The Real Reason You’re Overpaying for Every Lead

Hey, everyone, my name is Mike Andes. I'm the founder of Augusta Lawn Care. We have over 150 locations around the world. We do over $50 million a year in revenue mowing grass. Today I'm going to be talking about advertising and the fact that the vast majority of home service business owners would get our information off of Facebook groups and online from other people in our industry. And we fail to realize that there's one very important factor, and that is geography. All it means is different ads work differently in different areas. Whoa. All that means is that one ad that works really good for someone else might not work in your market. Inside of Augusta, there was two people run the exact same ad. One was in Kentucky and the other one was in Michigan, I think. And one of them over here in Kentucky had a cost per lead of over $600 per lead. That's insane. Dun over in Michigan had a cost per lead under $10. And the reason I'm talking about this today is that so many of us will go into a Facebook group or we'll go watch a YouTube video and be like, oh, well, so and so. He said this ad worked fantastically for them great in their market. All of us need to realize that we are all in different geographies, different markets, different cities, different states. The performance of them will be massively affected by. But where you're at in the country, what it means is we actually need to understand the mathematics and the metrics behind what makes a great ad. First off, we have cost per click. How much do I have to spend on marketing into Facebook or Google or whatever in order to get one click to my website? Great. Then I have my cost per lead. How many clicks do I need to spend on before I get one lead? An estimate request form, someone giving me a call, something on my website asking for service. The last and most important one is your customer acquisition cost. In other words, how much do I have to spend on marketing in order to finally get a customer? At the end of the day, as with all good things that happen in life, they start and end with a funnel. So how you can think about this is all your clicks that you spend money on in terms of advertising go into the top of the funnel. Bam. Whether Facebook, Google, or even if you're doing direct marketing through print marketing or door hangers, whatever, people are still going to come to your website. And so what's my cost per click to get them to my website? Great. There's a problem. We have filters inside of the funnel.

This is what I call your conversion rate. This is what percentage of people that get to your website actually convert into a lead. Because the reason they're not getting from a click to a lead is they did not convert. So there's a funnel. They come in the top down the funnel, they hit the filter, and all of a sudden, one what? Some percentage of them will actually become a lead. They'll fill out the request form, they'll give you a call, they'll send you an email in some way, they'll ask for service. And this can range anywhere from like half a percent to 2 or 3%. Just depends. If you're doing Facebook ads, probably less inclined that they're looking to buy for your service versus Google Ads where they literally typed in your keyword they had intent to buy, you might have a 5 or 10% conversion rate when you're getting clicks from Google. So again, not all clicks are created equal. Not all leads are created equal. And as they continue now, they've actually converted. They've become a lead. They fill out your customer request form. There's another one, another filter inside the funnel. And this is your close ratio. This is what percentage of of your leads become paying customers. How do you determine your close ratio? This is the total number of estimates accepted divided by the total number of estimates that you sent out to customers. In other words, how many leads converted into paying customers. And so when you're thinking about advertising instead of going online and asking everyone else what's working for them, that's not going to necessarily work in your market. And what these things will tell you is whether or not you're getting a good cost per click, a good cost per lead, and a good customer acquisition cost. And you're like, well, my customer acquisition cost is horrible. Well, yeah, if you have a 20% close ratio, you can have a great cost per lead. But if you only close 1 out of 5 jobs or even 1 out of 10 jobs, that's your close ratio, it's going to ruin your customer acquisition cost. In other words, that's the thing I really care about, customers coming out the bottom of the funnel. I don't care about clicks, I don't care about leads. I just care about customers. And that's why I get annoyed when people start bragging about what their cost per lead is. But yeah, not all leads are created equal. What percentage of them actually closed and became paying customers? That's the most important number. How much do I have to spend on marketing dollars? How much do I have to pump into the top of this funnel in order to get one paying customer at the bottom, track that in your market. So instead of spending $5,000 on one campaign to drive traffic, I spend I'm going to run five different campaigns for $1,000 each to be able to determine what my customer acquisition cost is on every single one. And then I'm going to take the one that wins. I'm going to hone it in. I'm going to make multiple variations of the same ad. I'm going to keep honing in and honing in and honing in until finally I get a great customer acquisition cost. And once you get that customer, watch this video, because you'll need to know when to raise your prices and just how much profit margin you're leaving on the table because you're not raising prices.