What should a lead cost for my business?
Short answerA lead should cost no more than the profit it is likely to bring in, minus a margin you keep. Multiply your average job value by your gross margin to get profit per job, multiply that by the share of enquiries that become jobs, then decide how much of that profit you are willing to spend winning the work. The result is your ceiling.
Key points
- Published cost per lead averages mix very different businesses and rarely fit yours; your own numbers give a far better answer.
- Maximum cost per lead equals average job value, times gross margin, times close rate, times the share of profit you will spend to win work.
- Your close rate moves the ceiling as much as your ads do, so how quickly and well you follow up is part of your cost per lead.
- Track cost per genuine lead and cost per job won every month, not the figure Ads Manager reports on its own.
Search for an answer to this and you will find tables of average cost per lead by industry, often with no clear source, no date and no definition of what counted as a lead. Even a well-sourced average mixes businesses that sell a £90 service with ones that sell a £30,000 project. The number that matters is the one your own business can afford, and you can work it out in ten minutes with figures you already know.
Why won't an industry average tell you?
A cost per lead is only good or bad relative to what a lead is worth to you, and that depends on things no benchmark knows: your prices, your margin, how many enquiries you turn into work, and how much work you can take on.
Two businesses in the same trade can have very different affordable costs. A kitchen maker whose average job is £30,000 and who wins one enquiry in five can pay far more per lead than a kitchen fitter whose average job is £6,000 and who wins one in fifteen. Both are in "kitchens". An average of the two describes neither.
Averages also hide definitions. Some count every form submission, including spam. Some count only qualified enquiries. Some include phone calls, some do not. Comparing your number with one built on a different definition tells you nothing.
The right cost per lead is not a market figure. It is a ceiling you calculate from your own job value, close rate and margin, and it is different for every business.
Which three numbers do you need?
You need three figures, and rough honest ones are better than precise guesses.
- Average job value. What a typical new customer pays for their first job. Use the last twelve months of invoices for work that came from new enquiries, and take the average. If a few huge jobs distort it, use the typical figure instead.
- Gross margin. The share of the job value left after the direct costs of doing that job: materials, subcontractors, the labour you pay for that job. If a £10,000 job costs you £6,000 to deliver, your gross margin is 40%.
- Close rate. The share of genuine enquiries that become paying jobs. Count enquiries and won jobs over the same period. If 40 enquiries led to 6 jobs, your close rate is 15%.
Then make one decision: the share of gross profit you are willing to spend to win a job. This is your call, not a rule. Spend all of it and you break even on the first job. Spend a small share and you keep most of the profit but may win less work. Many owners start somewhere they are comfortable with, then adjust once they see the results.
How do you turn them into a maximum cost per lead?
The calculation has three steps.
- Profit per job = average job value × gross margin.
- Most you will pay per job = profit per job × the share you are willing to spend.
- Maximum cost per lead = most you will pay per job × close rate.
Or in one line: maximum cost per lead = job value × gross margin × share you will spend × close rate.
It is also worth working out your break-even cost per lead, which is the same sum with the share set to 100%. Above that number, every job won through ads loses money on the first job. Your ceiling should sit comfortably below it.
A worked example with real arithmetic
Worked example. Hartwell Joinery is the sample business used across this site. Its figures here are illustrative, chosen to show the method.
Hartwell makes bespoke kitchens in Leeds. Most of its kitchens fall between £18,000 and £35,000, and the average first job from a new enquiry is £24,000. After timber, hardware, appliances it supplies and the fitters' time, it keeps 40% gross margin. Over the past year, one genuine enquiry in ten became a signed kitchen, so its close rate is 10%. The owner decides to spend up to 20% of gross profit winning a job.
| Step | Sum | Result |
|---|---|---|
| Profit per job | £24,000 × 40% | £9,600 |
| Most Hartwell will pay to win a job | £9,600 × 20% | £1,920 |
| Maximum cost per genuine lead | £1,920 × 10% | £192 |
| Break-even cost per lead | £9,600 × 10% | £960 |
So Hartwell can pay up to £192 for a genuine enquiry and still keep 80% of the gross profit on each job won. Anything well under £192 is a strong result; anything approaching £960 is losing money.
The close rate moves the ceiling as much as anything the ads do:
| Close rate | Maximum cost per lead (20% of profit) |
|---|---|
| 5% (1 in 20) | £96 |
| 10% (1 in 10) | £192 |
| 15% (about 1 in 7) | £288 |
Two adjustments follow. First, if one lead in five from the ads turns out to be spam or outside the area, the cost per lead Ads Manager reports needs to stay under £192 × 80%, about £154, for the genuine ones to come in at £192. Second, Hartwell's workshop can build three kitchens a month. Leads that would need a fourth slot have little value until capacity grows, so the budget should be sized to fill the diary, not beyond it.
Should you judge cost per lead or cost per job?
Both, at different speeds. Cost per lead tells you quickly whether a campaign is in the right range. Cost per job won tells you whether it is actually making money, but for higher-value work it takes weeks or months to know.
Leads from different sources can close at very different rates. Instant form leads, which are submitted inside Facebook, Instagram or TikTok with details pre-filled, are often cheaper but less committed than enquiries from a landing page where the person has read about your work first. If a cheap source closes at half the rate of a dearer one, it can cost more per job. The guide to landing pages for paid ads covers that trade-off in detail.
It helps to track one stage in the middle. For Hartwell, that is the design visit: the point where a genuine buyer has committed time. Cost per design visit booked shows lead quality much sooner than cost per kitchen signed.
Meta can optimise for lead quality directly through its conversion leads performance goal, where your CRM (the system where you record enquiries and their outcomes) reports back which instant form leads became customers. Meta lists requirements that include generating at least 200 leads a month and uploading data at least daily, so many smaller service businesses will not qualify yet. For them, a simple spreadsheet of every lead and its outcome does the same job by hand.
What raises or lowers the cost you can afford?
Each input in the formula is something you can change, and several are outside the ad account entirely.
- Follow-up speed. Leads cool quickly. Calling back within the hour rather than the next day is often the cheapest way to improve close rate, which raises your ceiling without touching the ads.
- Qualifying questions. A form that asks for postcode, rough budget or timeframe produces fewer leads but a higher close rate. Whether that helps depends on how much a wasted sales call costs you.
- Price and positioning. A higher average job value raises the ceiling in direct proportion. Looking like the premium option is part of the ads equation.
- The landing page. A page that proves you are credible before the enquiry brings buyers who are already half sold.
- Repeat work and referrals. If your records show customers come back or send friends, the true value of a first job is higher than the invoice. Add it only once the data supports it.
The reverse is true too. Discounts lower job value and margin, slow follow-up lowers close rate, and a full diary lowers the value of the next lead to almost nothing for now.
How do you track it every month?
Keep one sheet, updated weekly, with a row for every enquiry: the date, the source (Facebook, Instagram, TikTok, Google, referral), whether it was genuine, and whether it became a visit, a quote and a job, with the job value. Then once a month work out:
- Spend per channel, including management fees.
- Cost per genuine lead per channel: spend divided by genuine leads.
- Cost per job won per channel, over a rolling three months for high-value work.
- Your close rate, recalculated, and so your ceiling for next month.
Ads Manager's own cost per lead depends on the tracking being right. If the Meta Pixel fires a lead on page load instead of form submission, the reported number can look excellent while real enquiries are scarce. The main guide to ads that bring enquiries shows how to check that in about fifteen minutes, and the guide to SEO and ads together explains how to compare paid leads with the ones search brings in.
If you pay someone to run your ads, this is the report you should expect each month, in plain terms. The guide to what a marketing retainer should include covers the rest of what is reasonable to ask for. M/AFZAL's own monthly report is built around leads, cost per lead and the decisions for next month, as described on the packages page.
Straight answers.
The follow-up questions owners ask most.
- Should I count repeat business and referrals in the job value?
- Only if you have records showing how often they happen. Start with the first job alone, which gives a cautious ceiling, then raise it when your own data shows customers reliably come back or refer others.
- Is a lower cost per lead always better?
- No. Cheap leads that never become jobs cost more per job than dearer leads that do. Compare channels and campaigns on cost per job won whenever you have enough jobs to judge.
- Does my cost per lead include the fee I pay for ad management?
- For deciding whether advertising is profitable, yes. Ads Manager only reports ad spend, so add management fees and any landing page costs when you work out what each job really cost you.
- How many leads do I need before the numbers mean anything?
- There is no magic number, but a handful of leads can swing either way by chance. Judge over a period long enough to produce at least a few jobs, which for high-value work often means a quarter rather than a month.