What's a Good Cost Per Lead? Run Your Own Number in a Minute

Somebody told you your cost per lead is too high, and they never asked what a customer is worth to you.

That's the tell. Whether a lead is expensive isn't a fact about the lead. It's a fact about your business. A good cost per lead is a number you work out from your own average job, gross margin, and close rate, not a benchmark someone hands you. Here's how to get it in about a minute.

I run a door company in Dallas-Fort Worth, and I run Hivelead, where I help owners of $1M to $5M businesses figure out why they stopped growing. This is the fourth piece in a series on why marketing got more expensive, and it answers the question I get most: what's a good cost per lead?

What the benchmarks tell you, and what they bury

Search that question and you get benchmarks. Home services, $50 to $150 a lead. Roofing higher, plumbing lower, and so on.

Then, somewhere near the bottom, the article admits it depends on your job value. That's the whole answer, and they buried it.

Why the benchmark is a trap

A benchmark is an average of other people's businesses, with other people's tickets, other people's close rates, and other people's margins.

It tells you what a lead costs in your trade. It cannot tell you what a lead is worth to you. Those are the only two numbers that matter, what a lead costs and what it's worth, and you only control one of them. If you want the distinction between lead cost and customer cost spelled out, Cost Per Lead vs Cost Per Acquisition covers it.

Get your number

You need three things you probably already know:

1. Your average job.
2. Your gross margin on that job. What's left after materials and labor.
3. Your close rate. How many leads turn into a customer.

Then decide what share of the gross profit on a lead you're willing to spend to get that lead. A third is a reasonable place to start; it's a rule of thumb, not a law.

The $4,000 job

Say your average job is $4,000 and you keep 40% after materials and labor. That's $1,600 of gross profit on a job. You close one in three, so each lead is worth about $530 in gross profit. A third of that is about $175.

Your ceiling is $175 a lead. Above that, you're buying jobs that don't pay for the marketing. Below that, you're fine.

The $600 job

Same math on a $600 job. 40% margin is $240. Close one in three and that's $80 of gross profit per lead. A third of that is $27.

Your ceiling is $27 a lead. And there is no auction in America selling home service leads at $27.

What the benchmark did to those two owners

It told both of them $50 to $150 is a good cost per lead.

For the $4,000 business, that's true. He has room. For the $600 business, a $100 lead is more than his entire gross profit on the job. He's losing money on every one, and the benchmark told him he was doing fine.

The number wasn't wrong. It was somebody else's.

Want to see where the rest of your numbers stand? The Revenue Leak Calculator takes about two minutes and shows which of your five numbers is costing you the most. It's free and there's nothing to sign up for.

Your ceiling is a bid limit

Once you have your ceiling, it does two things for you.

First, it's a bid limit. You know exactly what you can pay, so you stop reacting to the dashboard every time cost per lead ticks up. If you're under your ceiling, leave it alone, even if it went up. If you're over, you have a problem.

Your ceiling tells you where the problem is

Second, and this is the one that matters, it tells you which problem you have.

If your ceiling is $175 and leads cost $200, you're a little over. That's an ad problem. Tighten the targeting, fix the page, work the account.

If your ceiling is $27 and leads cost $100, that is not an ad problem. No amount of campaign work gets a $100 lead down to $27. That's a ticket problem. The job is too small to afford a lead at any price, and the fix is what you sell and who you sell it to, not the ad account. Your Cost Per Lead Isn't the Problem. Your Average Job Is. walks through that fix.

Most owners spend years working the ad account when the math says the ad account was never the issue. Their ceiling was too low to buy a lead at any price, and nobody ran the numbers. Or they give up on digital marketing altogether, which is usually the other mistake; Why Cutting Your Ad Budget Made It Worse covers what that costs.

Run yours

Average job, gross margin, close rate. A minute with a calculator. Then compare your ceiling to what you're actually paying and you'll know which of the two problems you have.

A good cost per lead isn't a number somebody hands you. It's a number you work out from your own business. Once you have it, you stop asking whether leads are expensive and start asking whether your jobs are big enough to afford them.

FAQ

What is a good cost per lead for a service business?

There is no universal number. A good cost per lead is one that leaves room for profit after you account for your average job, your gross margin, and your close rate. Work out the gross profit each lead is worth to you, decide what share of it you're willing to spend on acquisition, and that is your ceiling. Anything under it is a good cost per lead for your business, whatever the benchmarks say.

How do I calculate my maximum cost per lead?

Multiply your average job by your gross margin to get gross profit per job. Multiply that by your close rate to get gross profit per lead. Then take the share you're willing to spend on the lead, a third is a reasonable starting point. For a $4,000 job at 40% margin and a one-in-three close rate, that's $4,000 × 0.40 × 0.33 ÷ 3, or about $175.

Are cost per lead benchmarks useful?

Only for telling you what leads cost in your trade. They can't tell you what a lead is worth to you, because they average other businesses' tickets, margins, and close rates. Two businesses in the same trade can have ceilings of $175 and $27 while the benchmark tells both of them $50 to $150 is fine.

My cost per lead is above my ceiling. What do I do?

It depends on how far above. Slightly over is an ad problem: tighten targeting, improve the landing page, work the account. Far over, where no realistic lead price could get under your ceiling, is a ticket problem: the average job is too small to afford leads at all. The fix for that is what you sell and who you sell it to, not the ad account.

Related reading

• Why Your Marketing Got More Expensive
• Your Cost Per Lead Isn't the Problem. Your Average Job Is.
• Why Cutting Your Ad Budget Made It Worse
• Cost Per Lead vs Cost Per Acquisition
• How to Actually Measure Marketing ROI

Sources

• Red Beard Digital, What Is a Good Cost Per Lead for Home Service Businesses? (June 2026)