When a contractor tells us they have stalled at $3 million or $5 million, the first question is always the same: what percentage of revenue are you putting back into marketing? The answer is usually a fixed dollar figure decided years ago. We spend about $5,000 a month. That number was set when the company was half its current size and has been treated as a constant ever since.
Budgets set that way produce exactly the growth they are sized for, which is none. Here is how to work the number backwards from a revenue goal instead, and the tracking that makes spending it feel safe.
What Is In This Article
The Reinvestment Benchmarks
| Percent of revenue reinvested | What it buys you |
|---|---|
| About 5 percent | Maintenance. Enough to keep the phone ringing at your current level. |
| 6 to 15 percent | Moderate, sustainable growth. |
| 15 percent or more | Accelerated growth, provided conversion and operations can absorb the volume. |
The last row carries a condition worth repeating. Fuel only accelerates a vehicle that can handle it. If half your calls are not being booked and your follow up is manual, increasing spend just increases waste. Fix conversion first, then fund growth.
Work the Number Backwards
Start with the revenue goal and reverse engineer to a budget. Here is the sequence with real arithmetic.
- Revenue goal. $3,000,000 a year, which is $250,000 a month.
- Average ticket. $850. That means about 294 booked jobs a month.
- Lead to booked job conversion rate. If you convert 55 percent of leads, you need about 535 leads a month.
- Cost per lead. If your blended cost per lead is $25, that is about $13,375 a month in marketing.
- Sanity check against revenue. $13,375 against $250,000 is about 5.4 percent, which is a maintenance budget. To actually grow into that number, you are looking at 10 percent, or roughly $25,000 a month.
Notice that improving your close rate from 55 percent to 70 percent cuts the leads you need by about 115 a month, which is real money you never have to spend.
Run this once and two things become obvious: what your budget should be, and how much cheaper growth gets when conversion improves first.
Know Your Cost Per Lead by Source
A blended cost per lead is the minimum. A cost per lead by source is what lets you make decisions. Paul The Plumber runs about $11,990 a month across all digital marketing and tracks 1,119 leads, an average of $10.85 per lead. Broken out, roughly 210 came from organic, 134 from paid search and 409 from the Google Business Profile.
That breakdown is only possible because every source has its own tracking number. Without it you have one useless average, and no way to know that your map listing is producing more calls than your entire paid search budget. The Google Maps playbook exists because that line is so often the largest one.
Two Levels of ROI Tracking
Level one: projected ROI. Take your leads, apply a qualified rate, apply your technician close rate, multiply by average ticket. For Paul The Plumber: 1,119 leads, about 85 percent qualified, giving 951; a close rate producing about 606 booked jobs; at a $450 average ticket that is roughly $272,000 in projected revenue on $11,990 spent, or about 22x projected. It is a model, not truth, but a model beats guessing.
Level two: actual ROI. Sync your dispatch platform, ServiceTitan, Housecall Pro or FieldEdge, back to your lead sources by phone number and email so you can report booked revenue rather than projected revenue. The Meridian Advantage tracks about $10,000 in monthly spend against 789 leads, 518 active customers and roughly $223,000 in actual attributed revenue.
As a floor, a projected five to seven times return is roughly break even once you account for cost of goods, labor and overhead. Above that you are genuinely growing. Below it, something in the stack is broken and more budget will not fix it. The Meridian case study walks through what that looked like over time.
Where the Budget Should Go
Once you have a number, allocate it in the order that produces leads soonest while building the asset that lowers cost per lead later.
| Line item | Role |
|---|---|
| Local Services Ads | Fastest, lowest cost per lead in most markets |
| Google Ads | Fills the gap LSAs cannot cover, service by service |
| Organic and content | Compounds. Lowers blended cost per lead every quarter it runs |
| Retargeting | Cheap insurance on traffic you already paid for |
| Automation and follow up | Raises the conversion rate that every line above depends on |
| Database marketing | Near zero media cost against a list you already own |
Why This Is Usually the Plateau
Companies stall at a revenue level because their marketing spend is a fixed dollar figure while their goals keep moving. Revenue targets grow, the budget does not, and the result is a business that reproduces last year with slightly worse margins.
Set the budget as a percentage of the revenue you intend to produce, track cost per lead by source, and connect leads to actual revenue. Then adding budget is not a leap of faith, it is turning a knob you already know the calibration of.
Get the Book and the Full Growth Training Library, Free
Josh Nelson's book, How to Triple Your Sales by Getting Your Digital Marketing Right, plus the complete Growth Training Library: 10 workshops covering local search, paid ads, website conversion and tracking, built specifically for plumbing, HVAC and electrical contractors. Read it, watch it, and put it to work in your own company.
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