How Much Should a Small Contractor Spend on Marketing?
"How much should I spend on marketing?" is the question every contractor asks, and the honest answer is that a percentage of revenue will not tell you. Ten percent of a million dollars is a hundred thousand, and whether that is enough or far too much depends on how many jobs you want, what it costs to get them, and what they are worth after you do the work. The number that matters is not a percentage, it is the relationship between what you spend and what the spend produces.
This is a worksheet for building a marketing budget from the jobs you actually want, with every assumption stated out loud so you can replace it with your own numbers. It distinguishes assumptions, revenue, contribution, and profit, because confusing those four is how a contractor ends up spending more on ads than the jobs are worth.
Why a Percentage Is Not an Answer
A flat percentage ignores three things that decide whether a spend is worth it: your margin on the work, your capacity to take more jobs, and how many jobs you actually want. Two contractors with identical revenue can have wildly different right answers. One with thin margins and a full schedule should not spend more to get jobs they cannot take. One with healthy margins and open capacity should spend aggressively to fill it. The budget has to come from the business, not from an industry average.
Start From the Jobs You Want
Instead of starting from last year's revenue, start from the jobs you want to add next month. That single number drives everything else: how many leads you need, what it costs to get them, and whether the spend leaves you with contribution after the direct cost of the jobs. Work backward from the outcome and the budget reveals itself.
The Worksheet (Hypothetical Example)
The numbers below are a hypothetical example with explicitly stated inputs so the math is transparent. Every input is an assumption; replace each one with your real business data before you use it. Check the arithmetic yourself.
| Input | Assumption (example) | Your number |
|---|---|---|
| Additional booked jobs wanted / month | 10 | ______ |
| Assumed qualified-lead-to-booking rate | 25% (1 in 4 leads books) | ______ |
| Qualified leads needed (jobs ÷ booking rate) | 40 | ______ |
| Assumed cost per qualified lead | $60 | ______ |
| Marketing spend needed (leads × cost/lead) | $2,400 | ______ |
| Average job value (revenue per job) | $900 | ______ |
| Revenue added (jobs × job value) | $9,000 | ______ |
| Direct job cost as % of revenue (materials, labor, subs) | 60% | ______ |
| Contribution after direct job costs (revenue × 40%) | $3,600 | ______ |
| Profit after marketing (contribution − spend) | $1,200 | ______ |
In the example, $2,400 of spend produces $9,000 of revenue and $1,200 of profit after marketing and direct job costs. That is a budget that earns its keep. Change the booking rate to 15% and the leads needed jumps to 67, the spend to roughly $4,020, and the profit after marketing to roughly negative $420, meaning the spend produces nothing once the jobs are done. Same jobs wanted, different math, opposite decision. This is why the inputs matter more than the total.
Revenue vs. Contribution vs. Profit
The three numbers most contractors confuse:
- Revenue is the total billed for the jobs the marketing brings in. It is the headline number and the least useful one on its own.
- Contribution is what is left after the direct costs of doing the jobs, meaning materials, labor, and subcontractors. It is the money the jobs actually put toward your overhead and yourself, before the marketing spend.
- Profit after marketing is the contribution minus the marketing spend. This is the number that tells you whether the spend was worth it. If it is negative, you paid more to get the jobs than the jobs were worth.
A contractor who only looks at revenue will celebrate a busy month and miss that the jobs cost more to acquire than they contributed. A contractor who only looks at spend will starve the pipeline out of fear. The worksheet keeps all three visible so the tradeoff is honest.
Sensitivity: What Moves the Number
Once you have the worksheet, the most useful thing you can do is bend one input at a time and watch the profit after marketing change. This is a sensitivity comparison, and it tells you which lever is worth pulling.
| Change | Effect on profit after marketing |
|---|---|
| Raise booking rate 25% → 35% | Fewer leads needed, spend drops, profit rises |
| Lower cost per lead $60 → $45 | Spend drops, profit rises by the difference × leads |
| Raise job value $900 → $1,100 | Revenue and contribution rise, spend unchanged |
| Want 20 jobs instead of 10 | Doubles leads and spend; only worth it if capacity holds |
In most contractor businesses the biggest lever is not more spend, it is the booking rate, because improving how many of the leads you already get turn into jobs multiplies every other input. That is why faster lead follow-up and a better intake often beat a bigger ad budget.
What to Track First
If you do not have the inputs yet, do not guess the budget. Track, for one month:
- How many leads came in and from where.
- How many of those leads booked a job.
- What you spent on each lead source.
- The average revenue and direct cost per booked job.
Those four numbers, for one month, give you a real lead-to-booking rate, a real cost per lead, and a real contribution per job. Drop them into the worksheet and the budget stops being a guess. If you want help setting up the tracking and building the first real version of this for your trade, call (740) 693-3736 or book a free strategy call.
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Frequently Asked Questions
What percentage of revenue should a contractor spend on marketing?
There is no one percentage that fits every contractor, and any single number ignores your margin, your capacity, and how many jobs you actually want. The more useful approach is to start from the jobs you want to add, estimate the leads and cost to get them, and see whether that spend produces contribution after direct job costs. A percentage is a starting point for a conversation, not a budget.
What is the difference between revenue and contribution in this worksheet?
Revenue is the total billed for the jobs the marketing brings in. Contribution is what is left after the direct costs of doing those jobs, meaning materials, labor, and subs, but before the marketing spend itself. Profit is what is left after the marketing spend is subtracted from the contribution. Confusing the three is how contractors spend more on ads than the jobs are worth.
Where do I get the numbers for my lead-to-booking rate and cost per lead?
From your own intake and your own campaign data, not from a benchmark. Track how many leads came in over a recent period, how many of those booked, and what you spent to get the leads, then divide. If you do not track it yet, start this month with a simple sheet. Replacing the assumptions in the worksheet with your real numbers is what makes it yours instead of a guess.
What if the spend to get the jobs I want is more than they are worth?
That is exactly what the worksheet is for. If the cost to acquire enough leads for your target jobs leaves no contribution after direct costs, the answer is not to spend more, it is to lower the target, improve the lead-to-booking rate, or lower the cost per lead before you raise the budget. The worksheet tells you which lever to pull.
Should I budget monthly or by season?
Both. Most home-service trades have seasonal peaks and valleys, so an annual number divided evenly across twelve months will overspend in the slow months and underspend right before the busy season. Build a monthly budget that fronts the spend ahead of when the jobs actually land, and revisit it each quarter against what booked.
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