Should marketing be judged on gross sales or net revenue?

Should a contractor measure marketing against gross sales or net revenue?

Net. Gross is what got signed and net is what survived cancellation, rescission and final settlement. At the eight-figure Toledo exteriors company where I direct marketing only 62% to 66% of gross made it to net from 2022 through 2024, so any cost-of-marketing figure built on gross was understated by a third.

What is the difference between gross and net in a contractor’s books?

Gross is the contract value on the day the rep walks out of the house, and net is what the job is worth after the three-day rescission, the financing decline, the customer who found a cheaper quote and the final settlement on the change order that came up when the crew opened the wall. Most sales dashboards show gross because it is the number that exists first and the one that makes the month look good. Most marketing reports inherit whatever the sales dashboard shows, which is how a shop ends up computing cost of marketing against revenue that partly does not exist.

At our company the two numbers ran this far apart, by year, from the appointment report in Lead Perfection (our CRM). In 2022 gross was $15.1M and net $9.4M, in 2023 it was $20.3M and $13.5M, and in 2024 it was $14.0M and $9.3M. That is 62%, 66% and 66% of signed dollars surviving to net, three years in a row, and nobody had put the two columns next to each other because each one lived in a different report.

Why did a third of our signed work never install?

Some of it was the normal fallout every exteriors shop carries, because a homeowner who signs on a Tuesday night can cancel on Thursday and a financing application can come back declined the following week. But a good part of it was how we defined a sale. A signed contract counted the moment the rep left the driveway, which meant a rep having a rough month had every reason to call a marginal deal sold and let the cancellation sort itself out later, and the sales report rewarded that behavior every time it happened.

I did not see this as a marketing problem for a long time, which was a mistake, because marketing was being judged against the gross column and the gross column was a third fiction.

What changed in 2025?

A consultant told our sales management to make it harder to call something a sale, and sales management did it: a deal counted only once it was fully qualified, financing cleared and the rescission window closed. The expectation, mine included, was that close rate would take the hit and we would at least be looking at honest numbers.

The opposite happened. Close rate went from 50.2% in 2024 to 55.1% in 2025, and net over gross went to 83%, because the reps stopped spending their energy defending deals that were never going to install and put it into the ones that would. I cannot prove the definition change did all of it, since 2025 was also the year our inspection program hit full stride and the average net ticket moved from $8,972 to $9,457, and the data does not separate those three things. What I can say is that we had spent years judging marketing against a revenue base a third of which was never going to be collected.

What does this do to cost of marketing?

It moves the percentage by a third, which is the difference between a budget that looks fine and one that needs a conversation. Our 2024 spend was $1,607,117. Against gross that year it is 11.5%, comfortably inside the 10% to 15% band we run to, and against net it is 17.3%, which is outside it. Same spend, same year, and the only thing that changed is which revenue column the report pulled.

The second effect is quieter. Because net settles weeks after the sale, a net-based cost of marketing pulled in June will always read worse than the same months will read in September once the cancellations have cycled. The number has to carry a date on it and be compared to the same window a year earlier, not to last month.

Where this is wrong

A trade paid on completion with no rescission exposure, a repair plumber or a service electrician, has a gross that is already net, and this whole note is a footnote for them. It is also wrong for a shop that does not track cancellation reasons at all. In that case net is just a smaller number with no story behind it, and the first job is to get the reasons into the CRM before arguing about which column to use.

What to do

• Tonight: pull gross signed and net installed for the last twelve months from the CRM and divide. Ours was 66% for three years and nobody had looked.
• This quarter: write down what counts as a sale, in one paragraph, and have sales management enforce it. Expect the close rate to dip. Ours rose.
• Ongoing: every marketing number that has revenue in the denominator gets computed on net, with the date it was pulled printed next to it.

Sources: Lead Perfection “Set Appointment Statistics by Sub-Source” (appointment report, Toledo, 2022 to 2025 full year) and “Cost of Marketing by Source” (Toledo, 2024), both first party. Sale-definition change and its timing as stated by the author. The 10% to 15% band is a Capstone operating standard, not a survey figure.

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