The rule of thumb, grounded
Small-business marketing budgets average 7.7–9.4% of revenue across industries (Gartner 2025; Deloitte CMO Survey). Home services can run leaner because intent capture (search, LSA) is so direct. Steady-state at 5%: a $1M contractor spends ~$50K/year — roughly $4,200/month covering ad spend and management. Growth mode at 10% doubles that. Below roughly $2,000/month total, most trades can't exit Google's learning phase fast enough to optimize confidently.
What budgets buy at 2026 benchmarks
- $500K company (~$2–2.5K/mo): LSA-first (electrical $39, HVAC $51, plumbing $57 per lead) + review engine + a converting website. Skip broad search until LSA caps out.
- $1M company (~$4–6K/mo): LSA + one disciplined search campaign on your highest-margin service + Meta retargeting + AI visibility foundation.
- $3M company (~$12–20K/mo): full multi-channel: LSA, segmented search (repair vs replacement), Meta, seasonal surges, and content that feeds AI answers. At this scale, the 3x management spread on CPLs is worth more than any budget increase.
Fixed fees change the math
Percentage-of-spend agency pricing creates a quiet incentive to grow your budget whether or not results follow. Flat management fees — ours run $750–$2,500/month depending on channels — mean added ad dollars go to ads. On a $5,000 budget that difference alone is often 15–20% more media working for you.
Frequently asked questions
What percentage of revenue should contractors spend on marketing?
5–7% of revenue for steady state, 8–12% for aggressive growth — consistent with cross-industry small-business averages of 7.7–9.4% (Gartner 2025; Deloitte). New companies front-load; established referral-heavy shops can run leaner.
What's a minimum viable ad budget for a contractor?
Roughly $2,000/month total in most metros. Below that, campaigns gather data too slowly to optimize and Google's learning phase never stabilizes. LSA-only strategies can start smaller because you pay per lead.
Should ad spend count inside the marketing budget?
Yes — count media, management fees, website, and tools together against the 5–7% benchmark. What matters monthly is one number: total marketing cost divided by booked jobs.
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