Why this matters more than any quote you receive
If you know what one enquiry is worth to your business, every price you are quoted becomes easy to judge. If you do not, you are negotiating blind and the supplier sets the anchor.
It takes about ten minutes and you need two numbers you probably already have.
The calculation
Start with average job value — what you actually invoice on a typical job in the service you want more of. Not your best job. Not the one you tell people about. The median.
Then close rate on warm enquiries — of the people who contact you wanting that service, what proportion end up as booked work. Count the ones who go quiet and the ones who chose someone else.
Multiply them. That is the gross revenue one enquiry produces on average.
Then multiply by your gross margin — what is left after materials, labour, travel and disposal. That is the contribution one enquiry makes, and it is the number your ceiling has to sit under.
A worked example
The figures below are arithmetic illustrations to show the shape of the calculation, not market data. Use your own numbers.
| Step | Example A | Example B |
|---|---|---|
| Average job value | $800 | $6,000 |
| Close rate on warm enquiries | 1 in 3 | 1 in 5 |
| Gross revenue per enquiry | $267 | $1,200 |
| Gross margin | 40% | 30% |
| Contribution per enquiry | $107 | $360 |
| Sensible ceiling per lead | well under $107 | well under $360 |
Two things fall out of this immediately. A higher job value buys you a much higher tolerable cost per lead, which is why demolition and restoration leads cost more than detailing leads on the industries page. And close rate moves the answer as hard as job value does — improving your close rate from one in five to one in three is worth more than negotiating a discount from any supplier.
How far under the ceiling should you sit?
Far enough that the arrangement survives a bad quarter. If cost per lead sits at eighty percent of contribution, a seasonal dip or a run of tyre-kickers puts you underwater immediately and you have done a lot of work for nothing.
A rough guide many operators use is that cost per lead should not exceed about a quarter to a third of the contribution one enquiry produces. Below that the arrangement absorbs variance. Above it, you are relying on everything going right.
The four ways people get this wrong
Using revenue instead of contribution. Makes every lead price look cheap. Materials and disposal are real money.
Using an imagined close rate. Owners consistently overestimate it. Measure three months before you commit to anything.
Using your best job as the average. The one that paid twelve thousand is not typical and using it will justify a lead price you cannot sustain.
Forgetting shared leads convert worse. If you are being offered shared rather than exclusive enquiries, discount your close rate hard before doing the sum. The reasons are set out in exclusive versus shared leads.
What to do with the number
Take it to every supplier conversation. Ask for their price per lead and hold it against your ceiling. If it is above, walk away regardless of how good the pitch is. If it is comfortably below, the remaining question is whether the leads are real, exclusive and delivered fast — which is what how pay-per-lead works covers.
Use the same number to judge a retainer. Divide the monthly fee by the enquiries you would realistically expect and you have an implied cost per lead you can compare directly. That comparison is worked through in pay-per-lead versus a retainer agency.
If the number comes out badly
If your contribution per enquiry is small, buying leads at any price will be marginal, and the answer is to fix close rate, job value or margin before spending on marketing at all. That is one of the situations listed in when pay-per-lead is the wrong model, and it is a far better use of the next three months than a campaign.
Our own pricing variables are on the pricing page. Bring your average job value and close rate to the first call and contact us — the conversation is much shorter and much more useful with them to hand.
Frequently asked questions
What is the basic formula?
Average job value multiplied by your close rate on warm enquiries equals the gross revenue one enquiry is worth. Multiply that by your gross margin to get the contribution one enquiry produces. Your sensible ceiling for cost per lead sits well below that contribution figure, not near it.
Should I use revenue or profit?
Profit, or more precisely gross contribution after materials, labour and travel. Using revenue makes every lead price look affordable and is the most common mistake owners make. A job that bills well but has heavy material costs contributes far less than its invoice suggests.
What about repeat work and referrals?
Include them if you can measure them, because they meaningfully raise what an enquiry is worth. A detailing customer who returns twice a year, or a landscaping client who refers two neighbours, is worth a multiple of the first job. Use a conservative figure you can defend rather than an optimistic one.
What close rate should I use if I do not track it?
Start tracking it this month rather than guessing, because owners almost universally overestimate it. Until you have real data, use a deliberately pessimistic figure. If the economics only work at a close rate you have not actually measured, you do not have a business case yet.