"Our leads are too expensive" is the most common sentence in lead generation and one of the least useful, because almost nobody saying it has worked out what a lead is worth to them.
The calculation
Four numbers, all of which you already have.
- 01Average contract value. What a closed job is actually worth, not what the good ones are worth.
- 02Gross margin. After materials, labour and subcontractors, before overhead.
- 03The share of that margin you are willing to spend to win a job. Most businesses land between 15% and 30%.
- 04Close rate from lead to signed job, measured over a full sales cycle rather than last month.
Why this changes the argument
Once the number exists, the conversation stops being about whether leads feel expensive and starts being about which lead sources clear the bar. Two sources at the same price routinely have close rates that differ by a factor of three, and the cheaper one is often the worse buy.
It also reframes the sales side. Lifting close rate from 12% to 15% raises your allowable cost per lead from $160 to $200, which unlocks inventory you previously could not afford. Sales training and marketing budget are the same lever viewed from different ends.
The number moves, so recalculate it
Average contract value drifts with your mix. Margin moves with materials. Close rate moves with the team and the season. Recalculate quarterly, and recalculate immediately after any pricing change, because a price rise quietly raises what you can afford to pay for demand.
None of this is complicated. It is just arithmetic that most businesses never do, which is why the ones that do it can outbid everyone else and still make money.