Transcription
Most of you that are running home service or contracting business Facebook ads are measuring the success of the campaigns with the wrong metric. I own multiple home service businesses. One of mine does seven figures a year. I own a separate online business that does seven figures a year as well. And I have spent at the time of filming this video over $400,000 on Facebook ads. I have documented it on my Instagram. I've documented it here on YouTube. And in this video, I'm going to show you some sauce that goes over exactly why looking at the cost per lead is the wrong metric when you're measuring the success of an ad. So, sit back, relax, and let's dive in.
[Music]
So, if you're new to this channel, we are chasing multiple six-figure months in home service businesses. That's the idea here. And so, what I want to do is I want to build with you, alongside you, instead of coming from this guru approach. And so everything I'm talking about in this video is stuff that I'm actively doing now in my home service businesses and what metrics I look at in my ads to actually make sure that my campaigns are running properly and they're probably a lot different than the ones you're viewing.
And so when we talk about home service businesses or contracting businesses running Facebook ads. The first thing I want to cover is Facebook is always going to spit you out the cost per lead metric. That's largely a vanity metric. And what I mean by that is you should pay attention to your cost per lead. Like if you're running a campaign and you've had it running for a week or two weeks and your cost per lead is $100, you should probably shut that off in most cases. Now, if you're a roofer and your average ticket's five figures, maybe not. But you know, your average ticket, if you're getting one at bat a week, shut off the ads.
But what happens is a lot of the time guys see other home service businesses ads. They see other campaigns, anything like that, and they see people bragging about $3 cost per leads or $5 cost per leads or whatever else. So, let's break down why not all leads are created equal.
There's two camps here that most home service businesses run ads on. On one side, it's the they run messaging campaigns, right? And I can tell you with confidence that the majority of the bigger businesses that I interact with or talk to do not run messaging campaigns. And there's a few reasons behind that. The main reason why we don't like running messaging campaigns is the way Facebook's running right now. if they just click your ad, a lot of the time it prompts the pixel to fire as like a lead. And so what happens is these people will go online and they'll be like, "Oh, I'm at a $3 cost per lead." But the reality of that is most of those messaging conversations aren't even responding back. And so if you look at just cost per messaging conversation started, it's not that great of a lead because it's an extremely low intent lead.
And then the other camp would be like people running lead genen campaigns or like lead forms or sending traffic to a landing page and converting there. Just a brief segue here. Lead forms would be like the forms where the customer doesn't leave the Facebook app or the Instagram apps. It's the native lead form that gets filled out in Facebook and Instagram. The customer never leaves the app. And then the other side would be like landing pages where you build your own landing page. You send traffic there either like a link to on the back end of your website or something like that. They click your ad on Facebook and Instagram. They go to that page and convert there and then your pixel fires back.
The reason why I like lead form and landing page ads is because that is a much higher friction event for the customer to actually go through. On one side, the messaging conversations, the pixels firing, if they just click the screen, they say, "Hey, I'm interested. It autofills whatever else." Those are going to be turds. And so what happens when turds come through the messaging funnel on Facebook, your pixel fires every single time those turds convert. And then your pixel's going, "Oh, let's show them more of that." And those are typically broker clients, typically less high intent leads versus when you do a lead form, yes, your average cost per lead might be slightly higher, but it's more friction for them to fill out. And so a lot of the time it's a higher intent buyer because they had to give you their name, their email, their phone number, whatever else. And they're way more interested in the service. And so what happens is after a few weeks, the pixel's learning a lot cleaner from the lead former landing page data because it's less dog doodoo leads and more quality ones.
What's wild is like I'll talk to guys who are walking around like, "Oh yeah, we get $3 cost per lead. I'm really good." And I'll open up their their ad account and it's messaging conversations. Then I'll go, "Cool. Here's the stat I want to know. How many of these leads converted to an appointment or a given quote?" That is the metric that really matters.
And so what happens is, let's do some basic math here. Let's say messaging conversation person is getting $5 per lead, right? And let's say they got 10 leads this week just for easy math. So they got 10 leads at $5 a lead, right? So that means that they for $50 they got 10 leads back. But then if you look at those 10 leads in messaging convos, the next question I want to know is how many of those 10 leads converted to a given quote, right? How many of those 10 leads converted to an in-person estimate? That's the metric that matters. And what you'll find with a lot of people who are doing messaging conversations is their cost per appointment is sometimes even worse than lead form campaigns or landing page campaigns because the majority of those $5 per conversion leads don't ever convert into any appointment or anything. And that's ultimately what matters.
And then you take the lead form side, the landing page side, there's more friction there. It's cleaner data. And the majority of those are high enough intent where you'll convert a lot more of those into an appointment. And so on one side, you're paying $5 a lead and you got 10 leads. So you spent 50 bucks for 10 leads. But there's a very realistic chance that one or two out of those actually converted into an appointment. And so you were actually paying $25 to $50 per given quote. And then if you take someone that's doing lead forms and their cost per lead is $10 a lead. So it's double what the messaging conversations were and they got 10 leads. the lead form side spent $10 a lead, they got 10 leads. They spent $100 for those 10 leads. But if six of those converted to an appointment or converted to a given quote, that means that their cost per given quote or booked appointment, which is the metric that actually matters, was $16 versus the messaging conversations, their cost per given quote or anything else was probably closer to $25 to $50 depending on how many people responded.
And so what happens is a lot of these people are making buying decisions on ads with faulty data. And so let's dive into it a little bit. What we find is high-quality leads typically cost more. And so if I go into your market and I find a zip code where the average income is $50,000 a year and then I go into another zip code and the average income is $110,000 a year, I can almost promise you that I'll get cheaper results, cheaper cost per lead in that less income per year area versus the area that's higher intent, higher income, everything else. My cost per lead might be higher there. But the only metrics I want to see is what are my costs per given appointment and then what is my close rate on those costs per appointment or cost per quotes. That's the only thing that matters.
And so what happens is like I'll say this until I'm blue in the face. Most of your ad pixels, if you're running messaging campaigns or you're running a lead form campaign where all you're asking for is like a name and an email or something like that, you're filling your pixel with dog doodoo. Like terrible stuff. And so over time, your pixel's not learning who a more quality lead is by taking the 50,000 data points that Facebook and Instagram ads meta take in on every one of your prospects. Like the pixel is going to learn a lot more cleaner in a higher quality area with higher intent leads that might be a little bit more expensive. That's a complete vanity metric. So get that out of your head. It's not cost per lead, it's cost per appointment, cost per given quote. And then the next measurement you want to take is what is my close rate on these leads?
At the end of the day, it's just basic math. On this side, if I go, okay, I had 10 inbound leads and I converted five of those into appointments. And then of those five appointments, I gave out five quotes. And then on those five quotes, I closed two of them. That means that I spent, depending on what your average ticket is, you spent $100 in ad spend. It doesn't matter how many leads came in. Doesn't even at this point even matter how many appointments came in. I spent $100 to buy two customers. That's just basic math. So then when you go to how many customers you sold from those ads over the last month, the only numbers that matter are what was my cost per appointment, how many of those appointments closed, and what did I spend on ads over the course of a month. Right now, we might spend $100 a day, so $3,000 in a month, and we might close $35 to $40,000 of new sales. And so that math becomes really easy. I spent $3,000 last month, and I bought $30,000 worth of clients. That means that I got 10 times my ad spend back into the business. It's the equivalent of going into a business vending machine and saying, "I'm gonna feed this vending machine $3,000 this month and it's going to spit me back out $30,000 worth of jobs." That's the math. That's the metric. That's all that matters.
And so if you're making the decision on whether you should kill a campaign or you make the decision on whether you should pivot and add new creative or anything else on just cost per lead and not cost per appointment, cost per given quote and then cost per booked job, you're probably buying ads wrong.
But here's the other thing. If you're in a business where your sales process is a little bit longer, a lot of the time you're killing campaigns too soon. So in Home Service Accelerator Pro, there's a perfect example. There's a guy named Joe. He has a landscape lighting and permanent Christmas lighting business. He was running an ad campaign for a week and a half. So, it was like 10 days. And he was like, "Steve, I'm getting like a 3x return on my ad spend right now. Should I kill the campaign?" And I was like, "Hey, whoa, whoa. How long have you been running them?" And he's like, "Oh, I've been running them for like 10 days. Uh, it's like 3x." So, like, that's not amazing. So, he's spending $100 to get back 300 in sales. It's not amazing yet. But what I said to him is like, "Hey, if you're listening to a window cleaner who has like a one-day sales process and they're just closing it on the phone and you're trying to make ad buying decisions based on that business, that's not going to be as applicable to you because you have a longer sales process."
And so what happens is you might buy these leads on the first week of the month and it's a longer sales process. It's more design focused. You go in person, it's a higher spend ticket. And so people might not be making decisions in the first week. Sometimes they might make decisions week two, week three, week four. And so what would happen in Joe's situation is like if he's getting a 3x return on ad spend on that campaign and he kills it on day 14 and then three of those leads that he got 2 or 3 weeks ago end up closing. If we go back to that campaign's return on ad spend a month later, he might have been at like a 10 to 15x, but he's already killed the campaign because he was a little bit impatient. And so what I said is like, "Hey man, if you're getting a 3x in the first 10 days, let that thing cook because you might sell a $10,000 landscape design job from a lead that came in 3 weeks ago and all of the numbers change the second that comes through." But you've already killed that campaign and now you're like, "Oh shoot, now I got to turn it back on." And then we know if you turn the campaigns back on, sometimes they can't get the same volume or the same whatever that they got before. You're kind of resetting the algorithm. So don't make any changes when they're live and working. If you have a working campaign, do not touch it until it stops working. Don't add ads to it. Don't add anything to it. If it is working and it is penciling at a positive return on ad spend, do not touch it.
If I look at like who is a good Facebook or Instagram or meta ad buyer, one of the driving traits that good ad buyers have, owners that do their campaigns themselves, I've got 300 something of them in Home Service Accelerator Pro right now. The ones that are killing it are the ones that slow down and let the algorithm cook. Be patient. We don't measure success on ads on a weekly basis. Typically, we measure them depending on the trade on like a two week to four-week basis.
If you're spending 50 bucks a day on ads and you look at your CPMs, which is like the cost per thousand people you reach, and the cost per thousand people reached is 50 bucks, that means you're essentially buying a,000 impressions from Mark Zuckerberg of people in your market. And so what happens is like that's not that many people. Like this is interruption marketing. This is not Google pay-per-click where they're searching for you. You are interrupting people's scroll and trying to convince them to buy your product or get a quote or whatever else. If you know you're getting a,000 impressions a day for $50, do not kill those campaigns until you've got like 14,000 to 20,000 impressions. You got to give the algorithm a chance to learn who the people are that are going to interact with this ad.
If I spend $50 a day for two weeks, that's $350 a week. 50 time 7. So that's $350 a week, two weeks, $700. That means over the course of those days, I spent $700 to reach $14,000 people if my cost per thousand people to reach was $50. Does that make sense? And so if we know that math, we know that if this is interruption marketing, we have to reach a ton of people to even give the algorithm and the machine learning a chance to figure out who are the type of people that like this product. Are they homeowners? Do they interact with homegoods stuff? Do they interact with luxury cars on their Facebook, on their Instagram? Are they liking pages about home improvement? Like, whatever it is, there's a thousand different data factors. We can't pretend to know how the algorithm works. All we know is you got to be patient. You got to slow down, and you got to actually understand that you have to give the algorithm a chance to learn.
And so I hit on it briefly, but for you guys that have recurring services, so my window guys, my pool service guys, auto detailers, if you get multiple auto details, whatever else, or you have a high ticket front-end offer with like a service plan on the back end, a thing that you also need to pay attention to is what is the LTV of that customer, the lifetime value. That's something that's really common in like tech or SAS products. SAS is software as a service, SAS. An example of that would be like Jobber is a SAS or Snipy Lead is a SAS or something like that. What they like to value is like, okay, if they're charging a monthly fee of $100 and they're getting you for uh, you know, and their average customer stays with them for 18 months, that means that their average lifetime value of a customer is $1,800. Now, that's easy math. I'm not going to get into churn and calculating churn or anything like that. That's not applicable here. But what the reason I'm saying that is if you're a pool guy or a cleaning service or you do windows but you sell a quarterly clean recurring on the back end or some sort of service plan, it might be in your best interest to find out what the lifetime value is of your customers than just looking at did I make the money from that lead this month.
So if you take Kaden for example, Kaden's a window cleaner that is a member of Home Service Accelerator Pro. I interviewed him and has like a couple thousand views on this channel. He has a window cleaning company that does like 50 to $60,000 a month, but off the top of my head, I think that he had said in the interview it was like 20some thousand a month is recurring services. And so what it means by that is if Kaden's looking at Facebook leads and just looking at did I get a $350 one-time clean from people with these Facebook ads, it might not be the best leading metric to him because he might be getting, you know, one out of three or one out of four of those inbound booked jobs to convert to a quarterly clean or a bimonthly clean or whatever else. And so then he has to actually value it's not just what did I get from this job in the immediate time that that lead converted. If his average ticket is $500 and one out of every four people converts to a quarterly clean, that means that he got the return on ad spend for the first clean, but knows that that one out of four of those turns into a $2,000 a year customer. That would be the lifetime value there. So, when he's looking at ads, it's not just, oh, did I make money back immediately? It's also like, what am I getting on the back end in recurring services?
There's a reason pest control companies sell for like 10 times their EBITDA. Ebida is earnings before interest, taxes, depreciation, and amortization, whatever else. You could look up the definition. But there's a reason that businesses that have recurring services end up selling for way more when they do sell because it's guaranteed income that has less operational lag and marketing spend associated to it than onetime sales. And so, if you take my Christmas light business for example, we're somewhat that, but not really. So, we do like a service-based leasing model, for lack of a better term, and we retain about 75 to 80% of our customers. When I do the math for my business, if I'm buying a Christmas light customer in year one, whatever my return on ad spend is, I know that three out of four of those are going to come back the next year. Just it's just math. And so now when I look at it, it's like, yeah, I might be buying them and I might be spending a lot on the front end, but that job comes back next year, I'm not spending money on ads again. That's just recurring business.
And any of the Home Service Accelerator Pro people know, I say this till I'm blew in the face in the group. You know what's better than a job that comes from paid advertising? A job that doesn't. So, you need to look at the business and find what are the ways that I'm getting income on the front end with ads and then how can I sell them something else, a service plan or something else in the back end. And if you have that, penciling and making ad campaigns return on ad spend profitably. Getting ad campaigns to pencil properly becomes a lot easier if you know your math on the back end.
So to wrap it up, cost per lead is a vanity metric. You guys should all be looking at what is your cost per booked appointment. You should be looking at what is your cost per given quote. Should be looking at what is your cost associated with buying a job on Meta. If you spent $1,000 this month, how many jobs did you get and what was the total revenue? Cost per lead is vanity. It's a good driving metric, but it should not be the main thing you measure ads on.
So, if you like this video, there's links in the bio here. I own Home Service Accelerator, both the starter school and the pro group. The starter school is for businesses that are doing typically less than $15,000 a month. It's the starter into my program. It's $97 a month to join that. A bunch of the basics, signage strategies, basic intros to Facebook ads, social media setups, all of like the backend systems I use in my business. The stuff in that group should get you to 15 20K a month alone if you do it properly. And then if you have a business that's doing maybe 15K a month all the way up to about 250 to 400K a month in sales depending on your trade. That's where Home Service Accelerator Pro comes in. That's the group where you see it on my Instagram all the time. You see the people getting interviewed on YouTube all the time. It's a bunch of killers. It's a bunch of dogs in there that own home service businesses that are cranking their systems and processes over time. That one is a little bit more expensive. It's more expensive so that the conversations are not full of a bunch of turds. So, if you want to join that one, book a call in the description. We have a small little interview process to make sure you're eligible because I don't want to bring in a bunch of turds in there that make the Discord look like crap. And so, join that one. And then, if you want to just keep consuming the content for free, you can subscribe to this channel. There's a bunch of sauce on here. And then you can also find me on Instagram. Thank you so much for watching. I appreciate you guys. A year ago, we had like 300 subscribers or something like that. We have 1500 now. It's super encouraging that you guys comment and tell me that this has been extremely impactful to you guys. So, keep doing that because it satisfies my little monkey brain when I'm doing this alone in my room. So, thank you so much. Subscribe to the channel. I'll see you guys on the next video. Peace.