Are Lead Generation Companies Worth It for Contractors?

A lead generation company is worth testing when its full cost can fit within what a completed, paid job leaves after the work costs and the profit your business needs. Judge the trial by paid jobs, not by the number of inquiries delivered.

Know what you are buying

Ask the provider which work it will do:

• Deliver leads: Send inquiries or contact details.
• Book appointments: Put qualified customers on your calendar.
• Close sales: Speak with customers and get approval for the work.
• Manage marketing: Run ads or campaigns. Ad spend may be a separate charge.

A lead is not a booked appointment. An appointment is not a completed job, and a completed job is not money collected.

Write down who answers each inquiry, checks the job fit, visits the site, sends the quote, follows up, and handles cancellations. Decide who keeps the customer record after the job.

Compare fees by their payment trigger

• Retainer: You pay a fixed fee for ongoing work, even if no job is collected.
• Ad spend: You pay for the campaign. Check whether management and setup cost extra.
• Per-lead fee: You pay when an inquiry meets the contract’s lead definition.
• Appointment fee: You pay when a visit or call is booked. Ask what happens if the customer cancels or does not show.
• Closing commission: You pay when the contract’s stated event occurs. That might be a signed sale or collected payment. Ask whether the percentage applies to the quoted price, the invoiced amount, or money collected after refunds.

There is no universal fair commission percentage. A percentage of revenue can consume too much of a job with high labor or material costs. Compare every proposal with your own numbers.

Define a qualified inquiry

Put the definition in writing before the trial. For example, require an inquiry to meet all of these conditions:

• The requested job is work you perform.
• The address is in your service area.
• The customer provided working contact details.
• The customer asked about work you can schedule.
• The inquiry is not already in your records.

Add any minimum job size, property type, or availability rule you need. Agree on how and when you can dispute an inquiry that misses the definition.

Fill in the job-cost worksheet

Start with a job for which payment has been collected:

Collected revenue − labor − materials − overhead allowance − required profit = maximum affordable acquisition cost for that job

Then calculate the trial result:

(All vendor fees + ad spend + your team’s follow-up cost) ÷ completed jobs that were paid for = acquisition cost per collected job

Include setup fees and commissions in vendor fees. Count each charge once. Use the amount you kept after any refund as collected revenue.

Compare the trial average with the affordable cost for the jobs it produced. Check each job too: assign its job-specific charges to that job, divide shared trial costs among the paid jobs using a consistent method, and make sure the job still leaves your required profit.

Hypothetical example

These numbers show the calculation. They are not typical results or recommended prices.

A completed job brings in $2,000. Labor and materials cost $900, the overhead allowance is $300, and the required profit is $300.

$2,000 − $900 − $300 − $300 = $500 available for acquisition.

If a $900 trial produces two completed, paid jobs with those same economics, acquisition costs $900 ÷ 2 = $450 per collected job. Each job has $50 of room below its $500 limit. Jobs with different costs need their own check.

Questions to send before signing

Ask the provider to answer these in writing:

1. Do you deliver inquiries, appointments, closed jobs, ad management, or a combination?
2. Which job types, areas, and customer requests qualify? Are inquiries shared with other businesses?
3. Who answers the customer, quotes the work, closes the sale, and keeps the customer record?
4. What are every setup, management, ad, lead, appointment, and commission charge?
5. What event earns each fee, and what amount is a commission based on?
6. What happens with duplicates, cancellations, no-shows, refunds, disputes, and unpaid jobs?
7. Can I export the inquiry and job-outcome records?
8. How can either party end the trial, and what charges remain due?

Ask for records showing inquiry date and source, job type, contact and appointment status, quoted amount, completed date, amount collected, vendor charges, and your team’s follow-up time.

If a provider claims a particular lead-to-job rate, ask how it measured that rate. In a 2023 case, the FTC alleged that HomeAdvisor told service providers its leads became jobs at rates higher than it could substantiate. That allegation does not predict your results. Your own records are what you will use to judge the trial.

Set a trial rule

Agree in writing on the qualified-inquiry definition, the records you will receive, a spending cap, and a review date that allows jobs to finish and payments to clear.

Continue only when the observed acquisition cost per collected job fits within the affordable cost of the jobs produced and each job still meets your required profit after its share of acquisition costs. If the jobs vary widely, use their individual results to decide whether the service fits the work you want.

If no job has been completed and paid for, cost per collected job is undefined. Review the inquiries and follow-up records, then stop or revise the agreement before spending past the cap.

For wider paid-channel planning, see how much a contractor should spend on marketing. If you want to build your own sources of inquiries, see low-cost marketing ideas for contractors.