Quick answer: A good cost per lead depends on your job value, margin and close rate. Work out your maximum, then judge campaigns on cost per customer.
“What’s a good cost per lead?” is the wrong first question. A $20 lead that never answers the phone costs more than a $120 lead that books a $15,000 job. The right number is different for every business, and you can work yours out in five minutes.
The basic calculation
Cost per lead (CPL) = ad spend ÷ number of leads
$2,000 spent, 40 leads = $50 per lead.
That’s easy. The useful part is knowing what you can *afford*.
Work out your maximum affordable cost per lead
You need three numbers:
- Average job value: what a typical customer pays (first job, or lifetime if they return)
- Profit margin: what’s left after materials, labour and overheads
- Close rate: what percentage of leads become paying customers
Maximum cost per customer = average job value × profit margin
Maximum cost per lead = maximum cost per customer × close rate
Example: bathroom renovator
- Average job: $25,000
- Margin: 20% → $5,000 profit per job
- Close rate: 15% of leads become jobs
Maximum cost per customer = $5,000 (break-even on the first job)
Maximum cost per lead = $5,000 × 0.15 = $750
You’d want to pay well below that to stay profitable, say $150 to $300 per lead. Even so, a “$200 lead” that sounds expensive is a great deal for this business.
Example: domestic cleaner
- Average first clean: $250, but customers stay about 10 visits → $2,500 lifetime
- Margin: 30% → $750
- Close rate: 40%
Maximum cost per lead = $750 × 0.40 = $300, based on lifetime value. If you only count the first clean, it’s just $30.
Why cost per customer matters more
Two campaigns:
| Campaign A | Campaign B | |
|---|---|---|
| Spend | $1,000 | $1,000 |
| Leads | 50 | 20 |
| Cost per lead | $20 | $50 |
| Customers | 2 | 5 |
| Cost per customer | $500 | $200 |
Campaign A looks better on cost per lead. Campaign B is more than twice as profitable. That’s common: cheap lead sources (quick instant forms, broad Display traffic) often produce weaker leads.
Track lead outcomes in a CRM, even a spreadsheet, so you can measure cost per customer by campaign.
What affects cost per lead
- Industry competition: legal, finance and home improvement are expensive. See how much Google Ads cost in Australia.
- Offer: a free, low-commitment offer gets cheaper leads; a high-commitment one gets fewer, better leads.
- Landing page conversion rate: doubling conversion rate halves cost per lead with the same ad spend.
- Tracking accuracy: broken tracking makes CPL meaningless.
- Seasonality: competition rises in some months.
When cost per lead is too high
Work through, in order:
- Check tracking. Are leads being undercounted? See signs your ad tracking is broken.
- Check the landing page. See the landing page checklist.
- Check the offer. Is there a clear reason to enquire now?
- Check targeting and keywords. Search terms and negative keywords on Google, placements and audience on Meta.
- Then test creative and bids.
When cost per lead is suspiciously low
Check lead quality before celebrating. Very cheap leads often mean spam, accidental submissions or a form that’s too easy. See Facebook lead ads vs a landing page.
Sources and further reading
Written by Gregory
20 years building websites and running lead generation, mostly with my own money on the line. Based in Sydney, working with clients worldwide. How I work →