The Percentage Is the Wrong Question
You will be told a percent of revenue to spend on ads. We will not repeat one, because we have no good source for a single number that fits a plumber, an AC shop and a garage door company. Instead, here is how to work out yours.
Why a Percent Breaks
Example, with made-up numbers. Two shops each earn $50,000 a month and spend 8% of it, $4,000, on ads. A paid job leaves $600 before ads in both.
| Shop X | Shop Y | |
|---|---|---|
| Spend | $4,000 | $4,000 |
| Cost per booked job | $250 | $700 |
| Jobs booked | 16 | about 6 |
| Paid jobs (3 of 4) | 12 | about 4 |
| Left after the ads | $3,200 | -$1,600 |
Same percent. One shop grew, the other lost money. The percent said nothing about which.
How Much Should a Contractor Spend on Advertising? The Two Numbers
- What a paid job leaves. Money collected, less parts, less the sub's cut, divided by paid jobs. In the example, $600.
- What a booked job costs. Ad spend divided by jobs the ads booked.
If the second is less than the first, adding spend can add profit. If it is more, it cannot.
Working a Budget Backward
Say you want 20 more paid jobs a month, a job leaves $600, and about three in four booked jobs get paid. You need about 27 booked jobs. At a $250 cost per booked job that is $6,750. At $700 it is $18,900, and you would lose money on each. The budget is an output.
One caution. The cost per booked job often rises as you spend more, because the first clicks are the best ones. Raise spend in steps and watch the number.
Start From What the Crew Can Do
The other end of the budget is capacity. Count how many extra jobs a week your crew can take without dropping quality. If that is five, a plan that books fifteen is a plan to disappoint people. Work the budget to the number you can serve, not the biggest number the math allows.
Raise It in Steps
Example, with made-up numbers. Raise spend by a quarter each month and watch what a booked job costs.
| Month | Spend | Jobs booked | Cost per booked job |
|---|---|---|---|
| 1 | $4,000 | 16 | $250 |
| 2 | $5,000 | 19 | $263 |
| 3 | $6,250 | 22 | $284 |
The cost per booked job creeps up. As long as it sits well below what a job leaves, the extra spend pays. When it gets close, stop raising it.
What Counts as Ad Spend
Count every ad dollar, including Local Services Ads, directories and anything you pay for leads. The Ad spend tile in HeadHoncho counts the ad accounts you connected and names the spend it cannot see. Add the rest by hand.
Questions Owners Ask
Is There a Safe Percent of Revenue?
We have no sourced number that fits every trade, so we do not give one. Work it from your cost per booked job and what a job leaves.
What If I Cannot Tell Which Jobs Came From Ads?
Ask each new caller how they found you and write it on the ticket. Add tracked numbers when you can.
Does a Bigger Budget Always Mean More Jobs?
No. The best clicks go first, so each extra dollar usually buys a little less.
What to Check Before You Raise the Budget
- Is the phone answered? More clicks into an unanswered phone is more waste.
- Do you have the capacity to do the jobs?
- Is the cost per booked job below what a job leaves, for three months?
Use the cost per booked job calculator, read Cost Per Booked Job, Explained and see what leads cost by trade in What a Lead Really Costs, By Trade.