Navigating Pros & Cons of Lead Generation Companies for Contractors
If you’re in the home services industry, finding quality leads is essential to ensure a steady flow of projects and maintain a healthy pipeline. Big online lead generator companies like Angi and Home Advisor are an option. But the question remains: are they worth the investment? We’ve gathered some real-world insight from industry pros who have firsthand experience with these lead generation services.
Navigating the complex world of lead generation companies can be a challenge for contractors. With promises of a steady stream of new leads, it’s tempting to sign up with big names like Angi, HomeAdvisor, Houzz, and Thumbtack. But are these companies really delivering value to contractors? What are contractor’s experiences with these services? In this article, we’ll take an in-depth look at how these companies operate, including some notable advantages and limitations to using them.
How Do Contractor Lead Gen Companies Make Money?
Pay-to-Play and Pay for Visibility
Contractor lead generation companies make money by charging contractors for each lead they receive. The cost per lead can vary widely depending on the company and the type of lead. For example, a HomeAdvisor lead can range from $25 to $100 or more.
When a homeowner submits a request for a contractor quote on sites like Home Advisor, the contractor will receive a lead that includes info such as the homeowner’s name, contact information, project details, and location. The company may send a single lead to several contractors at the same time. After a contractor receives the lead, it is their responsibility to follow-up with the homeowner. Unfortunately, if a contractor registers their business on multiple lead generation platforms like Angi, Houzz, and HomeAdvisor, they may end up paying for the same lead three times, whether or not the lead results in an actual job.
Additionally, many lead generation companies rely on their marketing-tools packages to upsell what would otherwise be a free service to contractors. They design these tools to help contractors grow their brand through the platform, but for a hefty fee. In other words, visibility on these platforms comes at a high cost. For example, the premium plan for Houzz Pro runs for $399 a month. Many contractors complain that despite signing up for a free plan, they keep getting many phone calls from the companies’ sales reps pushing them to upgrade their account to include marketing tools. These are often one-year contracts, or upgrades of their pre-existing plans. If the contractor chooses to discontinue the plan, because they were not booking enough jobs to validate the amount spent on leads, they get charged a cancellation fee up to 35% of the yearly contract.
Why Homeowners Use Angi, Home Advisor Etc
The Lure of Speed, Economy and Quality
For homeowners, using a service like Angi or HomeAdviser can be appealing as they promise to provide consistent quotas and deliver contractors for the job. However, when it comes to complex projects like electrical rewiring, HVAC, or energy-efficient home improvements for energy-efficient tax credit, hiring a vetted professional is crucial. Instant quotes, which are based on a few homeowner inputs and aggregated cost averages across a wide region, often don’t reflect the true costs of such projects.
What many homeowners may not be aware of is that the primary goal of these services is to generate revenue by selling leads to contractors. This means that the homeowner’s information will be sold to dozens of contractors. Many homeowners have reported receiving “an unwanted number of phone calls from contractors†as soon as they request quotes, and some of those contractors weren’t even local. Apparently, not all the contractors who were sold the homeowner’s information were qualified either. In fact, both Angie’s List and HomeAdvisor were the subjects of a class-action lawsuit for misleading advertising and failing to properly vet the contractors they recommended to homeowners. Although this does not directly impact contractors, it can lead to further frustrations and mistrust between contractors and homeowners.
Pros and Cons of Contractor Lead Gen Companies
Some Advantages of Lead Gen Services for Contractors
Easy to Set Up: One of the benefits of using pay-per-lead services is that they require little-to-no effort to set up. Contractors only need to fill out basic information, set up their payment account, and they are good to go.
Leads: pay-per-lead services enable contractors to receive leads directly, allowing them to concentrate their efforts on closing jobs rather than searching for leads.
Increased Visibility: Contractors can also increase their online visibility by using these sites. The sites typically show their company name, contact information, services offered and a rating. Homeowners can leave contractor reviews on these sites, which can be useful for other homeowners trying to make a decision on who to choose. For example, Angi ranks contractors based on the number of positive reviews they have. Higher ranked contractors get more visibility on these pages, increasing their chances for leads. Some sites offer contractors the option to pay more to boost visibility or advertising space to increase potential leads, making it an attractive option for contractors with a larger budget.
The Cons of Lead Gen Services for Contractors
Unjustified Costs
One of the major drawbacks of using contractor lead generation companies, according to contractors, is the high cost. Paying for every lead can quickly add up, particularly if the contractor is not successful in securing jobs. Depending on the service, some companies charge between $15 to $100 dollars per lead, regardless of whether the lead results in a successful bid or not. While some companies may offer lead credits for their own system errors, or if a homeowner places the same project twice resulting in duplicate leads, these credits will often expire within six months. They will credit you for their mistakes, but they do not provide refunds. Some contractors have paid as much as $500 per month for leads that do not translate into jobs.
Stiff Competition
Contractors who use these services face tough competition from numerous other contractors in the area for every lead. Online lead gen companies may send a single lead to a dozen contractors simultaneously, making it extremely challenging for a contractor to secure the job. What’s worse, the competitive bidding environment and the prevalence of “instant quotes†incentivize contractors to undercut one another with the lowest bids, resulting in pros accepting jobs at a loss. Nobody wins in this situation.
Poor Customer Service
Some lead generation companies, such as HomeAdvisor, are notorious for having poor customer service. For example, some contractors claim that HomeAdvisor charges them more than the agreed monthly budget and even for incorrect leads. Homeowners sometimes input incorrect information, making it impossible for contractors to follow up, but the contractors are still required to pay for these “misleads.” This results in high unpaid invoices and settlements with discounts. Homeowners have also reported issues with contractors not showing up, and getting minimal assistance from the lead selling company to correct the problem.
No Project Oversight
Lead generation services operate by having as many contractors as possible pay for leads. These companies are data aggregators and not home improvement professionals themselves. The lack of oversight in individual projects is an issue from the outset. Homeowners don’t receive the expert guidance they need to make informed decisions, and contractors often don’t receive the detailed service-specific information needed to provide accurate quotes. While homeowners and contractors can communicate through the services’ messaging function, these services do not offer cost control, contract management, project planning, safety management, or quality assurance. A lack of oversight in these areas can result in bloated timelines and budgets, as well as quality and safety issues that may arise.
Payments Not Guaranteed
For many contractors, getting homeowners to pay after they complete a project is a major issue. Stalled and delayed payments, as well as an unreasonable amount of return visits for adjustments, are common complaints. Unfortunately, these lead generation services often have no policies in place to ensure that contractors are paid for their work. Some contractors tell of having to waste time calling evasive homeowners constantly over the course of months. And because these services do not offer payment protection for contractors in the case of disputes, some contractors end up walking away without payment and are then forced to take legal recourse.
Poor Leads and Misleads
One of the biggest complaints about lead generation services is the poor quality of leads. Without proper pre-qualification of the homeowner’s intent to hire, many leads do not result in paid contracts. Additionally, important details necessary for providing accurate quotes are often lacking. In some cases, contractors are sent leads that do not even match their skills or specialties, or even within their geographic area. Here are some example complaints:
Source: abcnews.com
Source: Reddit.com
Contractors’ Experiences with Lead Services
Many contractors have shared their experiences with lead generation companies on forums and review sites like Contractor Talk, Reddit, and Quora. The general consensus is that while these services can be helpful in generating leads, they are not always worth the high upfront cost, the frustration of tire-kickers, trying to get refund credits, or the constant bombardment of calls from the companies upselling their marketing services.
Some contractors have reported that they received leads that were not at all related to their skill sets or the services they offer. This is particularly frustrating when they are charged per lead, which at times can go over 10% of a project, and must compete with other contractors for the lowest bid. Meanwhile, others have complained about the quality of the leads or the lack of transparency in the payment models, whereby contractors will end up overpaying their monthly allotted budget without notice or warning.Â
Contractors also express concerns about the trustworthiness of these lead gen companies. For example, some contractors have reported that HomeAdvisor shares a lead pool with Angie’s List, meaning that if you’re paying for both services, you might end up buying the same lead twice. This is why across the board, these services get low ratings from both contractors and homeowners. Here are some samples of contractor’s experiences:
Source: Reddit.com
Source: Contractortalk.com
A Better Way to Get Prequalified Jobs
Despite the problems mentioned above, contractors across the country are still using many of the big lead generating services. This is mostly due to a lack of better options and the alluring big-money marketing campaigns run by these companies with promises to fill their pipeline quickly. Many contractors accept these industry norms or revert to word of mouth recommendations despite the less than ideal conditions. That said, in recognizing these issues, some companies are making moves to radically reimagine how contractor could connect directly to prequalified work requests. Â
Introducing Ido: a young Seattle-based company dedicated to making lining up a steady stream of jobs less of a hassle for contractors. Ido was founded by Tien Ha, a long-time general contractor and builder with over twenty years of experience in the construction, property development, and home improvement industries. Having personally experienced the challenges of building his own company, having to constantly secure new jobs, manage all the business aspects, and make time for his family, Ha founded Ido to make it easier for contractors to get qualified work requests and grow their business.Â
How Ido is Different
Ido’s goal and business model isn’t to sell leads to contractors. We focus on helping homeowners accomplish all their home improvement projects with access to pros they could trust and hire immediately, expert guidance and project oversight. We also built Ido so that skilled contractors could get a stream of prequalified jobs rather than chase down leads. Ido sends contractors only pre-qualified projects to quote with no upfront costs. This means that contractors who join ido’s Pro Network can bid on and book jobs right away without spending any money.
For contractors, working with Ido is a simple process. Contractors simply create a profile by providing business background information such as their trade, license, and the type of services they offer. When a homeowner requests a project, Ido helps them define the project details and then sends the prequalified jobs to contractors to quote. Homeowners are presented with three quotes to choose from, and the contractor who wins the bid starts the job with support from Ido’s homeowner communication team and project management platform. Ido’s smart home service platform helps homeowners and contractors track the entire job lifecycle, from bidding to scope of work details, agreed-upon rates, documents, progress updates, and payment.
The Home Concierge Experience
Homeowners appreciate Ido’s services because the company doesn’t just connect them with vetted contractors. Ido also employs in-house specialists who review service request details to ensure that materials, timelines, quotes, and payments are all vetted and qualified. Homeowners enjoy having an expert facilitate the project and providing them with peace of mind. For contractors, Ido acts as a business building platform and an advocate, ensuring that business processes run smoothly from bidding to close out. With Ido, better job details are provided, information is organized, communication is clear, and payment is guaranteed for completed projects.
Ido has no hidden fees. To prove Ido as a real and valuable connection to a stream of jobs, Ido will charge contractors nothing until they have booked at least $20,000 in work with Ido. Contractors keep every cent they earn. Once a contractor reaches the $20,000 mark, the company will then negotiate a small annual percentage to keep growing business together. Ido highlights include:
- Easy to set up: just sign and qualify
- Free to use: no membership fees
- Contractors are only sent prequalified work requests
- Project oversight by Ido experts to ensure the project runs smoothly
- Track everything with an easy-to-use project management platformÂ
- Guaranteed payment: Ido ensures contractors get paid
Conclusion: Try Ido
Navigating the world of lead generation companies can be tricky and costly for contractors. While there are some advantages to using these services, there are also many downsides to consider, including high costs, competition, and poor customer service.
Ido’s platform oversees projects from quoting to close out. We ensure jobs are vetted, there’s clear communication support throughout, and contractors get guaranteed payment. These factors not only reduce overhead for many contractors starting out, it also benefits seasoned and skilled contractors who are masters of their craft. Please visit our Pro Network page to learn more about how Ido is changing the way contractors get jobs or click here to sign up.