How to Break Down and Evaluate Your Marketing Budget for 2025
Our first webinar of 2025 answered a common question many high performance contractors ask—“How much should I be spending on marketing each year?” by breaking down the individual metrics and components that an insulation, HVAC, or solar business would need to consider to determine how and where they should be spending their marketing dollars. Let’s review what we learned and how you can apply it to your own business today.
How Much of Your Gross Revenue Should You Spend on Marketing?
It’s important to tailor your marketing budget to your business size, market conditions, and growth objectives. The industry standard suggests allocating around 7% of gross revenue to marketing*, but this number varies significantly based on context:
- Established brands with a strong foothold in their market or an emphasis on commercial services might only need to spend as little as 2%
- Growth-focused companies or those entering new, competitive markets might need to allocate up to 12%
Now we can explore how to plug this percentage into projected sales numbers and build a marketing budget and strategy around it for the coming year.
*When we use the term marketing in this context, we are talking about all the expenses that you would have associated with marketing, including employees who are active in marketing, external costs for advertising, etc. It does not include sales.
How Many Leads Do You Need to Meet Your Target Revenue Goal for 2025?
Say your revenue target for the year is $1.75 million. If your average job size is $7,500, you would need to do 233 jobs in that year to meet your goal. Taking it a step further, a close rate of 30% would mean you need to generate 778 leads.
7% of $1.75 million would give you a marketing budget of $122,500. That’s a Cost Per Acquisition (CPA)—the total cost to get each job—of $526, or a Cost Per Lead (CPL) of $157. Now you know not only how many leads you need throughout the year, but how much you need to spend on each lead or acquisition.
Many contractors crunch these numbers retroactively while reviewing past performance. But we like to also think about CPA and CPL metrics as helping to establish tolerable levels of expense needed to close future jobs. You can use this information to plan out your marketing efforts at the beginning of the year, and evaluate your campaign performance as you go.
Understanding the Conversion Funnel (And Your Different Conversion Rates)
Conversion rates are critical to your marketing performance. Most sales funnels follow a process such as:
Lead → Appointment → Quote → Closed Job
Knowing your average conversion rate at each stage will help create a more accurate and attainable marketing plan. In our example, for a company that closes 30% of its 778 leads, the conversion rates might look like this:
- 50% of your leads need to turn into appointments
- 80% of your appointments need to turn into quotes
- 75% of your quotes need to turn into closed jobs
Using the above data, 778 leads turn into 389 appointments, which turn into 311 quotes, which turn into 233 closed jobs.
Calculating Your Cost Per Acquisition by Marketing Channel
In a well set up marketing system, you can track all of these numbers for each of the specific marketing channels that you're using.
The above chart shows real historical numbers from a contractor we worked with, and breaks down the Cost Per Acquisition for each of their different marketing channels in the prior year. With this information, a contractor can review which marketing channels are working or not working, and where you may want to invest in the coming year.
As a high performance contractor, running the numbers doesn’t begin and end with the building science work you do. Applying the same rigorous, analytical approach to your business operations and marketing efforts will help you succeed in your market and stand apart from competitors. So plug in your own numbers and start 2025 on the right foot.