Short answer: Contractors should spend 5-10% of their target revenue on advertising. For most home service businesses, that means $1,000-$3,000/month. At $500/month, expect 5-10 leads. At $1,000/month, expect 10-20 leads. At $2,500/month, expect 25-50 leads.
The 5-10% rule: If you want to grow to $500K/year in revenue, budget $2,000-$4,000/month for marketing. If you want $1M, budget $4,000-$8,000/month.
Ad Budget Breakdown by Spend Level
$500/Month Budget
- Expected leads: 5-10 per month
- Best use: Google Local Services Ads only
- Good for: Testing if ads work, solo contractors
- Limitation: Not enough data to optimize well
$1,000/Month Budget
- Expected leads: 10-20 per month
- Best use: LSAs ($600) + Google Ads ($400)
- Good for: Small teams, predictable lead flow
- Limitation: Limited geographic reach
$2,500/Month Budget
- Expected leads: 25-50 per month
- Best use: LSAs ($1,000) + Google Ads ($1,000) + SEO ($500)
- Good for: Growing companies, multiple technicians
- Advantage: Enough data to optimize and scale
$5,000+/Month Budget
- Expected leads: 50-100+ per month
- Best use: Full channel mix — LSAs, Google Ads, SEO, retargeting
- Good for: Established companies ready to scale
- Advantage: Market dominance in your area
What Affects Your Cost Per Lead
Not all contractors pay the same cost per lead. Here's what affects your numbers:
Location
Ads cost more in competitive markets. A plumber in New York City pays $120-$200 per lead. The same plumber in a small town pays $50-$80.
Service Type
Emergency services cost more per click but convert better:
- Emergency plumbing: $70-$120 per lead
- AC repair: $50-$100 per lead
- Electrical work: $40-$70 per lead
- General contracting: $30-$60 per lead
Competition
More competitors = higher ad costs. If there are 50 plumbers advertising in your city, you'll pay more than if there are 10.
Your Website
A fast, well-designed website converts 5-8% of visitors. A slow, ugly website converts 1-2%. Same ad spend, 3-4x different results.
Before increasing ad spend, fix your website. A website that converts 5% instead of 2% effectively gives you 2.5x more leads for the same budget.
How to Allocate Your Ad Budget
Here's the recommended split for most contractors:
If You're Just Starting (Under $1,000/month)
- 100% to Google Local Services Ads
- Reason: Pay per lead (not click), highest intent traffic, builds reviews
If You're Growing ($1,000-$2,500/month)
- 50% to Google LSAs — Your foundation
- 35% to Google Ads — More control, more keywords
- 15% to SEO — Long-term investment
If You're Scaling ($2,500+/month)
- 40% to Google LSAs
- 35% to Google Ads
- 15% to SEO
- 10% to retargeting/brand
The Minimum Viable Budget
Can you run ads on $300/month? Technically yes. Should you? Probably not.
Here's why: At $300/month, you might get 3-5 leads. That's not enough data to know if your ads are working. One bad week and you think "ads don't work." One good week and you think you've figured it out. You need at least 15-20 leads/month to see real patterns.
Minimum recommendation: $750-$1,000/month. Below that, you're not spending enough to learn what works.
When to Increase Your Ad Budget
Increase your budget when:
- Your close rate is above 30% — You're converting leads well
- Your cost per lead is profitable — You're making money on each job
- You have capacity — You can handle more work
- Your campaigns are optimized — You've tested and improved
Don't increase budget just because you want more leads. Fix your funnel first.
The ROI Math
Let's say you spend $1,500/month on ads and get 20 leads:
- Cost per lead: $75
- Close rate: 30% (6 jobs)
- Average job value: $800
- Revenue: $4,800
- Ad spend: $1,500
- Return: 3.2x
If your return is above 3x, your ads are working. Keep going.
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How much do contractors pay per lead?
Contractors typically pay $30-$100 per lead depending on location, service type, and competition. Google Local Services Ads cost $25-$50 per lead. Google Ads cost $50-$100 per lead. SEO leads cost $10-$30 each once you're ranking.
Is $500 a month enough for Google Ads?
$500/month is the minimum to test Google Ads, but you won't get much data. You'll get 5-10 leads, which isn't enough to optimize effectively. $1,000-$1,500/month is a better starting point for meaningful results.
Should contractors hire a marketing agency?
Contractors should consider a marketing agency when: (1) they're spending $1,500+/month on ads, (2) they don't have time to manage campaigns, or (3) their DIY efforts aren't working. A good agency should generate 3-5x return on their fee.