How Much Should a Contractor Spend on Ads?

Quick answer: Work backward from jobs, not forward from a budget. Most home-service contractors land between 5% and 10% of revenue on advertising, closer to 10% while growing. But the more useful number is this: multiply the jobs you want per month by what a booked job costs you to buy. That figure — not a percentage — is your budget.

Every contractor asks this question the wrong way round. “What should I spend?” assumes the budget is the input and jobs are the output. It’s backwards. The number of jobs you want is the input. The budget falls out of the math at the end.

Why the percentage rule is a bad place to start

You’ll hear 5%, 7%, 10% of revenue thrown around. Those numbers aren’t wrong — they’re just a description of where healthy companies end up, not a decision you can act on. They also break in the two situations where you most need an answer.

The first is a startup year. Ten percent of a revenue number you don’t have yet is zero. The second is a growth push. If you want to add 40% to your revenue, spending 7% of last year’s revenue will not get you there, and the percentage rule gives you no way to see that.

Percentages are a rear-view mirror. Use them to sanity-check the answer, not to produce it.

Start at the bottom: what a booked job is worth to you

Here’s the chain. Every one of these numbers is knowable from your own business, and if you don’t know them, that’s the actual problem — not the budget.

Average job value. What a closed job invoices, on average, over the last 12 months.
Gross margin. What’s left after materials and labor. Not net profit — gross.
Allowable acquisition cost. The share of a job you’re willing to spend to win it.
Close rate. Of the estimates or in-home appointments you run, how many become jobs.
Booking rate. Of the leads that come in, how many turn into a real appointment.

Multiply the last two together and you get leads-per-job. Divide your allowable acquisition cost by leads-per-job and you get the most you can pay for a lead. Multiply that by the leads you need and you have a budget.

The worked example

An HVAC company doing replacements. Real numbers, run all the way through.

Average install: $9,000
Gross margin: 40%, so $3,600 of gross profit per install
Allowable acquisition cost: $900 per install (10% of revenue, or 25% of gross profit)
Close rate on a run appointment: 35%
Booking rate, lead to appointment: 40%

Work it out:

Appointments needed per install: 1 ÷ 0.35 = 2.9
Most you can pay per appointment: $900 ÷ 2.9 = $310
Leads needed per appointment: 1 ÷ 0.40 = 2.5
Most you can pay per lead: $310 ÷ 2.5 = $124

Now the budget. You want 8 installs a month. That’s 8 × 2.9 = 23 appointments, which needs 23 × 2.5 = 58 leads. At a real-world cost per lead of $80, that’s $4,640 a month.

And here’s the sanity check: 8 installs at $9,000 is $72,000 in revenue. $4,640 is 6.4% of revenue — right in the middle of the range everyone quotes. You arrived at the same place, but now you know why, and you know exactly which number to fix if the budget looks too high.

Because that’s the real value of running it this way. If $4,640 is more than you can stomach, the math tells you where to go. Lifting your booking rate from 40% to 55% cuts the leads you need from 58 to 42 and drops the budget to about $3,400 — without touching your ads at all. That’s a follow-up fix, not a media fix, and it’s usually the cheapest lever in the whole business.

Run your own version in the ad budget calculator, and pin down your ceiling first with the max cost per lead calculator.

The floor: below this, ads don’t work

There’s a budget below which paid advertising doesn’t underperform — it simply doesn’t function. Two reasons.

You can’t buy enough clicks to matter. In competitive home-service markets, a click on a high-intent search term commonly runs somewhere in the $15–$60 range depending on trade, season, and city. Roofing and water damage sit at the top; smaller trades sit lower. At $35 a click, a $600 monthly budget buys about 17 clicks. Seventeen clicks might produce one lead. You cannot manage a campaign, judge a campaign, or improve a campaign on one lead a month.

You can’t get out of the learning phase. Ad platforms optimize by watching conversions. Feed them two or three a month and they never build a usable signal, so you pay the beginner’s price forever. Most accounts need something like 20–30 conversions a month before the algorithm starts helping instead of guessing.

In practice, for most home-service trades in a decent metro, the floor sits somewhere around $1,500–$2,500 a month. Below that, you’re better off putting the money into a Google Business Profile, review generation, and answering your phone faster — all of which work at any budget.

Seasonality: don’t spend in twelfths

Splitting an annual budget into twelve equal months is the most common budgeting error in the trades, and it’s expensive in both directions.

Demand isn’t flat. Roofing spikes after weather. HVAC has two peaks and two valleys. Pressure washing lives and dies by spring. When demand is high, your cost per lead falls — that’s exactly when an extra dollar buys the most, and exactly when most contractors are too busy to think about ads. When demand is low, cost per lead rises, and the contractors who keep spending flat are paying premium prices for the year’s worst leads.

Weight your budget toward your season. A useful starting shape: 60% of the annual spend into your four strongest months, 40% across the other eight. Then hold a reserve — 10–15% of the annual number, untouched — for the week a storm rolls through and every competitor is booked out. That’s the cheapest lead volume you’ll see all year. What to sell in each phase of the year, not just what to spend, is covered in seasonal marketing for home-service contractors.

When to raise it, and when to stop

Raise the budget when cost per booked job is comfortably under your allowable acquisition cost and your calendar can absorb more work. That’s it. Not when a report looks good, not when impressions climb.

Cut it when cost per booked job crosses your ceiling for two consecutive months — two, not one, because a single bad month is usually seasonality or a bad week of follow-up rather than a broken campaign.

And before you raise spend, always check the same thing first: is the bottleneck traffic, or the handling of traffic? If half your leads never get a call back inside an hour, more budget just buys more leads to ignore. The speed to lead calculator will tell you what that’s costing, and this breakdown of response time explains why the window is smaller than most contractors think.

Frequently Asked Questions

Is 10% of revenue too much to spend on advertising?

Not if you’re growing. Ten percent of revenue is a normal figure for a home-service company actively adding market share, and some spend more during a land-grab year. It becomes too much when cost per booked job exceeds what a job’s gross profit can carry — that’s the real ceiling, and it can be hit at 4% of revenue or comfortably cleared at 12%.

What’s the minimum realistic ad budget for a contractor?

For most trades in a real metro, roughly $1,500–$2,500 a month is where paid advertising starts behaving predictably. Below that you can’t generate enough conversions for the platforms to optimize, and you can’t gather enough leads to tell a good month from a bad one. If that’s out of reach, put the money into local search presence, reviews, and faster follow-up instead — those work at any spend level.

Should the budget include agency fees and software?

Track them separately, then judge the total. Media spend tells you what the auction costs; fees and software tell you what the operation costs. Cost per booked job should be calculated on everything combined, because that’s what actually leaves your bank account per job won.

How long before I know whether the spend is working?

Give it 60–90 days. The first 30 are largely the platform learning and you fixing follow-up gaps. Months two and three produce a trend worth reading. Judging a campaign on 14 days of data is how contractors end up churning through four agencies in a year and blaming all of them.

Does a higher budget lower cost per lead?

Sometimes, up to a point. More conversion data usually improves targeting, which brings costs down. But every market has a depth limit — once you’ve reached most of the people searching, extra budget buys progressively colder audiences and costs climb. Watch cost per booked job as you scale; when it starts drifting up and stays up, you’ve found your market’s ceiling.

What if my cost per lead is fine but I’m still not booking jobs?

Then the budget isn’t the problem and raising it will make things worse. Work backward through the chain: contact rate, booking rate, show rate, close rate. A lead that nobody reaches inside an hour is barely a lead. Use the cost per booked job calculator to find which step is bleeding, then fix that before touching spend.