“How much should I spend on marketing?” is one of the first questions contractors ask, and the usual answer, a flat percentage of revenue, is only a starting point. The right number depends on what you want to grow, what a job is worth to you and how many jobs your crews can take on.
This guide shows a simple way to work out a budget from your own numbers. You can follow along with our marketing budget calculator.
Why a percentage is only a starting point
You will hear rules of thumb that say to spend a certain percentage of revenue on marketing. They are useful as a sanity check, but they ignore the things that matter most for a contractor:
- Growth or maintenance. Holding steady costs less than growing into a new area or service.
- Job size. A company with a high average ticket can afford to pay much more per lead than one doing small repairs.
- Competition. Ads and rankings cost more in crowded markets.
- Capacity. There is no point paying for leads your crews cannot handle.
So start with the percentage you are comfortable with, then check it against the math below.
Work backward from your goal
The clearest way to set a budget is to start with the revenue you want and work back to the leads you need. Here is an example with made-up numbers. Use your own.
- Revenue goal. Say you want $1,200,000 in revenue over the next twelve months.
- Jobs needed. If your average job is $12,000, you need 100 jobs.
- Leads needed. If you close 30% of the leads you quote, you need about 334 leads, or roughly 28 a month.
- Budget. If you set aside 5% of the revenue goal for marketing, that is $60,000 a year, or $5,000 a month.
- What you can pay per lead. $60,000 divided by 334 leads is about $180 per lead. That is the most you can pay, on average, and stay on budget.
- What you can pay per job. $60,000 divided by 100 jobs is $600 per job won.
Now you have numbers you can test against. If search ads in your area are producing leads for $90, you have room to grow. If they are coming in at $400, something needs to change: the campaign, the website, the follow-up or the budget.
Fixed costs and variable costs
A contractor’s marketing budget usually has three parts:
- Foundation costs. Your website, hosting, branding and photography. Mostly up front, with small ongoing costs.
- Management. The time or fees for SEO, Google profile management, ad management and content. Fairly steady month to month.
- Ad spend. What you pay Google, Facebook or other platforms. This is the part you can turn up and down with the season and your schedule.
Keeping these separate makes it easier to see what is working. Ad spend should be judged on cost per lead and cost per job. Foundation and management should be judged on whether they make every other channel cheaper and more effective over time.
Where the first dollars should go
If your budget is tight, spend it in this order:
- A website that works on phones and a complete Google Business Profile.
- A review habit that brings in new reviews every month.
- Service pages for your most valuable work.
- Call and form tracking, so you know what is working.
- Paid ads on your best service, in your best area.
Paying for ads before steps one and two usually means paying more for each lead, because more of the people who click do not call.
Adjust for the season
Most trades are seasonal. Instead of spending the same amount every month, many contractors spend more just before and during their busy season, and less when the schedule is already full or demand is low. Your foundation and management costs stay steady; ad spend moves. Each of our industry pages includes a marketing calendar for that trade.
How to tell if it is working
Look at these numbers every month:
- Cost per lead, by source.
- Close rate, by source. Some sources bring cheap leads that rarely close.
- Cost per job won, the number that actually matters.
- Revenue per source, if your records allow it.
If you cannot see these yet, that is the first thing to fix. Call tracking and reporting makes it possible.
The short answer
Spend enough to reach the number of leads your goal requires, at a cost per lead your average job can support, and no more than your crews can handle. Start with the calculator, test for a few months, and adjust based on what actually turns into jobs.
Want a recommendation for your trade and market? Ask for a free marketing audit.