Before you spend a dollar on Google Ads, you need to know one number: the most you can afford to pay per lead and still make money.
Without that number, you have no way to evaluate your campaigns. You might look at a $120 CPL and think it’s too high. Or look at a $45 CPL and assume everything’s fine. Neither reaction means anything unless you know what your break-even CPL is.
The Formula
Walk Through the Math
Why Close Rate Is the Variable Most People Get Wrong
Most business owners overestimate their close rate when they first run this calculation. They think of their close rate on qualified, warm referrals — not on cold inbound leads from search ads.
| Lead Source | Typical Close Rate | Use in CPL Math? |
|---|---|---|
| Word-of-mouth referrals | 50–70% | No — too optimistic |
| Warm inbound (organic, social) | 30–50% | Maybe |
| Cold inbound (Google Ads) | 20–35% | Yes — use this |
If you don’t have data yet, start conservative — use 25% — and adjust up as you accumulate actual results.
What to Do With This Number
Once you have your max CPL, set it as your target in Google Ads using a Target CPA bid strategy. This tells the algorithm what a lead is worth to you and lets it optimize accordingly.
Review it quarterly. As your close rate improves and your average job size shifts, the number changes. An improving sales process means you can afford to pay more per lead — which means you can bid more aggressively and capture more volume.
Want help running this for your specific business? Book a Revenue Decision Review and we’ll build the model together.
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