Why More Leads Won't Grow Your Service Business

By Adam Stott, founder of Big Business Entrepreneurs and business growth expert

Will more leads grow your service business?

More leads for the wrong work means more jobs, more people, more costs and less time, so strategy has to come before lead generation. When a service business owner came into my hotseat at a Big Business Entrepreneurs Business Scale Up Breakthrough Day asking for more leads, what he actually wanted was more time. Ask "What's the one thing I do that makes the most money?" and point your marketing at that.

Key takeaways

• More leads for the wrong work means more jobs, more people, more costs and less time. Strategy comes before lead generation.

• Ask "What's the one thing I do that makes the most money?" and point your marketing at that.

• Paid ads run on simple maths: impressions (CPM), clicks (CTR), opt-ins and cost per lead (CPL). The same lead cost can buy a small job or a big one.

The business owner in this article has been anonymised to protect their privacy.

At a recent Business Scale Up Breakthrough Day, I brought the owner of a service business up into the hotseat.

The operation was fine. So he went straight to the solution he thought he needed: more leads. That's normal, because business owners are problem solvers. But it's tactical to think, "If I just get more leads, everything will be alright." If you get more leads, you get more work.

What he actually wants is more time, and to scale the business. So I asked him:

"So if I gave you a thousand leads tomorrow, would you have more time?"

He'd have less. That's the trap I want every service business owner to avoid.

Why won't more leads solve a service business's problems?

Because more leads for the wrong work just create more work. If you flood a service business with enquiries without changing who you serve or what you sell, you get busier, hire more people and take on more costs. You end up making less money, with more problems and even less time.

So before anything else, ask yourself: what are you actually building? What does great look like to you? Get clear on that first, then decide what kind of leads you need.

Should a growing service business focus on revenue or profit?

In the early stages, focus on increasing revenue, because the profit can follow. You've already got your overheads, your expenses and your fixed costs. As sales grow, more of each extra pound drops through to profit. So the priority is driving sales into the business, for the right work.

But that only works if those sales are for the right kind of job, which brings us to strategy.

What's the most important strategic question for a service business?

Ask yourself: "What's the one thing that you do that makes the most money?" If you offer more than one service, one of them will make a lot more money for your business than the others. Knowing which one tells you who to serve, what to offer and where your marketing should go.

I asked him exactly that, and you could see the hesitancy. "Well, we've got a little bit here, and we've got this here."

That hesitancy is why it's such an important question. I'd suggest the lead problem is fixable. But who you serve and what you offer could make you much more profitable, rather than just getting more leads for the wrong thing.

How do paid ads actually work for a service business?

You buy impressions, then you need people to click, then you need them to opt in. Those three steps (CPM, CTR and opt-in) give you your cost per lead, or CPL. Once you know your CPL, you can work out exactly what it costs to bring in each piece of work.

When you buy leads, you don't buy an actual enquiry. You buy someone's eyeball.

• CPM (cost per thousand impressions). In my example, it costs around £20 for a thousand people to see your message.

• CTR (click-through rate). An eyeball is useless unless it grows a hand and a finger and clicks.

• Opt-in. After they click, you want them to grow some legs too, and walk towards you. Now you've got a lead.

If it's £20 for a thousand eyeballs and 1% of them click, that's 10 clicks. If 10% of those convert, you've got one lead. So that lead cost you £20. That's your CPL.

Those numbers vary by industry. But if you're making more from your ads than you spend on them, you're just multiplying money. That's what scale is.

Why does the type of job matter more than the number of leads?

Because the same lead can buy you a small job or a big one. If every lead costs about £20, the jobs you advertise for decide how quickly you make money. Point your ads at your most profitable work and the same budget brings in far more revenue.

Imagine you buy ten leads this week at £20 each, and they're all people saying, "Come and trim my garden." Now imagine you buy ten leads at the same price, and they say, "Come and do my patio."

Who's going to make money faster?

"That's why it's not just leads, it's strategy."

How do you choose which service to focus your marketing on?

Choose the service that makes the most money, is easiest to scale operationally and brings in the most revenue for each lead you pay for. Then let that decide who you serve and what you offer. Small, operationally heavy jobs are much harder to scale than bigger work.

Ask yourself these questions about each service you offer:

1. Does it make the most money? Start with the question I asked on stage: "What's the one thing that you do that makes the most money?"

2. How heavy is it to scale? In his case, scaling the little pieces of maintenance work is much more operationally heavy than scaling the bigger work.

3. What is each lead worth? If a lead for a garden trim and a lead for a patio both cost £20, the patio makes money faster.

4. Who would you serve, and what would you offer? Get that right and it could make you much more profitable than more leads for the wrong thing.

More leads vs the right leads: what changes?

Chasing more leads means more of the same work, more staff and more costs, with even less time. Going after the right leads means deciding which work makes the most money, building the offer around it, using paid ads to bring it in and then handing the selling to a team so you can step out.

Here's the side-by-side for this business:

• What he asked for: more leads → strategy first: who you serve and what you offer.

• The work: a bit of everything, including small maintenance jobs → focus on the one thing that makes the most money.

• Marketing: flyers → paid ads with the right offer, aimed at the right people.

• Selling: the owner in the middle of it → a sales team, so he can step out.

• The result: "you'd have less time" → a business that can scale.

5 steps to grow a service business without more of the wrong leads

1. Re-strategise. Ask the thousand leads question, decide what you're building and find the work that makes the most money.

2. Target the right people for that work.

3. Put the right offer in place. Make it about the jobs you want more of, and know your CPM, CTR, opt-in rate and cost per lead.

4. Put the legs behind it. Use paid ads to bring the work in, instead of relying on flyers.

5. Bring in a sales team and step out. When enquiries flow, they sell the products and services, and you scale.

It only takes one tweak, one conversation, to completely change your direction.

Frequently asked questions

Will more leads help my service business grow?

Only if they're for the right work. Adam Stott's advice is that more leads for low-value or operationally heavy jobs just create more work, more staff and more costs. Decide which service makes the most money first.

How do you work out cost per lead for paid ads?

Start with your cost per thousand impressions (CPM), then your click-through rate (CTR), then the share of clickers who opt in. For example, £20 for a thousand views, a 1% click rate and a 10% opt-in rate gives one lead for £20.

Should a small service business focus on revenue or profit?

In the early stages, Adam Stott recommends focusing on revenue for the right work. Your overheads, expenses and fixed costs are largely already in place, so as sales grow, profit follows.

Which service should I advertise first?

The one that makes the most money and is easiest to scale. If every lead costs about the same, a lead for a bigger job brings in more revenue than a lead for a small maintenance job.

Are flyers or paid ads better for a service business?

Paid ads let you target the right people with the right offer and measure exactly what each lead costs, as long as you've first decided which jobs to chase.

About Adam Stott

Adam Stott is the founder of Big Business Entrepreneurs and a business growth expert. He helps business owners scale through events, training and coaching.

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