Every lead vendor and ad platform will tell you what a lead costs. It's the number on the dashboard, the number in the sales pitch, and often the number owners use to compare channels. It's also the number most likely to steer your budget the wrong way.
Why cost per lead misleads
A lead is an inquiry, not a job. Channels differ enormously in how many of their inquiries turn into signed contracts. Some send homeowners who are ready to build. Others send people collecting quotes from five contractors, or who were never a fit for your price range.
So a channel can deliver the cheapest leads you buy and still be the most expensive way you win work. Cost per lead only measures the top of the funnel, the part the vendor controls. Cost per signed job measures the whole thing.
A simple example
Here's a hypothetical comparison of two channels over a year:
| Channel A | Channel B | |
|---|---|---|
| Spend | $24,000 | $24,000 |
| Leads | 400 | 100 |
| Cost per lead | $60 | $240 |
| Signed jobs | 3 | 6 |
| Cost per signed job | $8,000 | $4,000 |
On a cost-per-lead report, Channel A looks four times better. Measured by signed jobs, it costs twice as much. Cut by the first number and you'd cut the wrong channel.
The real version of this
In our case study, a Texas design-build firm's Angi leads signed at 0.65%, about 1 in 153. Its other paid sources signed at 3.17%, about 1 in 32. Over 28 months, Angi took $55,358 and produced 2 signed jobs: $27,679 per signed job, against $4,958 for the other paid sources combined. That's one firm's account in one market, and another firm's results could look quite different. The point is that you can't know which until you trace your own leads to signed jobs.
How to calculate it yourself
- Pick a period. At least 12 months, so seasonality evens out. Leave out the most recent couple of months, since those leads haven't had time to sign yet.
- Count signed jobs by original lead source. Credit each job to the channel that first brought the lead in, not to wherever it was last touched.
- Total the spend per channel for the same period, including agency fees and subscriptions, not just ad spend.
- Divide spend by signed jobs. That's your cost per signed job for each channel.
Watch out for
- Blank or messy sources. “Website” or “Other” can hide several real channels.
- Small numbers. A channel with 2 jobs versus 4 jobs may not be different at all. How to check.
- Job value. If one channel signs much bigger projects, compare revenue or margin per marketing dollar too, not just job counts.
Then add the funnel
Cost per signed job tells you which channel is expensive. The funnel tells you why. If a channel's leads book consultations at a normal rate but rarely sign, the issue may be fit or price expectations. If they never get past the first call, it may be lead quality. Each points to a different fix, and sometimes the fix isn't cutting the channel at all.
If you'd like this worked out for your own channels, that's exactly what the Channel Decision Audit does, for a fixed price, in 2 weeks.