Marketing · How-to

How much should a contractor spend on marketing?

Don’t start from a percent of revenue. Start from what one booked job is worth to you, decide the most you’ll pay to win it, and divide by how many leads it takes to book one. That gives you a ceiling per lead; multiply by the jobs you need and you have a monthly budget you can test, measure and grow.

By Eric Smith, founder of Outfitter AI and a former general contractor · Prices checked October 4, 2026

What about the “spend X% of revenue” rule?

You’ll see percent-of-revenue rules everywhere. We looked for a credible one and didn’t find a rule written for home-service contractors.

The closest official source is a 2019 SBA blog post. It says there is no hard and fast answer to how big a marketing budget should be. It then passes along averages from other publishers: Small Business Trends reported that the average business spends 1.08% of revenue on advertising, and Web Strategies reported 2018 marketing spending averaging 7.9% of revenue, with business-to-consumer service companies at 11.8% [1]. Those are cross-industry averages from secondhand sources, several years old, and they mix in companies that look nothing like a ten-truck plumbing shop.

Percent rules also run backward for a small contractor. A shop doing $600,000 that needs to grow may need to spend more than a shop doing $3 million that runs mostly on repeat customers and referrals. Use a percentage only as a gut check after you’ve built the budget from your own job math, below. (For where each channel fits in the bigger plan, see the full contractor marketing guide.)

Work backward from one booked job

You need four numbers. Most owners can pull them from last year’s invoices in an hour.

1. Average ticket. Total revenue from new customers divided by the number of new-customer jobs. Keep repair and replacement separate if your shop does both.
2. Gross margin. What’s left after labor, materials and job costs, as a percent. Revenue is not the number to spend from; gross profit is.
3. Most you’ll pay for a booked job. Pick a share of that gross profit you’re willing to give up to win a new customer. Shops with strong repeat business can afford a bigger share, because the first job isn’t the last.
4. Booking rate. Out of every ten calls, forms or messages from a channel, how many turn into a sold job? Count it for at least a month.

Then the math is two lines:

Max cost per booked job = average ticket × gross margin × share you’ll spend

Max cost per lead = max cost per booked job × booking rate

Worked example (illustrative numbers, not a benchmark): a plumbing shop with a $600 average new-customer ticket and a 50% gross margin makes $300 of gross profit per job. If the owner will spend 40% of that, the ceiling is $120 per booked job. If half of its leads book, the shop can pay up to $60 per lead.

Now compare that ceiling to real lead costs. LocaliQ’s search ad data put plumbing at $129.02 per lead [3]. At a 50% booking rate, Google search ads would cost this shop about $258 per booked job, more than twice its ceiling. Its options are to raise the booking rate, raise the ticket, count repeat value, or put the money somewhere cheaper.

Notice the cleaning row uses first-year revenue rather than one visit. For any recurring service, valuing only the first visit makes every paid channel look too expensive.

What leads cost by channel

These published figures help you guess before you have your own data. They are averages across many advertisers, from vendors that sell advertising, so treat them as a starting point.

Two cautions. A cheap lead isn’t a cheap job: someone who tapped a Facebook ad may book at a lower rate than someone who searched “furnace repair near me,” so compare channels on cost per booked job, never on cost per lead alone. And Google is moving Local Services Ads into Google Ads as Performance Max campaigns with pay-per-lead goals, starting with select US home-service advertisers in August 2026 [6], so expect your LSA reporting and budget settings to change. The Local Services Ads guide has the details, and our comparison of marketing options lists what each platform charges.

The cheapest budget increase: book more of the leads you already pay for

Every point of booking rate lowers your cost per job without spending a dollar more. In Invoca’s 2026 analysis of home-services calls, only 52% of callers spoke with a person, and 55% of home services businesses didn’t ask leads to buy or book the job [7]. That’s vendor research, but it points at the same leak most owners can find in their own call log.

Using the plumbing example above: at $60 per lead, a 50% booking rate means $120 per job. Raise booking to 65% and the same lead costs about $92 per job. Before you raise the budget, fix the phones. The guides on booking more jobs from phone calls and calling leads back fast walk through it.

How to split the budget across channels

Think in three layers. Fund them in this order.

A reasonable starting split for a shop with one proven channel might be roughly 70% to the proven channel, 15% to one test, and the rest to referral rewards and postcards around jobs. That’s a suggestion to adjust, not a rule from any study.

Plan for seasons too. Spend more ahead of your busy months and on maintenance and past-customer offers ahead of your quiet ones; the slow season guide lays out the timing.

Test, then scale what works

1. Set a test amount and length. Enough money to bring in at least 15 to 20 leads at the published cost per lead, run for four to eight weeks. A $200 test of a channel that averages $120 a lead tells you nothing.
2. Track source on every lead. Ask “how did you hear about us?” on every call and form, and use a separate tracking number per channel if you can. The call tracking guide explains how.
3. Count booked jobs and revenue, not clicks. At the end of the test, divide spend by booked jobs.
4. Compare to your ceiling. Below it: raise the budget in steps of about 20% to 30% a month and watch whether cost per job holds. Near it: work on booking rate or the ad itself. Well above it: stop.
5. Re-check every quarter. Lead costs, competition and your own capacity all change.

• Never raise spend faster than your crew can take the work
• One change at a time, so you know what moved the number
• Keep a written ceiling per booked job and look at it before every budget change
• Pause paid channels when you’re booked out three weeks ahead; restart before the calendar empties

Monthly marketing budget worksheet

Copy these columns into a spreadsheet and fill them in every month. The rows below are a labeled example for a small plumbing shop spending $3,000 a month; the cost per lead figures are made up for illustration, not quotes or benchmarks.

How to read the example: the shop’s overall cost per booked job is $3,000 ÷ 25 = $120, right at its ceiling. Referrals are the cheapest source, so the owner should push them harder. Postcards and the test channel are above the ceiling this month, so the postcards get another round with a better offer and the test gets one more month before it’s cut. Local Services Ads and Facebook are close to the line, so the next move there is a better booking rate, not more spend.

Marketing here equals 20% of new-customer revenue that month. That sounds high next to the averages above, but it ignores repeat jobs and referrals those 25 customers will bring later, which is why the job math matters more than the percentage.

Common questions

Sources and how we compared

Lead costs come from WordStream and LocaliQ benchmark reports (vendor research), postage from USPS, Local Services Ads billing from Google Ads Help, call handling from Invoca’s 2026 report, and percent-of-revenue figures from the SBA blog, all opened October 4, 2026; every worked example is labeled and uses made-up numbers.

1. SBA: How to get the most from your marketing budget — July 2019 blog post; figures quoted secondhand from Small Business Trends and Web Strategies
2. WordStream: 2026 Google Ads benchmarks — 13,474 US search campaigns, April 2025–March 2026; vendor research
3. LocaliQ: Search ad benchmarks for home services — 3,211 US campaigns, April 2024–March 2025; vendor research
4. LocaliQ: Facebook advertising benchmarks for 2026 — Updated September 2026; vendor research
5. USPS: Every Door Direct Mail — U.S. Postal Service
6. Google Ads Help: Local Services Ads transition to Performance Max campaigns with pay-per-lead goals — Google help page
7. Invoca: Home Services Lead Conversion Benchmarks Report 2026 — July 2026; 70 million+ calls; vendor research

Last updated October 4, 2026. Prices change; if something here is out of date, call or text (507) 628-0400 and we’ll fix it.

Related: Marketing: the full guide · Every marketing option compared · Google Local Services Ads · Slow season marketing