Home Service Companies That Track Profit Instead of Leads Get 38% More From Their Ad Spend, Study Finds
Home service companies may have a bigger advertising measurement problem than an advertising budget problem.
A new analysis from Lachi Media found that home service businesses connecting advertising to completed jobs generated a median $1.68 in gross profit for every $1 spent on advertising. Companies that focused on leads and phone calls generated $1.22.
That is a 38% difference in gross-profit return.
The findings come from an analysis of $84.1 million in advertising spend across 126 U.S. home service businesses. The study covered roughly two years of advertising and completed-job information and included $410.7 million in advertising-attributed revenue.
For contractors, plumbers, electricians, HVAC companies, roofers, landscapers, property maintenance businesses and other service providers, the distinction could be significant. A lead may look good on a monthly marketing report. A completed job is a much better indicator of whether that lead actually produced money for the business.
The Number on the Advertising Report May Not Be the Number That Matters
Most advertising platforms are very good at telling an advertiser what happened immediately after an ad interaction.
Someone clicked an ad. Someone called. Someone submitted a form. Someone became a recorded conversion.
Then the report often stops.
The problem is that a phone call is not revenue. A form submission is not a job. A job is not necessarily profitable.
Lachi Media’s analysis focused on what happened after the lead entered the business. That meant connecting advertising activity with completed jobs and, where available, the financial value of those jobs.
The study defines gross profit as revenue minus technician labor and parts. It does not subtract overhead such as vehicles, insurance, office expenses or advertising costs.
That distinction matters. The study is measuring the money left after the direct cost of performing the work, not the final amount that ends up in an owner’s pocket.
Still, the difference between the groups was substantial.
The 38% Difference Appeared Across Advertising Budgets
The relationship between job-based measurement and advertising returns was not limited to small advertisers.
Lachi Media reported that the difference remained present across the spending levels included in the analysis.
Smaller Advertising Budgets
Businesses spending between $21,500 and $107,000 per year generated a median $1.69 in gross profit for every advertising dollar when advertising was connected to completed jobs.
Businesses in that spending range focused on leads generated $1.27 per advertising dollar.
Mid-Size Advertising Budgets
At annual spending levels between $109,500 and $247,000, the difference became even larger.
Job-connected advertising produced a median $1.77 in gross profit per advertising dollar. Lead-focused accounts produced $0.89.
That is a substantial gap. A company can spend the same amount of money, use the same advertising platform and operate in the same general market, yet get very different financial results based on what information is being sent back to the advertising system.
Larger Advertising Budgets
For businesses spending between $253,500 and $10 million, job-connected advertising generated a median $1.65 per advertising dollar. Lead-focused businesses generated $1.26.
The numbers make one point fairly clear: spending more money does not automatically solve an advertising measurement problem.
The Closer Advertising Gets to Profit, the Better the Return
One of the more interesting parts of the study is the progression from leads to profit.
Lachi Media grouped accounts according to how closely their advertising conversion goals were connected to actual financial outcomes.
The median gross-profit return increased at each major step:
- Leads and calls: $1.16 per advertising dollar
- Qualified leads: $1.27 per advertising dollar
- Completed jobs: $1.28 per advertising dollar
- Jobs measured by revenue: $1.69 per advertising dollar
- Jobs measured by gross profit: $1.75 per advertising dollar
That progression is worth paying attention to.
A marketing report can say that a campaign generated 100 leads. That sounds productive. But if only five of those leads become paying customers, the headline number does not tell the whole story.
Take the next step and report completed jobs. The picture becomes clearer.
Add the revenue generated by those jobs and the picture gets clearer again.
Then add gross profit and the advertising platform has a much better signal for deciding which clicks and searches deserve more of the budget.
“A Lead Is Not a Job, and a Job Is Not Profit”
Roy Danino, CEO and co-founder of Lachi Media, summed up the issue in a way that should resonate with anyone who has ever looked at a monthly lead report and wondered what happened to all those inquiries.
“A lead is not a job, and a job is not profit,” Danino said.
His point is simple. If an advertising system is told that a phone call is a valuable conversion, it will try to find more phone calls.
That does not mean every caller is a good customer.
It does not mean every caller books a job.
It does not mean every booked job produces the same amount of revenue.
And it certainly does not mean every job produces the same amount of gross profit.
Advertising automation can only work with the signals it receives. Give it weak signals and it has less useful information. Give it completed-job and financial information, and the bidding system has a better basis for making decisions.
More Than Four Times as Many Lead-Focused Accounts Lost Money
Another finding from the study may be even more significant for business owners.
Ninety-two percent of businesses that connected advertising to completed jobs generated more gross profit than they spent on advertising.
Among businesses focused on leads and calls, that figure was 63%.
Put another way, lead-focused accounts were more than four times as likely to lose money on their advertising when compared with accounts optimized around completed jobs.
The same pattern appeared among the 43 businesses independently observed by Lachi Media rather than managed by the agency. In that group, 88% of businesses connecting advertising to completed jobs generated more gross profit than their ad spend, compared with 60% of businesses focused on leads and calls.
That second group is worth noting because it provides a useful counterpoint to the obvious question: Is the result simply a reflection of how Lachi Media manages its clients?
The independent accounts showed a similar relationship.
The Advertising Platform Only Knows What the Business Tells It
Google Ads and Microsoft Advertising can collect a large amount of information about an advertising interaction.
They can see clicks, calls, forms and other conversion events. They can also use conversion information as a signal for automated bidding.
What they do not automatically know is what happened after a lead entered the contractor’s sales process.
Did the homeowner answer the phone?
Did the person schedule an appointment?
Did a technician actually perform the work?
Was the job worth $300 or $3,000?
Did the company make money after paying the technician and purchasing the parts?
Those answers typically live in a CRM (Customer Relationship Management) system, field-service management software or accounting system.
Connecting those systems with the advertising account closes the information gap.
That can allow a business to send completed-job information back to the advertising platform instead of stopping at the initial lead.
The Technology Is No Longer Reserved for Large Companies
For years, this type of measurement was much easier for large advertisers with sizable technology budgets.
That has changed.
CRM systems, field-service platforms and advertising integrations have made it possible for smaller home service businesses to connect leads with completed jobs and job values.
Danino described the shift as a democratization of the technology.
That is an important point. A two-truck plumbing company may not have the technology department of a national home services chain. It may not need one.
The tools required to send conversion information from a CRM or field-service platform back to an advertising account are now accessible to smaller operators.
The harder part may be recognizing that the information needs to be connected in the first place.
The Small Advertiser vs. the $20 Million Advertiser
Lachi Media found another result that challenges a common assumption about digital advertising: that the biggest advertiser will naturally get the best results.
Among the smallest advertisers in the study, businesses spending less than $50,000 per year and measuring advertising by completed jobs generated a median 1.69 times return in gross profit per advertising dollar.
One operator in the analysis spent approximately $20 million over two years and generated a 1.80 times return.
Those numbers are remarkably close.
Nearly half of the smaller advertisers reportedly beat the $20 million operator outright.
That does not mean budget is irrelevant. Large advertisers have access to more campaigns, more markets and larger amounts of conversion data.
It does suggest that measurement can be a major equalizer.
A smaller contractor does not need to spend millions of dollars to tell Google Ads what a profitable job looks like.
The big question is whether the contractor is actually sending that information back.
Why So Many Businesses Still Optimize for Leads
If the solution sounds straightforward, there is an obvious question: Why are so many businesses still optimizing for leads and calls?
Part of the answer is that leads are easy to count.
A marketing agency can open an advertising account and say, “We generated 300 leads this month.”
That number is simple.
It fits neatly into a report.
It is also far less useful than knowing how many of those leads became profitable jobs.
The second issue is the integration work. Sending completed-job information back to an advertising platform requires the CRM, field-service software and advertising account to communicate correctly.
That can involve conversion tracking, tracking parameters and customer records.
Lachi Media says its analysis matched roughly 90% of ad-sourced jobs to advertising activity using identifiers such as gclid, msclkid and UTM parameters.
Gclid is a Google Click Identifier used to connect an ad click with later conversion activity. Msclkid serves a similar purpose for Microsoft Advertising. UTM parameters are tracking values added to URLs so traffic sources and campaigns can be identified.
These technical details may sound minor. They are not.
Without reliable attribution, the business cannot confidently connect the original advertising click with the job that eventually produced revenue.
The Study Found a Statistically Significant Relationship
Lachi Media also tested whether the relationship between advertising goals and returns was statistically meaningful.
Across all 126 companies, the study reported a Spearman’s rho of 0.32 with p<0.001.
Spearman’s rho is a statistical measure used to assess the relationship between two ranked variables. In this case, it was used to examine the relationship between how closely an advertising account’s conversion goal was tied to financial outcomes and its gross-profit return.
The reported relationship also appeared within the independently observed group of 43 companies, with rho of 0.33 and p=0.03.
The relationship held within each advertising spending tier as well.
That does not prove that changing the conversion goal alone will produce the exact returns reported in every business. The study has limitations, and Lachi Media acknowledges them.
It is a cross-sectional analysis of the agency’s client base and independently observed accounts. It is not a random sample of every home service business in the United States.
Labor costs were also self-reported and could be calculated differently by companies using W-2 employees and those using 1099 contractors.
Those limitations should be kept in mind when applying the findings to a specific business.
What Home Service Companies Can Do Now
The study does not suggest that a contractor needs a perfect accounting system before improving advertising measurement.
There is a progression that makes sense.
Start With Completed Jobs
The first step is to connect advertising leads with completed jobs.
This moves the advertising system past the initial inquiry and gives it information about which leads actually produced work.
Add Job Revenue
The next step is to associate a dollar value with each completed job.
A $250 service call and a $5,000 replacement project should not necessarily send the same signal to an automated bidding system.
Revenue-based conversion values give the platform more information about the financial value of the customers it is acquiring.
Move to Gross Profit
The most advanced step in the Lachi Media study was connecting advertising to gross profit.
That means considering the money left after direct technician labor and parts.
It is a more useful business metric than revenue alone because two jobs with identical sales prices can have very different direct costs.
A contractor that cannot calculate reliable gross profit for every job should not wait indefinitely. Moving from leads to completed jobs can already provide a much better signal.
The Bigger Lesson for Digital Marketing
The findings point to a broader issue in paid search.
Digital advertising has become extremely good at optimization. The catch is that an advertising platform can optimize only toward the information it receives.
If the conversion is a phone call, the system can seek more phone calls.
If the conversion is a qualified lead, it can seek more qualified leads.
If the conversion is a $4,000 job that produces $2,000 in gross profit, the system has a much stronger financial signal.
This is where the distinction between marketing metrics and business metrics becomes important.
Clicks, impressions, calls and leads are marketing metrics. Revenue and gross profit are business metrics.
A company can have excellent marketing metrics and poor financial results. It happens more often than many owners would like to admit.
The better question is not simply, “How many leads did the campaign generate?”
The better question is, “What did those leads produce?”
A Shift From Counting Leads to Measuring Outcomes
Lachi Media’s analysis does not suggest that leads are worthless. Leads are the starting point of the sales process.
The issue is stopping the measurement there.
For home service businesses, the path from click to cash often includes several steps: an advertisement produces a lead, the lead becomes an appointment, the appointment becomes a job, the job produces revenue, and the revenue produces gross profit after direct costs.
Every step tells the business something different.
The closer advertising measurement gets to the final financial result, the more useful that information becomes for budget decisions.
That may be the most practical takeaway from the study. A contractor does not necessarily need to spend more on advertising. The contractor may first need to tell the advertising platform what a good customer actually looks like.
For a small home service company, that could be a much cheaper place to start.
Lachi Media’s study analyzed 126 U.S. home service companies, $84.1 million in advertising spend and $410.7 million in advertising-attributed revenue over roughly two years. Its central finding is straightforward: businesses that connected advertising with completed jobs produced substantially better median gross-profit returns than businesses that stopped measurement at leads and calls. The numbers do not mean every company will see a 38% improvement, but they do make a strong case for following the money instead of stopping at the lead.