Solved: Inefficient Marketing Spend? (LTV Calculator Inside)

Hi there,

Thanks for reaching out! Happy to give you some of my initial thoughts on your situation. I understand you're trying to figure out what a good cost per lead (CPL) is for Canterbury to see if your marketing spend is efficient. It's a very common question, but I'll be honest with you, it's also the wrong question to be asking. Chasing a generic 'average CPL' for a specific town is a bit like chasing a ghost – it's a number that doesn't really exist in a meaningful way, and it's probably leading you to optimise for the wrong things entirely.

The truth is, the efficiency of your ad spend has almost nothing to do with what your competitor down the road is paying. It has everything to do with your own business's maths. Instead of looking outwards for a meaningless benchmark, we need to look inwards at what a lead is actually worth to *you*. Once we figure that out, we can build a strategy that allows you to acquire customers profitably, regardless of what the so-called 'average' is.

We'll need to look at why chasing an 'average CPL' is a waste of time...

Let's break down why this idea of a single, average CPL for a place like Canterbury is so flawed. Imagine two electricians in Canterbury, both running Google Ads.

Electrician A has a clunky, slow-loading website he built himself. His ads have generic copy like "Electrician in Canterbury. Call Us Today." He sends all traffic to his homepage, where visitors have to hunt for a phone number. He only answers calls when he's not on a job, so he misses half of them. He might get a CPL of, say, £70, but he only converts 1 in 20 leads into a paying job.

Electrician B has a professionally designed, mobile-friendly landing page that loads instantly. Her ad copy speaks directly to a pain point: "Lights out in CT1? Get a certified electrician to your door in under 60 minutes." The ad goes to a dedicated page with a massive "Call Now for Emergency Service" button and glowing customer reviews. She uses a call answering service, so she never misses a lead. Her CPL might be £40, and she converts 1 in 5 leads into a high-value emergency call-out.

So, what's the "average" CPL here? Is it £55? That number is completely useless. It tells you nothing about the profitability or efficiency of either business. Electrician B is building a thriving business while Electrician A is probably wondering why his ads are so expensive and don't work. The 'average' is a meaningless vanity metric because it's influenced by so many factors:

• Industry: A lead for a solicitor will cost vastly more than a lead for a window cleaner.
• Offer: A "free 10-point safety check" will generate cheaper leads than a "£5,000 rewire quote".
• Ad Quality: Better, more relevant ads get cheaper clicks and better positions.
• Landing Page Experience: A fast, persuasive page will convert more visitors, lowering your effective CPL.
• Seasonality: Plumbers see CPLs skyrocket during the first cold snap of winter.
• Competition: If three new companies start bidding on the same keywords next week, everyone's costs will go up.

Trying to benchmark against an 'average' is like trying to navigate a ship using a map of a different ocean. You're focusing on an external variable you can't control, instead of the internal ones you can. The only number that matters is the one dictated by your own business model.

I'd say you need to ask the only question that matters: What CPL can *you* afford?

This is where we shift from guesswork to mathematics. To stop worrying about efficiency and start driving profitable growth, you need to understand two critical numbers: Customer Lifetime Value (LTV) and your internal conversion rates. LTV tells you what a customer is worth to you over the entire relationship, not just the first transaction.

The calculation is pretty straightforward. You need three bits of information:

1. Average Revenue Per Account (ARPA): What's the average amount a customer spends with you in a given period (e.g., per month or per year)? For a service business, you might calculate the average value of a job and multiply it by how many times a typical customer hires you per year.
2. Gross Margin %: What's your profit margin on that revenue after accounting for the direct costs of delivering the service?
3. Customer Churn Rate %: What percentage of customers do you lose in that same period? (e.g., if you have 100 customers and 5 stop using your service in a year, your annual churn is 5%).

The formula looks like this: LTV = (ARPA * Gross Margin %) / Churn Rate %

This single number is the absolute foundation of a scalable advertising strategy. It tells you the maximum potential value you can extract from a new customer. From there, we can work backwards to figure out what you can afford to pay for a lead.

A healthy business model often aims for a 3:1 LTV to Customer Acquisition Cost (CAC) ratio. This means for every £1 you spend to acquire a new customer, you should get at least £3 back in lifetime gross margin. So, your maximum affordable CAC is simply your LTV divided by 3.

But that's the cost to get a *customer*, not a *lead*. The final step is to factor in your sales conversion rate. If you know that you turn 1 out of every 10 qualified leads into a paying customer (a 10% conversion rate), then your maximum affordable CPL is your affordable CAC divided by 10.

This all might sound a bit complex, so I've built a calculator for you below. Play around with the sliders using your own business numbers (or your best estimates) to see how these metrics interact. This will give you a real, data-backed target for your CPL – a number that's tailor-made for your business, not based on some imaginary average.

You probably should define your ideal customer by their nightmare, not their postcode...

Once you know what you can afford to pay for a lead, the next step is to find the *right* leads. The biggest mistake I see local businesses make is targeting too broadly. They think "my customer is anyone in Canterbury who needs [my service]". This is lazy, expensive, and it leads to weak, generic advertising that speaks to no one.

To stop burning cash, you have to get incredibly specific about who you're targeting. And I don't mean demographics like "homeowners aged 30-55". That tells you nothing useful. You need to define your customer by their pain. What is the specific, urgent, expensive, or deeply frustrating nightmare they're experiencing right before they need you?

Your Ideal Customer Profile (ICP) isn't a person; it's a problem state. Let's make this real for a few local businesses:

• For a plumber: Your ICP isn't "homeowners in CT2". It's the person staring at a spreading water stain on their ceiling at 10 PM on a Sunday, panicking about the damage and the cost. Their nightmare is property damage and finding someone trustworthy *right now*.
• For a pest control service: Your ICP isn't "families". It's the parent who just saw a rat in their kitchen and is now terrified for their children's health and disgusted by their own home. Their nightmare is a feeling of invasion and unhygene.
• For a family law solicitor: Your ICP isn't "people getting divorced". It's the individual lying awake at 3 AM, worried sick about losing access to their children or their financial security. Their nightmare is uncertainty and the fear of an unfair outcome.

When you understand the nightmare, your entire marketing strategy changes. Your ad copy stops being about you ("We are Canterbury's premier plumbers") and starts being about them ("Ceiling leak? Don't panic. We'll have a certified plumber with you in 60 minutes, 24/7."). Your targeting gets sharper. Your website's message becomes a beacon of hope in their moment of crisis.

Before you spend another pound on ads, sit down and do this work. Talk to your best past customers. Ask them what was going on in their life right before they called you. What was the final straw? What were they most worried about? Map out that emotional journey. That "nightmare" is the key to unlocking ads that don't just get seen, but get felt—and acted upon.

You'll need an offer they can't ignore...

Now we get to the part where most campaigns fall apart: the offer. Your prospect has seen your ad, they're feeling the pain of their nightmare, and they click through to your website. What do they find? In most cases, it's the most arrogant, high-friction Call to Action (CTA) ever invented: "Request a Quote" or "Contact Us".

This CTA is a massive gamble for the customer. It's high-commitment and offers zero immediate value. It forces them to take a leap of faith, hand over their contact details, and brace themselves for a sales pitch. It positions you as just another commodity vendor they have to haggle with. This is where you lose countless potential customers who are interested but not quite ready to commit to a sales conversation. This friction kills your conversion rate and inflates your CPL.

To fix this, you must change your offer. Your offer's only job is to provide a moment of undeniable value and make it incredibly easy and safe for the prospect to take the next step. You need to solve a small, real part of their problem for free (or at a very low cost) to earn the right to solve the whole thing.

This means turning your expertise into a productised, low-risk first step. Here are some examples:

Do you see the difference? The good offers deliver real value upfront. They educate, diagnose, and solve a small problem, which builds trust and demonstrates your expertise. The Free Safety Check from the electrician doesn't just generate a lead; it generates a lead from a homeowner who is now aware of potential issues and sees the electrician as a trusted authority. The drone inspection from the roofer provides concrete proof of a problem, making the subsequent quote feel like a necessary solution rather than a sales pitch. This approach turns advertising from an expense into an investment in educated, pre-qualified customers who are already sold on your competence.

I'd say you should focus on where the intent is highest...

With a clear ICP and a compelling offer, the final piece of the puzzle is choosing the right place to advertise. For most local service businesses, the answer is overwhelmingly simple: you need to be where the intent is highest. This means you need to be on Google Ads.

Think about your customer's journey. When their boiler breaks or they need a will written, they don't scroll through Facebook hoping to stumble upon a solution. They go to Google and type their problem into the search bar: "emergency plumber Canterbury", "solicitors near me". This is what we call 'high-intent' traffic. These people aren't just browsing; they have an urgent need and they are actively looking for someone to pay to solve it. Capturing this demand is the lowest hanging fruit and should be your absolute priority.

Platforms like Facebook and Instagram (Meta) are 'discovery' platforms. You're interrupting their social scrolling with an ad for a service they probably don't need *right now*. While it can work for some businesses (like a cosmetic clinic or a restaurant), for most need-based local services, it's like trying to sell umbrellas on a sunny day. You might get some interest, but it's far less efficient than selling them in the middle of a downpour.

I've built a simple flowchart to help visualise this decision-making process. For 90% of service businesses, the path leads directly to Google.

Within Google, you should focus on two main things: regular Search Ads and, if your industry is eligible, Local Service Ads (LSAs). LSAs are the "Google Guaranteed" listings at the very top of the results page. You pay per lead, not per click, and they offer a huge trust signal to searchers. For regular search campaigns, the key is to structure them properly. Don't just dump all your keywords into one campaign. Group them thematically based on the user's nightmare. For an electrician, you'd have seperate campaigns for "Emergency Call Outs," "EICR Certificates," and "EV Charger Installations." This allows you to write hyper-relevant ads and send traffic to specific landing pages that match the searcher's exact need, which boosts your conversion rates and lowers your cost per lead. It's more work upfront, but it's the only way to do it properly.

This is the main advice I have for you:

We've covered a lot of ground, moving from the flawed idea of an 'average CPL' to a robust, internal framework for profitable advertising. To make it as clear as possible, here is a summary of the actionable strategy I would recommend for you to implement. This isn't just theory; it's a practical roadmap to take control of your marketing performance.

Following this process will be a radical shift from what you're currently doing. It requires more strategic thinking upfront, but the payoff is immense. You move from being a passenger, subject to the whims of the market "average," to being the pilot, with a clear dashboard and a precise flight plan for profitable growth. It's the difference between gambling on ads and investing in a predictable system for acquiring customers.

As you can probably tell, doing this properly involves a fair bit of work – from financial analysis and customer research to technical campaign setup and copywriting. It can be a bit much to handle when you're also trying to run your business day-to-day. Many business owners find that trying to master this complex world on their own leads to costly mistakes and wasted months that could have been spent growing.

If you'd like to discuss how to apply this framework specifically to your business, I offer a free, no-obligation strategy session. We can go through your numbers together, look at your current campaigns, and map out a clear plan of action. It's a chance for you to get some expert, tailored advice and see if professional help might be the fastest way to get the results you're looking for.

Regards,

Team @ Lukas Holschuh