In the past we've talked about several different kinds of advertising small businesses can use in our advertising to your local community post, and we've gone over why Google ads might not be right for service businesses. There's another type of advertising/marketing we haven't touched on yet: directly paying for leads with online lead generation services. Home Advisor, Thumbtack, and Porch are a few examples of these lead-selling companies. They all operate a little bit differently, but the purpose of each one is connecting customer leads to service businesses.

How they work

If you're not familiar with those services and how they work, the general idea is that a customer selects a specific type of service they need done — landscaping, roof repair, etc., and then they submit a job request for that service. Next, the job request is shown to several different service businesses, and they each get the chance to put in an estimate for the job. It can vary between each platform, but commonly the business will have to pay a fee to send an estimate to the customer. The customer can then decided whether or not they want to accept one of the estimates, and if they do, they'll be put in contact with the business that sent it, and the job can proceed from there.

The cost to purchase a lead varies from service to service. Generally, you can expect to pay between $5-$60 for each lead, with smaller jobs like hanging a door on the low end and bigger ones, like a complete remodel, on the higher end. In most cases, the lead will only be sold to a small number of businesses, usually 4-5, so you won't be competing with a large number of businesses. You're able to add as many or as few services areas as you want. The more areas you're willing to work in, the higher number of customers you'll see.

The goal is to bring together people who need a service done with the people and businesses that can provide that service. We're going to take a look at some the pros and cons of these "service business matchmakers" and their benefits to service business owners and whether or not they're worth using.

What's good about them

Easy to get started with

With most of these lead generation services, you only need to fill in business info, and you're ready to start getting leads. Other types of marketing can take a fair amount of time and effort if you want to do it right. Running a service business and doing all or most of the work may not leave enough time to brainstorm new advertising ideas or actually create/write ads for your business.

Immediate results

It can take time before you see a new customer from more traditional types of advertising (ads, fliers, etc.), but when purchasing a lead, you're getting in touch with a potential customer as soon as you get a notification from the lead gen service. It's also easier to track where your customers are coming from. You'll know exactly where they came from as soon as you contact them, so there's no need to ask them how they found you.

Exposure to a lot of customers

These services have millions of people visiting their site each month, and depending on your service area, that can mean a lot of eyeballs on your business. More importantly, most of them are actively looking to have work done, whereas a person seeing a newspaper ad for a service isn't necessarily going to need new drywall or their patio power-washed.

What's bad about them

You may not have enough details about the job

One of the guidelines in our post about setting prices for jobs is never price a job you haven't seen, and that applies here as well. Each job you do as a service professional can vary so much. If you don't know enough about a potential job, you could end up giving a customer one price for it and then the actual cost could exceed the original price. Price differences can often lead to an unhappy customer and bad reviews for your business.

Bad leads

You're going to be paying for every lead, so a bad one can really hurt. It could be a customer that changes their mind or even one who just wanted to see what a job might cost, and they never had any intentions of hiring someone. Any way you cut it, that's money coming directly out of your pocket.

Strict refund policies

For the most part, refunds for purchased leads are limited to a few specific circumstances. That means that if you do get a bad lead, you may not be able to get your money back for it. Refund policies can vary between each lead selling service, so read the fine print and know what

You need to be "on-call" all the time

One of the keys to doing well with these kinds of lead generation services is responding as fast as possible when you get a notification for a new lead. Unfortunately, that's not always possible when you're running your own business. You could be working on a job site, eating dinner with your family, or are in any other situation where it's difficult, or not possible, to quickly send an estimate to a customer.

One of the reasons you want to respond quickly is that each lead is sold to a limited number of businesses, so you could completely miss a job opportunity if you're slow to respond. Responding quickly also means you can get your estimate to the customer before they've decided on who they want to work with.

Are they worth signing up for and using?

The negatives may seem to outweigh the positives, but some businesses have had success with purchasing leads from places like Thumbtack or Porch. They can be especially attractive to newer businesses that might not have many, or even any, customers. They can also help you find new customers in your slow seasons, but you shouldn't entirely rely on them as your only way of finding new work.

The big thing to remember is they're just like other types of marketing: you're not guaranteed to get new work from them. Sure, you're directly in contact with a potential customer, but you could still spend $400 a month buying leads and not get enough new jobs from it to cover the cost of those leads.

There are a few things you should keep in mind if you do decide to try one of the lead purchasing services:

  1. Be sure to take the cost of the lead into account when deciding on what to charge for the job. You could end up making a tiny profit or even worse, losing money on the job.
  2. Set a budget and stick to it. It can be easy to see a new lead come in and just buy it without thinking about how much you're spending.
  3. Keep track of how much money you're getting from the leads you purchase and the total you've paid for them. It doesn't make sense to continue buying leads if you're not making any money from it.

Growing your business

Whether you're buying a lead or getting a new customer from an ad, you're building your customer base, and that's the most important part. Each new customer can mean repeat work, but it also means your business's name is getting out there. Referrals from previous customers are one of the best ways to get new customers, and the best part is it's free.

Getting new customers can often be a struggle for service businesses, so it's important to keep an open mind about all of your options, including directly paying for leads. Just be aware of their downfalls, have realistic expectations about how much new work you'll get from them, and keep working hard. Your customer base will continue to grow, and your business with thrive.