I get this question a lot from contractors large and small, and while there are guidelines to follow, the only person able to answer this question is the one writing the check since it is their money.
But a great place to start when trying to figure out just how much to spend, is by figuring out how much you want to make. If you want to just get by, then a minimal marketing budget with a solid referral business will do.
If you have bigger ambitions, like being the industry leader in your market, then you’re going to need to spend a lot more than that guy that just wants to get by.
Either option requires a budget
I think the last time I checked, two-thirds of all small businesses closed their doors within five years. I bet that number is higher in the home-improvement industry. Most contractors start out with some business cards, tools, and a desire to do great work. But many don’t set aside any cash to tell the world about how great of a plumber or electrician they are.
So what are the numbers?
Well, most small businesses can get away with spending between 5% to 10% of gross sales on advertising, and construction marketing is no different. In fact, many of the high-flyers in the trades spend 12% to 15% marketing their businesses.
Now, there are contractors out there that will tell you they haven’t spent a dime on marketing in years, living solely from referrals. Well, that’s great for them, but bad advice for you, especially if you’re contracting company is less than 5 years old.
New businesses need more care and feeding
If your business is 5 years old or less, then you are still a start-up in the trades, and you should plan on spending at least 15% of gross sales for the next three years on advertising.
Obviously, the closer you are to the 5 years instead of a year will play a part in this equation, but 15% will help get your name out there in an highly competitive market during a down economy.
And if you think that 15% of gross sales is too much, you have to understand that if your budget is too limited to make an impact in the market, then any advertising you will do will have less of an impact and eventually require you to spend even more money on advertising to get the same results than if you just allocated the 15% originally.
Again, I want you to understand, these numbers are subjective, but one thing I know for sure, the more you put into marketing your construction company, the more money you WILL make…if done properly!
Darren and his team help contractors develop a solid online presence with website design, social media and reputation management, and SEO services. A full service digital agency helping contractors sell more and market to buyers! 
{ 3 comments… read them below or add one }
Something I’ve found in talking to “referral only” contractors is that most, if not all are struggling to stay busy… and because they don’t have a well defined marketing plan in place, they are without a true plan to regenerate business (outside of wishing & praying). it’s dead on-the-vine…
Just because you want something to happen (like getting 2005′s business back)… doesn’t mean it will happen. You HAVE to adapt to current conditions in order to survive.
You are absolutely right Darren about budgeting- once you grasp that concept, then you can begin to pick advertising options that you can afford- and that will help accomplish your goals.
Good notes!
~Matt
Thanks Matt!
A lot of the guys I talk to today lived off of referrals for too long without spending anything on marketing. Unfortunately, referrals work off of a merry go round scenario. You don’t get them unless you make a client or customer happy, and you can’t make a client or customer happy until you have one…which you usually get by advertising. And finally, I don’t care how many referrals a company works off of, they are never as busy as they could be!
Thanks for stopping by and commenting Matt, good luck in the New Year!
-Darren
I am the fourth generation in my family painting business (in the States anyway). My Grandfather was about 80 and had not advertised or actively gone looking for new accounts for about 20 years when he said “I wonder what happenend to all my old customers?” I told him “Dead, nursing homes or Florida”.
He dislike advertising and it was a major fight to get a Yellow Pages ad when they still really worked.
Today, we spend about 5% on advertising, but also do a tremendous amount of community work (charity and chambers of commerce), plus always updating our social media sites. I do not believe simple advertising alone is the way to go. Business owners need to go out and press the flesh.