How Much is a Plumbing or HVAC Lead Worth?

Owning a plumbing or HVAC business can be exceedingly rewarding, but it also comes with its share of frustrations. I’ve spent enough time with shops like yours to know that marketing is usually near the top of the “stuff I wish I didn’t have to deal with” list. But, as you know, it’s a necessary evil:

• Marketing creates leads and
• Leads create customers and
• Customers create cash.

• Your marketing will create leads if you’re targeting the right customers and spending enough to make a difference.
• Your leads will become customers if your website’s built to convert and if your customer service reps are well-trained.
• Customers create cash if you’re using a value-based pricing strategy and if your services are both retention- and referral-worthy.

Determining the cost of your HVAC and plumbing leads is easy—if you have a way to keep track of your leads, anyway. Assuming you do, divide your total marketing spend for a particular time period by the total number of leads you got over that same time period. So, if you spent $25,000 on marketing last year and you got 250 leads, your cost per lead is $100.

But here’s the thing: How much leads cost is a different question from how much leads are worth . Sure, your cost per lead might be $100, but the worth, the value, of that lead is many times that amount. I don’t know about you, but I’d trade $100 for $1500 any day.

Unfortunately, it’s often difficult to look past the immediate cha-ching of a PPC ad campaignto see the value that investment brings. So let’s take a look at that.

If you want to grow a sustainable HVAC or plumbing business, you’ll have to not only track data but also respond to that data. There are a ton of numbers to deal with and math to do, and while I realize that’s no fun at all, it’s also no fun at all to waste money.

Incidentally, if you just can’t imagine spending your time on this, hit that Schedule a Call button on the top right. I enjoy helping plumbing and HVAC contractors make more money, and I do this kind of analysis every day.

Let’s figure the value of your leads for the past six months:

1. List your paid lead sources. Make a list of all the places you spent money to get new business: Google Ads, Facebook ads, Angie’s List, and so on.
2. Count leads. Determine how many leads you got from all of those sources combined in that same time period.
3. Count new customers. Figure out how many customers you got from all of those leads.

1. Divide leads by customers. Divide your total leads by your total new customers. For example, let’s say you got 100 leads and 20 of them became customers. So, your lead-to-sale conversion rate is 20%.
2. Determine average revenue per new customer . Using our example, let’s say those 20 jobs averaged $1500 in revenue.
3. Figure the worth of each lead. Finally we get there! Multiply the number you got from step 5 by the percentage you got from step 4. In our example, each lead is worth $300 ($1500 *.20).

So, why does it matter how much each of your leads is worth? It is really necessary to keep track of all that data and do all that math?

Absolutely.

By giving sufficient attention to what your leads are worth, you’ll have a much better idea of where to cap certain elements of your marketing strategy. For example, Google Local Services is pay-per-lead. As long as you’re spending less per lead than those leads are worth, that’s a good option for you. But if your per-lead cost is $500 (using our example), you should definitely re-think that approach.

But again, “How much should my leads cost ?” is the wrong question. At best, it’s an incomplete question. The most important metric here is how much your leads are worth.

OK, here’s another way to think about this: Worth is the same thing as profit potential. Let’s say you spend $1000 on stock that’s going to make you $1000. There’s zero profit potential there—zero worth—so the hassle’s unnecessary. If you spend $1000 on stock that’s going to make you $800, that’s definitely not worth it. That’s called going bankrupt in a hurry. I don’t want that to happen to you.

But so many HVAC and plumbing shops are doing just that: spending ridiculous amounts of money for leads that simply aren’t worth it. Let me be specific: HVAC guys? Don’t pay for leads to replace thermostats. Plumbing gals? Don’t pay for leads to pull matchbox cars out of toilets.

That said, don’t get too mired in the details. If you’re looking at the value of your Google Ads leads compared to the value of your Angie’s List leads compared to the value of your social media leads, for example, you’re likely going to make less profitable decisions. Here’s why: Worth has a relative value that’s dependent on how much a particular sale brings in. If you’re focusing only on the leads with the absolute highest potential value, you may slash your marketing budget too dramatically on more middle-of-the-road opportunities. Over time, that simply won’t be sustainable.

You probably don’t get nearly as many high-dollar install jobs as you do run-of-the-mill repair jobs, right? So figure out what your tried-and-true, bread-and-butter jobs are, and finagle your lead acquisition strategy to fetch you more of those.

An effective HVAC or plumber marketing strategy narrows the lead cost-worth gap and keeps an eye on your most important key performance indicator (KPI): Customer Acquisition Cost (CAC) or Cost of Acquisition (COA).

Determining your CAC requires significantly less math than figuring the worth of your leads—and it provides more important data than trying to hash out what to spend per lead:

1. Total your marketing expenses for a particular time period.
2. Add the number of new customers you gained over that same time period.
3. Divide #1 by #2.

1. Improve website conversion rates. The most efficient way to improve your website conversion rates is to bring the right leads to your website to start with.
2. Increase referrals. Referral business costs you nothing.
3. Do more of what works. Take money away from an underperforming Google Ads campaign and bolster one that’s killing it.
4. Use what you already have. Stop reinventing the wheel and repurpose existing content across other marketing channels. Have a blog post that’s getting a lot of attention? Turn the same content into a YouTube video.

Having a hard time wrapping your head around cost vs. worth? Or do you get that part, but you’re not sure how to implement these ideas to grow your business? You’re not alone. Most HVAC and plumbing contractors feel confused when it comes to marketing, and they feel ripped off when they think about how much money they’ve spent—and how little they have to show for it.

At Levergy, we’ve developed a proven marketing process to get you the leads, jobs, and revenue you deserve. I’d love to chat more.