How Much Should You Pay Per Lead? A Contractor's Guide

If you've ever Googled "how much should I pay per lead," you probably got useless answers. "It depends." "Anywhere from $20 to $500." Thanks for nothing, right?

Here's the problem: most articles conflate completely different things when they talk about "cost per lead." Are we talking about raw ad spend? All-in costs including management? What a lead seller charges you? These are very different numbers.

Let me break down what leads ACTUALLY cost—the full picture—so you can make smart decisions about where to spend your marketing dollars.

First, Let's Define "Cost Per Lead"

When someone says "leads cost $50," they might mean:

• Raw ad spend: What you pay Facebook or Google directly to generate that lead (if you're running ads yourself)
• Lead seller price: What Angi or HomeAdvisor charges you per lead (their ad costs + their markup + profit, bundled into one price)
• All-in cost: Ad spend + agency fees + your time + tools + everything else

These are wildly different. A "$30 lead" from running your own Facebook ads isn't the same as a "$30 lead" from a lead seller. With the lead seller, their costs and profit are baked in. When you run ads yourself, you're only counting ad spend—not your 10 hours/week managing campaigns.

The only number that matters is your TRUE all-in cost per lead. Let's break that down.

What Facebook Ad Spend Looks Like (By Trade)

If you're running Facebook ads yourself—or working with someone who runs them through your ad account—here's what the ad spend portion typically looks like for qualified, exclusive leads:

Important: These are just the ad spend numbers. If you're running these campaigns yourself, you also need to factor in your time (or an employee's time), the learning curve, wasted spend while you figure things out, and tools. If you're working with an agency or lead gen partner, there are service fees on top.

Which brings us to the real question...

The TRUE Cost of Leads: Comparing Your Options

There are basically four ways to get leads. Each has a different cost structure—and most people don't think through the full picture.

Option 1: DIY Facebook/Google Ads

What you pay: Just ad spend ($20–$100+ per lead depending on trade)

What you're really paying: Ad spend + 10-20 hours/week of your time + months of learning + wasted spend on bad campaigns + tools and software

The "cheap" option isn't cheap when you factor in opportunity cost. If you're worth $150/hour running your business, spending 15 hours/week on ads costs you $9,000/month in lost productivity—on top of your ad spend. And that's assuming you eventually get good at it. Most contractors burn through $5-10K learning what doesn't work first.

Option 2: Traditional Marketing Agency (Retainer Model)

What you pay: $1,500–$5,000/month retainer + ad spend

What you're really paying: Fixed cost regardless of results. Good month? You pay the same. Bad month? You pay the same.

The agency gets paid whether you get 50 leads or 5. Their incentive is to keep you just happy enough not to cancel—not to maximize your results. And if it doesn't work out? You're out the retainer AND the ad spend with nothing to show for it.

Option 3: Lead Aggregators (Angi, HomeAdvisor, Thumbtack)

What you pay: $50–$150 per lead

What you're really paying: $50–$150 per lead × 4-5 contractors = you're actually paying $200-750 for a 20-25% chance at each job

The price looks straightforward, but it's shared with your competitors. Your effective cost per ACQUIRED customer is astronomical. Plus, you're not building any brand equity—homeowners remember "I found them on Angi," not your company name. We break this down in detail in our post on exclusive vs. shared leads.

Option 4: Performance-Based Lead Gen (Pay Per Lead)

What you pay: Ad spend (paid directly to Meta/Google, you see every dollar) + per-lead fee to the lead gen partner

What you're really paying: Exactly what you see. Ad spend is transparent. Fee is tied to results.

This model flips the incentive structure. The lead gen partner only makes money when you get leads—so they're motivated to optimize constantly. You pay ad spend directly to the platform (so you see exactly where your money goes), and you pay a fee per qualified lead delivered.

Why the "Ad Spend + Fee" Model Makes Sense

When you work with someone who runs ads through YOUR ad account and charges per lead, a few things happen:

• Total transparency: You log into your own Meta ads account and see exactly what's being spent. No mystery. No hidden markup on ad spend.
• Aligned incentives: They only get paid when you get leads. Bad month for leads = bad month for them. They're motivated to perform.
• You build YOUR brand: The ads run under your company name, to your landing pages, building your reputation—not theirs.
• You own the data: The pixel data, the audiences, the retargeting lists—it's all in your account. If you part ways, you keep everything.

Compare that to lead sellers where you have zero visibility into their costs, zero brand building, and zero ownership of anything.

What Can You Actually AFFORD to Pay? (All-In)

Whatever model you choose, here's the formula for calculating your maximum all-in cost per lead:

Let me break this down with a real example.

Say you're a roofing contractor with:

• Average job size: $12,000
• Profit margin: 35%
• Close rate: 25% (1 in 4 leads becomes a job)
• Target ROI: 5x return on marketing spend

Your calculation: ($12,000 × 0.35 × 0.25) ÷ 5 = $210 max CPL (all-in)

That means your TOTAL cost per lead—ad spend plus any fees or time—can be up to $210 and you'll still hit your ROI target. If your all-in cost is $100/lead (say, $50 ad spend + $50 per-lead fee), you're way under your max. That's a profitable campaign.

Now let's say you're a fence contractor:

• Average job size: $4,500
• Profit margin: 30%
• Close rate: 30%
• Target ROI: 5x

Your calculation: ($4,500 × 0.30 × 0.30) ÷ 5 = $81 max CPL (all-in)

Tighter margins mean tighter CPL targets. At $81 max, you need efficient campaigns—but it's still very doable with the right partner and realistic ad spend expectations.

Why "Cheap" Leads Are Usually a Lie

When someone promises "$30 leads," ask yourself: what's the catch?

• Shared with competitors: That $30 lead is also going to 4 other contractors. Your real cost per acquired customer is 4-5x higher.
• Low contact rates: Cheap lead sources often have outdated or unverified data. If only 40% answer vs. 70% from quality sources, your effective cost doubles.
• Tire kickers: No qualification means leads who "just want a price" or are "getting quotes from everyone." They waste your sales team's time.
• Wrong service area: That $30 lead is worthless if they're 50 miles outside your territory.
• Hidden costs: "Just ad spend" doesn't count the 15 hours/week you're spending managing campaigns instead of running your business.

I've seen contractors switch from "$40 leads" to "$90 all-in leads" and INCREASE their ROI—because the more expensive leads actually picked up the phone, had real projects, and were ready to buy. The "cheap" leads were costing them more in wasted time and lost opportunities.

What Makes a Lead "Qualified"?

Not all leads are created equal. A qualified lead should include:

• Verified contact information (real phone number, real email)
• Within your service area (verified zip code)
• Actual project intent (not just "thinking about it someday")
• Property ownership (renters can't authorize major work)
• Realistic timeline (within 30-90 days, not "next year maybe")

When you're comparing lead costs, make sure you're comparing apples to apples. A $50 lead with all this information verified is worth more than a $30 lead that's just a name and phone number.

Red Flags: Signs You're Getting Ripped Off

Watch out for these warning signs:

• You can't see where your ad money goes. If they won't give you access to the ad account or show you spend reports, they're hiding something.
• Leads are shared with competitors. Ask directly: "Am I the only one getting this lead?" If they dodge the question, you have your answer.
• Fixed retainers with vague deliverables. "We'll manage your ads for $3,000/month" means they get paid whether you get 100 leads or zero.
• They won't explain their pricing model. Legitimate partners can tell you exactly what you're paying for and why.
• Contact rates below 50%. This means bad data, old leads, or poor qualification. You're paying for garbage.
• No brand building. If leads come from their landing pages with their branding, they're building their business—not yours.

The Bottom Line

Here's what you need to know about lead costs:

1. Know your all-in number. Don't compare ad spend to bundled lead prices—they're not the same thing. Calculate your TRUE total cost.
2. Use the formula. (Avg Job × Margin × Close Rate) ÷ ROI = your max CPL. If your all-in cost is under that, you're profitable.
3. Demand transparency. If you can't see exactly where your ad dollars are going, you're probably overpaying. The best arrangements let you see your own ad account.
4. Avoid shared leads. The sticker price is a lie. Divide by 4-5 competitors to get your real cost.
5. Align incentives. Work with people who only get paid when you get results. Retainers and hidden markups create misaligned incentives.
6. Factor in what you're building. Leads through your own brand are worth more long-term than anonymous leads from aggregators.

The contractors who win aren't chasing the "cheapest" leads. They're finding partners with transparent pricing, aligned incentives, and a model where everyone makes money when the leads flow.