Resources

What should a contractor actually pay for a lead?

19 August 2026 · 7 min read

Ask ten home improvement companies what they pay per lead and you will get ten numbers and no reasoning. Ask what they should pay and most will say "as little as possible," which is not a number you can negotiate with.

There is an actual answer, and it takes about ten minutes to work out.

Start with the funnel

A raw lead becomes revenue by surviving five conversions. These are the industry standards for home improvement:

Compound them:

0.30 × 0.75 × 0.85 × 0.70 × 0.30 = 4.0%

Four percent. Roughly twenty-five raw leads per sold job at standard. That multiplier is the bridge between what you pay for a lead and what you pay for a customer, and every conversation about lead price should start there.

The cost ladder

Each conversion makes the lead in front of it more expensive. Walk a $50 lead up the ladder at standard rates:

Nothing went wrong there. Those are the standard ratios performing exactly as expected — a $50 lead costs $1,245 by the time it becomes a customer.

This is why cost per lead alone is a trap. A vendor offering leads at $35 against your current $50 looks 30% cheaper. If their leads set at 15% instead of 30%, your cost per sold job goes to $1,743 — 40% worse — while your cost-per-lead report shows an improvement.

Judge a channel at the bottom of the ladder, never the top.

The formula

Your marketing percentage, your average sale and your funnel are not three separate facts. They are one equation:

Cost per sold job ÷ average sale = your marketing percentage

Rearranged, it gives you the number you came for:

Target CPL = average sale × marketing % × raw-lead-to-sale rate

Most home improvement companies should be spending 10–20% of revenue on marketing, with 15% as the sweet spot. So at a $20,000 average sale:

$20,000 × 0.15 × 0.040 = $120

$120 per raw lead. Pay $150 for the same lead quality and you are running a 19% marketing cost, whether or not anyone notices for a quarter.

Two things fall straight out of that:

• A higher average sale buys a more expensive lead. A company at $40,000 average sale can pay $241 at the same 15%. This is why two competitors bidding on the same keyword can both be behaving rationally.
• Fixing a conversion rate beats negotiating a discount. Lift your set rate from 30% to 35% and your target moves from $120 to $141 — a 17% improvement you own outright, rather than one you have to ask permission for.

Third-party leads are a different number

Here is the mistake that costs the most money.

Purchased raw leads set at 10–25%, not 30%. The blended 30% is carried by your direct and event leads, where somebody has already spoken to a human. Interest expressed on a comparison form is not the same thing.

Price a bought lead against your blended rate and you will overpay every time:

A vendor quoting $85 a lead is asking you to believe their leads set at over 20%. That is a testable claim, and it is the claim you should be negotiating about — not the price.

The number that actually matters

Everything downstream of a booked appointment is the same regardless of how the appointment was created. So while the lead price swings with set rate, the appointment target is fixed:

Target cost per set appointment = average sale × marketing % × 0.134

At $20,000 and 15%: $402

That is the figure to price a live transfer or a pre-scheduled appointment against, and it is what makes those offers comparable to raw leads for the first time. A $200 lead that sets at 60% costs $333 an appointment. A $60 lead that sets at 15% costs $400. The expensive lead is the cheaper appointment.

Treat it as a target, not a wall

Exceed the number on a given source and you have not broken a rule — you have raised your blended marketing percentage, and something else has to come down or your sales team has to outperform. Both are legitimate outcomes as long as you chose them.

What is not legitimate is finding out at the quarter's end.