How much should contractors spend on marketing?

A contractor should spend on marketing whatever buys the next job for less than that job leaves in gross profit, multiplied by the number of extra jobs the crews can take on. That is a number you work out from your own books in about ten minutes. A flat percent of revenue is a rough ceiling at best, and the percentage most articles quote does not come from where they say it does.

This guide gives you the source check first, then the method, then how each channel charges so you can compare them against your number.

What percentage of revenue should a contractor spend on marketing?

There is no reliable single percentage for contractors, and you should be wary of any article that gives one without a source you can open. The figure you will see most often is "7 to 8 percent of revenue, according to the Small Business Administration". We looked for it. The SBA post on the subject, How to Get the Most From Your Marketing Budget, says something different: that many businesses use a percentage of revenue as a guide, but that there is a wide range in what percentage to spend.

The figures that post does quote come from outside surveys and run from about 1% of revenue on advertising for the average business to nearly 12% on marketing for consumer services companies. None is specific to construction. Its practical advice is to ask your trade association for a benchmark, and to budget more when the business is new and less once you have a steady customer base.

What do contractor margins say about the budget?

They say a contractor has far less room than a generic small-business rule assumes. The National Association of Home Builders publishes the trade's own numbers:

• Single-family builders: an average gross margin of 20.7% and net margin of 8.7% for fiscal 2023. All operating expenses together (finance, sales and marketing, general and administrative costs, and owner's compensation) averaged 12.0% of revenue. Marketing is one slice of that 12%.
• Remodelers: an average gross margin of 29.9% and net margin of 6.3% in 2024, which NAHB reports as the highest since 1996.

Put the two together. On $1,000,000 of revenue, a 7 to 8 percent marketing budget is $70,000 to $80,000. A remodeler at the average net margin keeps $63,000. The popular rule asks for more than the whole profit. For a builder, it would be well over half of everything spent on running the office, paying the owner and financing the work.

That does not mean contractors should spend nothing. It means the budget has to be set per job, from margin, and not as a slice of the top line.

How do you work out your own marketing budget?

Start from what one job leaves you and work backward to what you can pay for a lead. Do it separately for each type of work, because a bathroom and a second-story addition have nothing in common here.

1. Average job value for that job type, from last year's invoices.
2. Gross margin on it: what is left after materials, labor and subs.
3. Close rate: signed contracts divided by estimates given.
4. Lead-to-estimate rate: estimates given divided by enquiries received.
5. Break-even cost per lead = job value x gross margin x close rate x lead-to-estimate rate.
6. Your target cost per lead: a fraction of break-even, because break-even means working for free.
7. Capacity: how many more jobs of this type your crews and subs can take this year.

Here it is with example numbers for two job types. These are placeholders to show the sum, not benchmarks.

Now the budget falls out. If you can take eight more bathrooms this year and are willing to spend $750 to win each one, the budget for that job type is $6,000. If you can take two more additions at $4,000 each, that is $8,000. Add the job types up and you have a number tied to work you can actually deliver. Divide it by revenue afterward if you want a percentage, but the percentage is the output, not the input.

Two things the sum makes obvious. A contractor with a full schedule should spend little and only on the job types they want more of. And a lead that costs $150 can be cheap for an addition and ruinous for a faucet repair.

How does each marketing channel charge a contractor?

Differently, and the difference decides how you compare them to your cost-per-lead number.

Sources: Google Ads Help on cost-per-click bidding; Local Services Help, Getting started with Local Services Ads, which lists general contractor among its categories; Angi Leads service professional FAQ; Houzz Pro.

We sell one row of that table. We do website SEO and AI-search work, and we do not run ads, Local Services Ads or lead-site accounts. So take this as the view of a firm with a stake, and check it against your own figures.

Should a new contractor spend more than an established one?

Yes, as a share of revenue, because a new contractor has no past clients sending referrals yet. The SBA post makes the same point: budget more when you are starting out, and reduce it once you have a steady customer base, without stopping.

For a new contractor the sum above still applies, but the close rate and lead-to-estimate rate are guesses. Use cautious ones, spend on channels that charge per lead while you learn your real rates, and write down the source of every enquiry from day one. Six months of that record is worth more than any benchmark.

How much of the budget should go to SEO and how much to ads?

Split it by how soon you need the work. Ads and bought leads produce enquiries this week and stop when the money stops. Website pages take longer to start producing and then carry on without a charge per enquiry. A contractor with gaps in next month's schedule needs the first. A contractor booked for the season who wants better projects next year should put more into the second.

You can test the SEO side before you commit. Our SEO break-even calculator takes a monthly investment, your average project value, your gross margin and your close rate, and tells you how many extra qualified enquiries a month would cover the cost. If that number is one or two for your job type, the case is easy to make. If it is thirty, it is not, and you should not buy it. Our guides on what SEO costs and SEO against Google Ads cover the pricing and the trade-off.

How do you know the marketing is working?

You know when you can name the source of every signed job. Ask each caller how they found you, record it against the estimate, and mark which estimates sign. Once a quarter, divide what each channel cost by the jobs it produced. Keep the ones under your target and cut the ones over it.

Website visits and ad impressions are not that record. If your site has visitors and no enquiries, work through these checks before spending more to send it traffic. Contractor projects also take months to sign, so judge a channel on estimates requested in the first quarter and on signed work after that.

Where to start

Do the sum for your two most profitable job types today. Then look at what you spent last year, by channel, and see which side of your number each one landed on. If you want to know whether your website is costing you enquiries it should be getting, ask for our free site check: one useful finding about your own site within two business days, no call required. How we work with builders and general contractors is on our contractor SEO page, and remodelers should read how to get more remodeling leads.