bought leads.
- Test small. Buy a few, follow every one up fast, and record what happens. After ten or so you have a real figure of your own.
Your win rate also depends on how quickly and how well you follow up. Our guides on how fast to respond to building enquiries and why builder quotes go quiet cover that side.
If you want to see how a one-business, phone-checked model fits the sums, look at how PreBuild finds homeowners. Run any seller’s offer through the same worksheet first.
Common questions
How much should I pay for a lead?
No more than your break-even figure, and well under it so you are paid for your time. Work it out as job profit x win rate x quote rate.
How is cost per lead calculated?
Total spent divided by the number of leads received. It is a starting point; cost per signed job is the number that matters.
What is a good cost per lead for a tradie?
There is no single good figure, because job size, margin and win rate differ by trade. A good price is one comfortably under your own break-even.
Should I count the leads that never answer?
Yes, because they are part of what you paid for. That is why cost per signed job is the fairer measure.