Max cost per lead calculator
Max cost per lead = gross profit per job ÷ leads per job. A $9,500 job at 45% margin is $4,275 of gross profit; at a 35% set rate and a 40% close rate you burn 7.1 leads per job, so break-even is $598. Paying near that means working for free.
Four numbers set your ceiling
For one service line. Averaging replacements with repairs distorts everything below.
What is left after labour and materials, before overhead.
Of leads that come in, how many become an attended appointment.
Of appointments you sit, how many sign.
Leaves $2,992.50 of gross profit per job for overhead and owner profit.
Pay this and the entire gross profit on the job goes to acquiring it. Hard ceiling, not a target.
The whole pool available for acquisition, overhead and profit.
And 2.5 appointments sat for every job signed.
For heavy overhead, or a channel you are still testing.
Only with lean overhead and a funnel you have measured, not estimated.
$363.38 more per lead you could justify, on the same job at the same margin.
The same ceiling expressed per job instead of per lead.
How to use this calculator
Enter four numbers for one service line: what the average job bills, what gross margin it carries, and the two conversion rates that turn a lead into a signed contract. The tool works out how many leads it takes to produce one job, then divides gross profit by that figure to find the absolute most a lead can be worth.
Run it once per service. A roof replacement and a roof repair have different values, different margins and often different close rates, and a single blended ceiling will have you overpaying for one and losing the other to a competitor who did the maths properly.
A worked example
A roofing company averages $9,500 a job at a 45% gross margin, so gross profit per job is $4,275. Of the leads that come in, 35% reach an attended appointment, and 40% of those appointments sign.
That is a lead-to-job conversion of 14%, or roughly 7.1 leads for every job. Break-even cost per lead is $4,275 ÷ 7.1 = $598.50. At that price, every dollar of gross profit is going to the lead seller.
Spending 30% of gross profit on acquisition gives a working ceiling of $179.55 a lead, leaving $2,992.50 per job to cover overhead and pay the owner. A vendor quoting $250 a lead is not obviously outrageous — it is inside break-even — but it consumes 42% of gross profit on every job, which only works for a very lean operation.
Answering the real question
Most contractors ask this in the middle of a sales call from a lead vendor, and the question is always the same: am I overpaying? Compare the price being quoted against your own break-even figure above.
- Above break-even. Every job from that source loses money. It does not matter how good the leads sound or how exclusive they are.
- Just under break-even. You are running the business for the lead seller. Overhead is not being covered, so the more volume you take the worse the year gets.
- Around a third of gross profit. Workable for most contractors. Enough left over to cover overhead and pay the owner properly.
- Well under a fifth of gross profit. Cheap enough that the constraint has moved elsewhere — usually volume available, or crew capacity to deliver it.
The common mistake
Using revenue instead of gross profit. A $9,500 job feels like $9,500 of room, and it is actually $4,275. Setting a lead ceiling from revenue produces a number roughly twice as high as it should be, which is exactly how a business ends up busy, fully booked and unprofitable at the same time.
The second mistake is using hoped-for conversion rates. The two rates in this calculator sit in the denominator, which means optimism there inflates the ceiling fast. A 35% set rate that is really 25% takes break-even from $598 down to $428 — and a price you had judged safe is suddenly a loss on every job.
Notice that the ceiling is not fixed. It is a function of your funnel, so improving conversion raises what you can afford to pay. The speed to lead calculator shows what response time is doing to the first rate, the cost per booked job calculator shows what you are paying today, and the ad budget calculator turns the ceiling into a monthly plan.
Common questions
How do you work out the most you can pay for a lead?
Start with gross profit per job, then work out how many leads it takes to produce one job. Gross profit divided by leads per job is the break-even price of a lead. A $9,500 job at 45% margin is $4,275 of gross profit, and a funnel converting 35% of leads to appointments and 40% of appointments to jobs needs about 7.1 leads per job, so break-even is around $598 a lead.
What is break-even cost per lead?
Break-even cost per lead is the price at which the entire gross profit on the job is consumed by acquiring it. At that price the business is working for free: crews get paid, materials get paid, and the owner gets nothing. It is a hard ceiling rather than a target, and anything approaching it means every job is being sold to fund the marketing.
Why is gross margin the right number to use rather than revenue?
Because revenue is not money the business keeps. A $9,500 job with $5,225 of labour and materials leaves $4,275, and that is the entire pool available to fund acquisition, overhead and profit. Calculating a lead ceiling from revenue rather than gross profit produces a figure roughly twice as high as it should be, which is exactly the error that lets lead sellers look affordable.
What share of gross profit should go to buying the lead?
There is no universal figure, because it depends on how much overhead sits behind the job and what profit the owner needs. The practical method is to work out what percentage of gross profit is left after overhead is covered, and treat acquisition as a claim on part of that remainder. Businesses with heavy fixed costs can afford a much smaller share than lean operations.
Am I overpaying for leads?
Compare what you actually pay against the break-even figure for your own funnel. Paying more than break-even means losing money on every job the lead source produces, and paying close to it means the business is running for the benefit of the lead seller. Paying a modest fraction of gross profit per lead is where an acquisition channel becomes an asset rather than a treadmill.
Why do shared leads justify a lower price than exclusive leads?
Because they convert at a lower rate. A lead sold to four contractors produces a lower lead-to-appointment rate and a lower close rate than the same enquiry sold once, which raises leads per job and drops the price the buyer can justify. The headline price on a shared lead is usually lower, and the price per booked job is usually higher.
How does improving conversion change what you can pay for a lead?
It raises the ceiling in direct proportion. Lifting a lead-to-appointment rate from 35% to 45% cuts leads per job from about 7.1 to about 5.6, which raises break-even cost per lead by roughly a quarter without changing anything about the job or the margin. That is why a business with a strong follow-up process can outbid a competitor for the same leads and still make more money.
Should this calculation use the average job or the average of one service?
Calculate it per service line whenever the values differ materially. Averaging a $20,000 replacement together with a $600 repair produces a ceiling that is far too high for repair leads and far too low for replacement leads, which usually results in overpaying for the cheap work and losing the expensive work to a competitor willing to bid properly.
Keep going
What you are actually paying per job today, against the ceiling this tool sets.
Free tool Ad Budget CalculatorWork backwards from a revenue goal to the spend and lead volume it requires.
Free tool Speed to Lead CalculatorRaise conversion and the ceiling rises with it. See what slow follow-up is costing.
Know your ceiling.
Then stop paying above it.
20 qualified appointments in 30 days, guaranteed in writing — priced against your margin, not a lead seller's.
Book a Free Call →