What Is a Lead Actually Worth to You?

Every argument about marketing spend is really an argument about this number, and most businesses have never worked it out.

Without it, "is forty dollars a lead expensive?" has no answer. With it, the question answers itself in about ten seconds.

The basic calculation

Two inputs. Both of them you already know, or can find out this week.

Average job value. Add up what you invoiced over a recent period and divide by the number of jobs. Use a few months rather than a good week.

Close rate. Of the enquiries you receive, what share turn into paid work? Count honestly. The ones who never rang back, the ones who went with a cheaper quote, the ones who were never going to book.

Multiply them.

Say your average job is 600 and you convert one enquiry in three. Each enquiry is worth 200. Those figures are an illustration, not a benchmark: put your own in, because the whole point is that the answer is specific to your business.

That single number now tells you what you can afford to pay for an enquiry, and it is the number that makes working out what to spend on ads a calculation instead of a guess.

Use gross profit, not turnover

Here is the first correction, and it matters.

A 600 job is not 600 of value to you. Materials, fuel, the hours, subcontract labour. If that job leaves you 250 after the direct costs of doing it, then your enquiry is worth a third of 250, not a third of 600.

The whole figure changes. In the example above, 200 becomes about 83.

Use the profit figure for any decision about ad spend, because that is the money actually available to buy more work with. Businesses that run the calculation on turnover talk themselves into spending that feels fine and is not.

The two parts everybody forgets

Repeat work. This is the big one in trades. A customer who rings you twice a year for eight years is worth a multiple of that first job, and the first job is the only one your marketing had to pay for. If your business genuinely has repeat custom, a lead is worth far more than the first transaction suggests.

Be honest about whether you have it. A plumber doing maintenance for the same households does. Somebody doing one-off installations largely does not.

Referrals. Harder to measure and real. One good job in a street produces the neighbour, and no analytics tool will ever show you that happening, which is part of why where a lead came from is such an awkward question.

You cannot put a precise figure on either. You can stop pretending they are zero, which is what the basic calculation implicitly does.

Doing it properly, in five steps

1. Take three months of invoices and work out the average job value.
2. Strip out direct costs to get to gross profit per job.
3. Count enquiries over the same three months, from every source, including the phone.
4. Divide jobs won by enquiries received for your close rate.
5. Multiply profit per job by close rate. That is your lead value, conservatively, before repeat work and referrals.

Step three is where most people stop, because nobody counted the enquiries. That is the argument for keeping a log even a rough one, and it is why the counting has to come before the maths.

What to do with the number

Judge any cost per lead against it. Somebody quotes you a price per enquiry. Compare it to your figure. If a lead is worth 83 in profit and the enquiry costs 70, that is a bad deal with no room in it.

Leave margin for variance. You will have months where the close rate drops and the leads are poor. Paying a third of lead value is comfortable. Paying most of it means one bad quarter hurts.

Notice which lever is cheapest. Sometimes the answer is not more leads. If your close rate is one in five, lifting it to one in four is worth more than a twenty per cent increase in enquiries and costs nothing in media spend. Quoting faster, answering the phone, following up the ones that went quiet.

I spent close to a decade quoting bathroom jobs, and the quotes I lost were far more often lost to slowness than to price. That was free money I was leaving on the table and no amount of extra advertising would have fixed it.

Treat it as the filter for lead sellers. Anybody selling you shared enquiries is selling something worth less than an exclusive one, because you are quoting against three others. Price it accordingly.

Review it once a year

Job values move, close rates move, costs move. A figure worked out three years ago is now wrong in a direction you cannot predict.

Once a year is enough. Just do it once to begin with, because every other decision gets easier afterwards.

If you want help turning that number into a sensible monthly budget rather than a figure somebody else picked, that is the conversation worth having before any Google Ads work starts.