Your ad dashboard says you got 40 leads this month. Is that good? It is impossible to know without connecting those leads to money. Here is a step-by-step example of how a service business can check whether its ads are profitable. Swap in your own numbers as you go.
All numbers are examples.
The scenario
A home services company spends $4,000 a month on ads. Here is what it knows:
- Ads produced 40 leads
- About 1 in 4 leads becomes a customer (a 25 percent close rate)
- The first job averages $1,500 in revenue
- The company keeps about 40 percent of revenue as profit before ad spend
Step 1: Count customers
40 leads x 25 percent = 10 customers.
Step 2: Estimate revenue
10 customers x $1,500 = $15,000 in revenue from ads.
Step 3: Calculate ROAS
ROAS = revenue / ad spend = $15,000 / $4,000 = 3.75.
Step 4: Find the break-even ROAS
Break-even ROAS = 1 / profit margin = 1 / 0.40 = 2.5.
The company's ROAS of 3.75 is above its break-even of 2.5, so the ads are covering their cost.
Step 5: Calculate profit after ad spend
Profit before ads = $15,000 x 0.40 = $6,000. Profit after ads = $6,000 minus $4,000 = $2,000.
So the ads brought in about $2,000 of profit this month from first jobs alone, or about $0.50 for every $1 spent.
Step 6: Look at cost per lead and customer
- Cost per lead = $4,000 / 40 = $100
- Cost per customer = $4,000 / 10 = $400
- The most the company can afford per customer, at this margin and job value, is $1,500 x 0.40 = $600
- The most it can afford per lead, at a 25 percent close rate, is $600 x 0.25 = $150
Its actual cost per lead ($100) is below that limit ($150). That is a good sign.
What if one number changes?
Try some small changes and see how sensitive the result is:
- Close rate drops to 15 percent. 40 leads become 6 customers, revenue is $9,000, ROAS is 2.25, and profit after ads is negative. The company now loses money.
- Job value rises to $1,800. Revenue is $18,000, ROAS is 4.5, and profit after ads is $3,200.
- Cost per lead rises to $140. With $5,600 of spend for 40 leads, ROAS drops to 2.68 and profit shrinks.
Small shifts in close rate or lead cost can swing the result. That is why tracking matters.
Check yours in a minute
Our free ROAS Calculator does these calculations for you. Choose lead generation mode, enter your spend, leads, close rate, customer value, and margin, and it shows your ROAS, break-even, profit after ad spend, and a rating from "losing money" to "excellent." It also has a what-if slider so you can see the effect of improving your results.
What the first job does not capture
This example only looks at the first sale. Many customers come back, which makes the true value higher. If you have repeat business, estimate lifetime value carefully. Our free LTV and CAC Calculator helps. Be conservative, and do not count repeat revenue you cannot document.
Where to find your numbers
- Spend: your ad accounts
- Leads: call tracking and form submissions
- Close rate: your CRM or a simple log of leads and outcomes
- Job value: your invoices
- Margin: your accounting records or an honest estimate
If you do not track these yet, start now. Even a rough month gives you a baseline.
If the answer is "no"
If your ads are not profitable, look for the leak before cutting spend:
- Are you answering calls quickly? See our free Missed Call Revenue Calculator
- Is your website converting clicks into leads?
- Are you following up fast and consistently?
- Are the right keywords and audiences driving the leads?
Frequently asked questions
Start with estimates, then refine as you gather data. The exercise still shows where you stand.
Monthly at least, and when you make big changes.
Not necessarily if repeat business supports it, but understand the assumptions.
What to do next
If you want help finding where your ad money is leaking, book a free strategy call. We will go through your numbers together.
