Running a plumbing business is like managing a complex network of pipes. Two often misunderstood concepts that help keep the optimal revenue flowing are Cost per Acquisition (CPA) and Return on Advertising Spend (ROAS). They might sound like technical jargon, but they're really as practical as your trusty wrench and plunger.
CPA: The Cost of a New Job
Think of CPA like the cost of getting a new plumbing job. Suppose you spend $200 on advertising in your local newspaper and receive 10 calls for new jobs. Your CPA is $20. That's simple enough, right? Just divide the total money spent ($200) by the number of jobs (10). It's like each job costs you $20 from your advertising budget.
But what if the same $200 ad only leads to 5 jobs? Now your CPA is $40. A higher CPA means you're spending more money for each job.
ROAS: The Profit from Your Advertising
ROAS tells you how much money you earn from each dollar you spend on your newspaper ad. If you make $1000 from the 10 jobs you got from your ad, your ROAS is 5. For every dollar you spent on advertising, you're earning $5 back.
Now, if the $200 ad only brings you $500, your ROAS drops to 2.5. A lower ROAS means you're getting less money back for every dollar you spend on advertising.
Using CPA and ROAS in Plumbing
These numbers can be like your level and measuring tape, helping you understand if your plumbing business is on the right track.
A good CPA depends on what you're charging for your services. Let's say you've upgraded your equipment and are now providing premium plumbing services for $200 a job. If it costs you $50 to get each job (your CPA), you're making a solid profit.
ROAS helps you see if your advertising is effective. If for every dollar you spend on your newspaper ad, you're making $10 in sales, your ROAS is 10. This means your advertising is working well.
When CPA and ROAS Might Spring a Leak
However, just like your level and measuring tape, these numbers only show part of the story. If you're offering a drain cleaning service for $30, but it's costing you $50 to get each job (CPA), you're losing money with every call.
And what if you're trying to make your plumbing business a household name? You're focusing more on getting the word out than making immediate profits. A low ROAS, in this case, doesn't necessarily mean your strategy is failing.
The Full Plumbing Picture
Remember, a successful plumbing business doesn't just rely on a level and measuring tape. You need to look at the whole picture. How is your competition doing? Are you spending more to get jobs or earning less than they are?
Also, consider the lifetime value of each customer. If a customer keeps calling you for all their plumbing needs, a higher CPA might be okay in the long run.
Learning from Your Plumbing Jobs
CPA and ROAS are like tools in your plumbing toolkit. But be careful not to use a pipe wrench when you need a plunger. Understanding what these numbers really mean and avoiding common business mistakes is crucial.
Just like learning the plumbing trade, understanding CPA and ROAS takes practice and experimentation. With these concepts under your belt, you'll be well on your way to running the most successful plumbing business in town!
Ryan Chute
Helping small businesses become BIG brands with a holistic marketing strategy that speaks the same language across all sales and marketing channels.
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