How much is a roofing lead worth? That depends on many factors. The main considerations in determining lead value to a roofing contractor are the quality of the lead, how many other contractors are competing for the same job, and the likelihood that the contractor will close the job.
If the average roofing job in the US brings in a profit of $1000, would it sound reasonable to pay $100 for a lead? For some contractors, this question yields a resounding “yes” and for others, that price point is not sustainable. Let’s analyze lead pricing and lead valuation based on the factors presented.
What defines a “quality” lead? First, is the call a live transfer, or a stale inquiry? Did the lead come from an email request or a live phone call? After years of collecting data on lead types, we have found that email leads tend to come from “shoppers”, while phone calls come from “buyers”. Although leads that are sent through email are valid and are often closed, phone calls are far superior to text messages or email inquiries. Motivated buyers are more likely to pick up the phone and speak with a contractor.
And when customers call for a quote, the contractor is more likely to set an appointment when given the ability to speak directly with the buyer. He’ll already begin the process of establishing rapport, developing a relationship and winning new business. When working with a lead generation company, you’ll want to ask how much freedom you will have in determining what would be considered a qualified lead.
99 Calls allows contractors to define “qualified lead” by defining specific towns in which to be promoted and specific services that will be provided, such as reroofing, roof installations and roof repairs. If a consumer is calling for a service not offered by the contractor, or from an area not covered in the specified territory, it is NOT considered a qualified lead and is not billable.
If you’re being sent leads from 70 miles away, you’ll have to consider the time it takes to get out there to provide a bid and will need to factor your time into your total cost for acquiring the job. If it takes hours to provide one estimate for a roofing job, that’s time that could have been better spent giving multiple bids closer to your office.
Shared vs. Exclusive Leads
Another very important factor in determining a fair price for roofing leads is the number of contractors the lead is being distributed to. Is the lead being shared with multiple roofing contractors, or is it exclusive to one contractor?
Shared leads tend to be considerably less expensive than live, exclusive leads, but the chances of closing the job are greatly diminished. The last thing a roofer wants is to enter into a bidding war over a job. If a lead is sent to 4-6 contractors, a bidding war will almost certainly ensue, which will drive revenue and resulting profitability of the job down. Consumers frequently go with the lowest price when given multiple bids. Being forced to give “low ball” bids can quickly diminish earnings.
In addition, the close rate on shared leads is much lower, of course, than on leads that are exclusive, as the competition for the same job is higher.
Some roofers prefer low-priced shared leads. If you’ve got lean operating costs and high lead volume so that you can work under a lower profit margin, and are a superior closer, you may benefit from buying discounted shared leads.
However, most contractors would prefer to operate with higher profit margins and avoid bidding wars. Although exclusive leads cost 25-50% more than shared leads, the close rate could as much as double, especially if you answer your phone when it rings, speak with the customer and present yourself professionally. In this case, exclusive leads will bring a much higher return on your investment dollars and will be more valuable to your business. For more information on shared vs exclusive leads, see this LinkedIn article.
Roofing Sales Close Rate
The close rate of the contractor also plays a tremendous role in the value of a lead. Most contractors understand that being a trained sales professional isn’t necessary to increase close rates.
Being honest, clean cut, friendly and professional goes a long way. Arriving on time and bringing a portfolio to meets with prospective customers, having testimonials from prior satisfied customers and a solid local reputation will really set a contractor apart from the competition. One of the best things a contractor can do to increase close rate is simply answer the phone, especially when purchasing live, exclusive leads.
Why Close Rate and Lead Type Matter
The two biggest factors in determining your budget for buying leads are the close rate for jobs and whether the leads are exclusive or shared with other roofers. If you’ve hired a sales person to close jobs, you’ll also have a commission payment to add to your expenses.
A roofer’s ability to close jobs makes the difference between winning enough bids to run and even grow a business or not being able to scrape by. Shared vs. exclusive leads will affect acquisition cost, or the cost of acquiring each roofing job. In the examples below, let’s say the average job yields $1000, before factoring lead cost.
Effect of Close Rates with Exclusive Leads
Example 1: Close Rate:
Contractor “A” is a real professional. He closes 1 of every 3 leads. If he’s paying $100 per lead, his job acquisition cost is $300, since he wins one job for every three bids that he provides, on average. Subtracting the $300 to buy three leads from his average earnings of $1000 per roofing job, he is netting $700 per job. That means he’s paying 30% of his earnings to land his jobs.
Contractor “B” is less professional. He doesn’t follow up after dropping off a quote, doesn’t frequently answer his phone, and doesn’t present himself as “polished”. If he closes 1 of every 6 leads, he’s paying $600 for each new job. That’s 60% of his earnings being spent to land the same $1000 job.
Both contractors still must factor in their fixed, or indirect, expenses into the equation. These are the expenses they pay regardless of the number of jobs they close, such as rent, utilities, work vehicles and insurance. Once these are subtracted from the gross profits of each job, the actual profit margin is figured. As you can see from the example above, contractor “B”’s profit margin will be significantly lower than contractor “A”’s.
Acquisition Cost with Shared vs Exclusive Leads
Example 2: Shared Leads vs Exclusive Leads:
There are many companies that sell leads to multiple contractors, such as HomeAdvisor and Networx. Some contractors find them to offer a great value. Other roofers will avoid distributed leads at all costs.
If Contractor “A” is buying SHARED leads, even if he is a fantastic closer, his close rate will decrease. He’ll be competing with multiple contractors, which often leads to bidding wars. He may need to lower his prices to be competitive. Having to lower prices to compete comes right off the top! Shared leads will decrease the close rate of even the best salesman and will decrease profitability of each job.
Less professional Contractor “B” will far even worse in a shared lead situation. If he’s only closing one and six jobs with EXCLUSIVE leads, having to lower prices to compete with multiple bidders could put him out of the game entirely.
If a contractor isn’t careful and lowers pricing too much in hopes of winning the job without attention to his acquisition price, profits could be minimal or worse. By the time labor and expenses and leads are paid for, (let alone those indirect expenses) he may have actually LOST money on the job!
Before a roofing contractor decides an appropriate price to pay for leads, he should decide if he is after exclusive leads or shared leads. Contractors can expect to pay $35-$180 for live, exclusive roofing leads, and $18-$85 for shared leads.
Great closers and contractors who are quick to answer calls will fare well in any situation and may benefit from buying discounted shared leads. All contractors, and especially those who are quick to answer and return calls can benefit from exclusive leads but must be willing to pay more initially for them, knowing that the ROI will be more robust.
For more information on lead generation for roofers and on purchasing exclusive roofing leads priced under $40.00, call to speak with a roofing lead specialist from 99Calls.com at 800-717-4669.