Contractors who serve home and commercial industries understand that to get jobs, you need leads. This blog was updated based on 2023 information. Whether you are a skilled painter, carpet cleaner, plumber, or electrician, you share the common headache of finding a reliable stream of leads. You may get quite a few referrals from happy customers who have shared your information with a friend or neighbor. Other people may have called after seeing your lettered truck around town. While referrals and recognition deliver the highest quality leads, there generally aren’t enough for sustained growth.
Are Leads Worth the Cost?
Many contractors are reluctant to purchase leads, especially if they have been able to operate, or even thrive without it in the past. The first page of Google for service industries has become so saturated, that it’s nearly impossible to get found by organic efforts alone, especially for small businesses with small marketing budgets. There is still value to be found when purchasing quality leads. There are a few companies out there that get it right and work to give you the biggest bang for your marketing bucks.
If you think leads are too expensive, you are not alone. We frequently hear from contractors that they don’t have the money to buy leads. And it can certainly feel that way when you do not have a lot of revenue coming in and times are tight. However, investing in lead generation is a proven way to grow your business. How can you determine what a good price to spend on a lead is for your industry? The following calculation can be used to ensure a positive return on your investment.
How to Calculate a Fair Lead Cost
Here is a simple way to figure out how much you can afford to spend per lead. In general, the goal is to keep your cost of lead generation and other marketing efforts below 15% and Ideally below 10% of your revenue from each job. If your average job brings in $800, you should spend no more than $120 on your marketing to get each job. To complete the calculation, you’ll also need to know your close rate. Most professional contractors close 1 or 2 of every four jobs they bid, a 37.5% close rate on average.
So, if you generally close 1 or 2 jobs out of every 4 and the average job brings in $800, you can afford to spend a maximum of $45.00 for each lead. Imagine if your goal was to get 20 good leads in a month. You could expect to win about 8 jobs from the 20. For an investment of $900 (20 leads X $45 each), you could expect to bring in $6,400 in revenue. If you can get your leads for less, your profits will increase, of course!
Unfortunately, just like all other forms of marketing and advertising, there is no guarantee that a purchased lead, no matter how “hot”, will turn into a job. In fact, even the best sales reps close about one of every two to three leads. Those less seasoned may close one in 5 or 6, especially if they don’t have a polished presentation or regularly follow up after providing a quote.
This is just the cost of doing business. There are certain methods you can use to increase your close rate, which will increase your return on investment of purchased leads. The biggest factor is knowing ahead of time how much you can budget each month for your leads and working with a lead generation business that won’t bill for unqualified leads. Finding a company that listens to the calls and only bills you for qualified leads is key. What is a qualified lead? You decide what that means to you, but we generally define it as an inbound call or, form or email requesting a quote for a service you provide in an area that you serve.
Lead Generation Methods
Quite a few contractors tell us that they are concerned about being sold “stale” leads. Many share stories of getting a lead and calling the number almost immediately, only to find that the person does not respond, or that they “no longer need the service”. How can this be if they were just sent the lead? Some companies sell leads from a list, and they tend to be inexpensive and of low value.
There are companies that use different channels to generate leads. Our experience is that producing live, exclusive leads is the most cost-effective way to go, even if shared leads are less expensive on the front end. Three of the most effective methods of procuring paid leads are SEO (organic lead generation), PPC (pay-per-click with Google Ads), and LSA (Google Guaranteed). Although SEO lead generation is less expensive, it takes time to generate consistently, PPC and LSA are great ways to accelerate lead production.
The Difference Between Shared and Exclusive Leads
Contractors can choose to purchase shared or exclusive leads. Many lead generation companies sell their leads to multiple contractors (AKA shared leads).
Shared leads can create situations where multiple contractors are competing for the same jobs. They have to race to be first to respond and provide a quote and often have to undercut themselves to compete.
This situation can be disastrous if you have to compete with businesses that do not play by the same rules. Businesses that cut corners by not being fully licensed and insured and don’t pay employees reasonable wages quote low estimates for jobs that quality contractors can’t compete with.
There are lead generation companies that offer live and exclusive leads to contractors. Although a lead may be exclusive to a contractor, customers may still choose to call several contractors for quotes, and some corporations require getting 3 or more bids. However, contractors who answer their phones in a professional manner and provide professional and fairly priced bids quickly, enjoy much higher close rates. And if they are exceedingly professional and knowledgeable, the consumer may feel no need to call others.
Here are the top things to look for in a lead generation company:
- Avoid paying a high fixed monthly rate for organic lead generation that doesn’t hold them accountable for results. Organic lead generation is a very slow process and you will not see results quickly. Many companies are happy to charge you $599 or more per month whether you receive 1 lead or 30. Find a company that will bill you a fair price per lead.
- Look for transparency. Ask if you will be given regular reports of progress.
- Find a company that only bills for qualified organic leads. Getting billed for services you do not provide or from areas you don’t serve will rack up your expenses and offer no value. Be sure to set the parameters ahead of time and find out what their policy is for disputing leads.
- Beware of companies that sell shared leads. These are frequently cheaper, but the quality is lower, and you probably end up having to compete on pricing to win the jobs. Be careful that you do not bid so low that you lose your profits, or worse, come out in the hole!
- Avoid any company that requires a long-term contract. Make them prove themselves to you month after month.
- Don’t allow companies to own your listings. Thousands of customers have wound up with listings in a tangled-up mess, with outdated information that they no longer have access to. Reputable companies will keep you as the owner or will turn over the ownership to you should you part ways.
- Be patient! If you are working with a company that utilizes SEO-style lead generation, which tends to be the least expensive method, know that it takes months for the system to ramp up. In the meantime, consider working with them on a highly effective and pinpointed PPC campaign. These leads are a bit more expensive but can still produce leads within your max lead price point.
If you still have questions about buying leads, the lead generation specialists at 99Calls.com are ready to help. You can call 800-717-4669 to speak with a representative or click here to schedule a call at a convenient time for you.