How Much Should a Contractor Spend on Marketing

The SBA recommends businesses under $5M in revenue spend 7-8% on marketing. The latest CMO Survey puts the average across industries at 7.7%. Construction companies? They average just 3% on digital marketing.

That gap explains a lot about why so many contractors feel stuck.

The standard ranges

Industry benchmarks for home service marketing budgets fall into a wide band: 5-10% of annual revenue. Where you land depends on your growth stage, competitive market, and how much of your work comes from repeat customers and referrals.

Established contractors with strong referral networks can get away with 3-5%. If 60-70% of your jobs come from past customers and word of mouth, you don’t need to spend as aggressively on acquisition. Your reputation is doing the heavy lifting.

New or growing contractors should budget 8-12%. You’re building awareness from scratch. Nobody knows your name yet. You need visibility, reviews, and a pipeline that doesn’t depend on knowing the right people.

Contractors in competitive metros often push past 10%. Markets like Austin, Phoenix, and Tampa have PE-backed competitors spending $20,000-30,000 per month on Google Ads alone. You can’t match that dollar for dollar, but spending 3% of revenue while they spend 15% means you’re invisible where it counts.

A $1M revenue HVAC company at 8% spends $80,000 per year on marketing, roughly $6,700 per month. A $2M plumbing company at 6% spends $120,000 annually, or $10,000 monthly. These numbers feel significant because they are. Marketing is either an investment that returns multiples or an expense you’re wasting. The difference is how you allocate it.

Why 3% isn’t enough anymore

Construction companies averaging 3% on digital marketing reflects an industry that historically grew on handshakes and referrals. For decades, that worked. A few yard signs, some truck wraps, maybe a Yellow Pages ad. Jobs came in through repeat customers and neighbors who saw your crew on the street.

That world still exists, but it’s shrinking.

Home services led all industries in new business openings throughout 2024 in every US state. More competition for ad space means higher costs for everyone. LocaliQ’s 2025 benchmarks confirm it: home service cost per lead increased 10.51% year-over-year, with 69% of businesses reporting higher costs. Google Ads clicks for HVAC keywords average $30+ each. PE-backed competitors are consolidating markets and outspending independents 10:1 on advertising.

A contractor spending 3% on marketing in a market where competitors spend 8-12% is bringing a garden hose to a structure fire. You might get some trickle of leads, but you’re ceding the high-value, high-intent homeowners to companies with bigger budgets and better systems.

The 3% number made sense when your only competition was the other local guy who also spent 3%. That era ended when private equity started writing $50M checks to roll up home service companies.

Budget based on goals, not current revenue

Most contractors calculate their marketing budget off current revenue. If you made $1.5M last year and want to spend 7%, that’s $105,000.

The problem with this approach: spending based on where you are keeps you there.

If your goal is $2M in revenue next year, your marketing budget should reflect $2M, not $1.5M. At 7%, that’s $140,000 instead of $105,000. The extra $35,000 funds the growth campaigns that bridge the gap.

This feels counterintuitive. You’re spending money you haven’t earned yet. But every business that’s grown past $1M did exactly this at some point. They invested ahead of revenue and let the marketing generate the returns.

The math supports it when your ROI is right. Aim for a 3:1 return minimum on your marketing spend. Every $1 invested should generate at least $3 in revenue. At 3:1, a $140,000 marketing budget should produce $420,000 in attributable revenue, more than enough to cover the investment and fund further growth.

Track this ruthlessly. If a channel delivers 3:1 or better, increase spend. If it’s below 2:1, fix or cut it. If you can’t measure the return at all, that’s a problem worth solving before spending another dollar.

John Wilson of Wilson Companies grew from roughly $5M to $30M+ in revenue using this exact discipline. On the Owned and Operated podcast, Wilson advocates for zero-based budgeting where you justify each marketing expense from scratch rather than applying a blanket percentage of revenue. His philosophy: focus on your CAC to LTV ratio and “ride your winning channels like you stole it” rather than spreading budget thin across bus stops and radio spots that can’t be tracked.

Read our guide on marketing attribution for home services to set up proper tracking.

Where the money should go

Knowing how much to spend is half the equation. The other half is allocation across channels. A bad mix wastes good money.

On Owned and Operated episode #237, Wilson and Tony Castellucci from Wanamaker broke down what actually works at different budget levels. At $100K, concentrate everything on LSA and Google Business Profile. At $500K, add PPC and content marketing. At $1M, layer in brand-building and community engagement. The point: your channel mix should match your budget reality, not the other way around.

Website and SEO: 20-30% of budget

Your website is the foundation everything else builds on. Paid ads send traffic to your website. SEO drives organic visitors to your website. Reviews send curious homeowners to your website. If your site doesn’t convert, every other channel underperforms.

For a contractor spending $8,000/month on marketing, that’s $1,600-2,400 toward website improvements, content creation, and local SEO. This covers ongoing technical maintenance, new service area pages, blog content that targets long-tail keywords, and Google Business Profile optimization.

SEO compounds over time. The content you publish this month still drives traffic 12 months from now. Paid ads stop the moment you stop paying. Weighting 20-30% toward SEO builds an asset that reduces your dependence on paid channels over time.

Paid search: 15-25% of budget

Google Ads and Local Services Ads capture homeowners who are actively searching for your services. High intent, immediate results, measurable returns.

At $8,000/month total, that’s $1,200-2,000 in paid search. In less competitive markets, this buys meaningful visibility. In metros with aggressive PE-backed competitors, it’s enough for targeted campaigns on your highest-margin services but won’t dominate the auction.

The key is efficiency, not volume. Tight keyword targeting, proper negative keyword lists, dedicated landing pages, and call tracking make $1,500/month in Google Ads outperform a sloppy $5,000/month campaign. One electrical contractor on ContractorTalk reported spending $2,000/month on Google Ads and pulling 20-30 solid leads in a moderate competition area with a 4:1 ROI. That kind of return is achievable when your campaign is dialed in, but rare when you’re running broad match keywords to your homepage.

Read about common Google Ads mistakes before spending here.

Social media and reputation: 15-20% of budget

This covers review generation tools, social media content, and occasional boosted posts on Facebook or Instagram. For most contractors, organic social media alone doesn’t drive enough leads to justify major spend. But reviews absolutely drive revenue.

91% of homeowners check reviews before hiring a contractor. A review generation system that adds 5-10 new Google reviews per month has a measurable impact on both rankings and conversion rates. Budget $50-200/month for automation tools and put the rest toward content that showcases your work.

Referral and neighbor marketing: 10-15% of budget

Referrals close at 40-60% compared to 15% for paid ad leads. Dollar for dollar, referral programs and neighbor marketing deliver the best ROI of any channel.

Budget here covers door hangers, yard signs, referral incentives, and postcards to neighbors after completing a job. A contractor spending $800-1,200/month on neighborhood marketing can generate 5-15 warm leads that close at rates paid channels can’t touch.

Read our marketing budget allocation guide for a deeper breakdown by channel and business stage.

Direct mail and offline: 5-10% of budget

Postcards and direct mail have a 90% open rate compared to 20-30% for email. Targeted mailings to homeowners in your service area, especially around seasonal peaks, generate consistent returns.

Budget $400-800/month for targeted mailings tied to seasonal campaigns: AC tune-ups in spring, furnace checks in fall, water heater flushes in winter. The cost per impression is low, and the tangibility of a physical mailer keeps your name visible longer than a digital ad.

How to tell if your budget is working

A marketing budget without tracking is just a donation to Google and the postal service.

Track cost per lead by channel. Your Google Ads cost per lead should be visible in your dashboard. Your SEO cost per lead requires dividing monthly SEO spend by organic leads generated. Your referral cost per lead includes incentive costs divided by referral-sourced jobs.

Track cost per booked job, not just cost per lead. A channel that delivers $50 leads that never convert costs more than a channel delivering $150 leads that close at 40%. Read more about cost per lead vs. cost per job to understand why this distinction matters.

Review allocation quarterly. Markets shift. Seasonal demand changes which channels perform best. A quarterly review of spend vs. returns by channel keeps your budget aligned with results instead of habit.

Benchmark against industry data. Our methodology page details how we measure and benchmark home service marketing performance. Use it to compare your numbers against contractors in similar markets and trades.

Common budget mistakes

Spending nothing and expecting referrals to sustain growth. Referrals are the best leads you’ll get. They’re also finite. Every contractor who’s plateaued at $500K-$1M in revenue and can’t break through has the same story: “We get all our work from referrals.” That works until it doesn’t. A single slow season or lost relationship exposes the fragility of zero-budget marketing.

Going all-in on one channel. Contractors who put 100% of budget into Google Ads have no fallback when CPCs spike during peak season. Diversification is basic risk management. If Google changes its algorithm or a PE-backed competitor floods your market with ad spend, you need other channels generating leads.

Cutting marketing first during slow seasons. Slow seasons are when marketing spend matters most. Your competitors cut budgets too, which means lower CPCs, less competition for attention, and cheaper leads. The contractor who markets through winter books the first wave of spring demand while everyone else scrambles to restart campaigns.

No tracking, no accountability. If you can’t connect a marketing dollar to a booked job, you can’t optimize anything. Before debating budget percentages, invest in basic tracking: call tracking numbers, UTM parameters on links, and a CRM that logs lead sources. Without this foundation, budget discussions are just guessing.

The bottom line

For most home service contractors, 7-8% of revenue is the right starting point. Push to 10-12% if you’re in growth mode or competing in a market with aggressive PE-backed competitors. Drop to 3-5% only if your referral engine is genuinely strong enough to sustain your revenue goals.

Allocate across channels based on data, not habit. Track returns by channel and shift dollars toward what works. Budget against your revenue targets, not your current revenue.

The contractors who grow consistently aren’t always the ones who spend the most. They’re the ones who spend deliberately, track obsessively, and fix the leaks in their pipeline before pouring more money in at the top.