How much should you pay per lead?

The right price to pay is not an arbitrary market average; it comes directly from your own close rate, job value, and gross margin through one straightforward formula.

The formula

Maximum break-even cost per lead = close rate x average job value x gross margin. Above this ceiling, the marketing channel loses money on every inquiry; below it, the channel pays for itself and yields sustainable net profit.

Worked example: a roofing company

Consider a contractor with an average job of $9,500, a gross margin of 35%, and a close rate of 25%. Their break-even cost per lead is $831.25 (0.25 x $9,500 x 35%). Paying $450 per lead leaves $381.25 of expected profit per lead. Many owners target at most about 60% of break-even to leave room for slow months, which equals $498.75 here.

If a lead provider quotes above your break-even threshold, the only honest fixes are a better close rate, higher-margin jobs, or walking away.