“Is $40 a lead good?” It depends. A $40 cost per lead is a bargain for a roofer and a disaster for a coffee shop. Instead of chasing an industry average, the right question is: what can your business afford to pay for a lead and still make money? That’s how you find a good cost per lead for a local business like yours.
What cost per lead means
Cost per lead (CPL) is how much you spend on marketing to get one inquiry: a call, a form fill, a booking request or a message.
The formula is simple: total ad spend ÷ number of leads = cost per lead.
If you spent $1,200 on Google Ads last month and got 30 leads, your cost per lead is $40.
Why industry averages mislead
You’ll find plenty of charts listing average cost per lead by industry. They’re a rough reference at best. Your real number depends on:
- How much a customer is worth to you
- How many leads you close
- Your local competition
- The quality of your ads, landing page and follow-up
Two plumbers in the same city can have very different costs per lead, and both can be profitable.
Work out your own target
Start with three numbers:
- Average job value: What a typical sale is worth
- Close rate: Out of 10 leads, how many become paying customers
- Max cost per customer: How much you’d pay to win one customer and still be happy with the profit
Then: max cost per customer × close rate = target cost per lead.
Example: A cleaning company’s average first job is $250, and with repeat visits a customer is worth about $900 a year. They’d happily pay $120 to win a customer. They close 4 out of 10 leads. Their target CPL is $120 × 0.4 = $48.
Anything under $48 is a good cost per lead for them, even if an industry chart says cleaning leads “should” cost $25. The same math helps you set your Facebook ads budget.
Look past cost per lead
A cheap lead isn’t a good lead if it never turns into a customer. Track these too:
- Cost per booked job: What it costs to get someone on the calendar
- Cost per customer: What it costs to land a paying customer
- Return on ad spend: Revenue from ads ÷ ad spend
You might find that Facebook brings $20 leads that rarely book, while Google brings $60 leads that close half the time. Google wins, even though its CPL is triple. More on choosing channels in Facebook Ads vs Google Ads and Local Services Ads vs Search Ads.
How to lower your cost per lead
If your CPL is above target, check these in order:
- Targeting: Are you reaching people who can actually buy? Check locations, search terms and audiences.
- Offer: Is there a clear reason to contact you now?
- Landing page: Does it match the ad, load fast on a phone and make it easy to call or book?
- Ad creative: Are you testing new images, videos and headlines?
- Tracking: Are all your leads being counted? Missed calls and untracked forms make CPL look worse than it is.
Our post on why Facebook ads get clicks but no calls walks through the most common leaks.
Raise your target by closing more
The fastest way to afford higher-cost leads is to close more of them. If you go from closing 3 in 10 to 4 in 10, the same ad spend suddenly produces a third more customers. Faster follow-up and better sales scripts often beat any ad tweak.
FAQ
Cost per click is what you pay each time someone clicks your ad. Cost per lead is what you pay for each person who actually contacts you. Many clicks never become leads.
Weekly is good for spotting problems. Make decisions on two to four weeks of data, not a single day.
No. A higher CPL that brings better customers can be far more profitable. Judge by cost per customer and revenue.
The bottom line: A good cost per lead for a local business is whatever still leaves profit after the job is done.
Want to know the right cost per lead for a local business like yours?
We’ll set up proper tracking and show you your cost per lead, cost per booked job and return on ad spend by channel. Request a proposal.