How Much Should I Spend on Ads When I'm Starting Out?

Ask how much you should spend on ads and you'll usually hear "it depends," or a range like $1,500 to $30,000 a month. Neither one helps you set a number.

Here's the actual math. It takes about a minute, and there's one number in it that can cut your budget in half.

Why most owners pick an ad budget backwards

Most people start with a number that sounds reasonable. A thousand a month. Two thousand a month. Then they hope it brings in enough work.

When it doesn't, they can't tell whether they spent too little or something else broke.

Flip it around. Start with the jobs you need.

The three numbers you need

1. New jobs you want from ads each month.
2. Your booking rate. Out of every 10 leads, how many actually book? Four out of 10 is a 40% booking rate.
3. Your cost per lead. If you're already running ads, you know this. If you're not, for a lot of home service businesses it falls somewhere in the $30 to $80 range. My door company runs about $35 to $40 a lead on Google.

How to calculate your ad budget

Jobs you want ÷ booking rate = leads you need.

Leads you need × cost per lead = your monthly budget.

Say you want 20 new jobs a month. You book one out of every four leads, a 25% booking rate. Your leads cost $40.

20 jobs ÷ 25% = 80 leads.

80 leads × $40 = $3,200 a month.

That's your budget. Not a guess. A number based on your business.

The number that can cut your budget in half

Same business. Same 20 jobs. Same $40 leads. But now you book one out of every two leads instead of one out of four.

20 jobs ÷ 50% = 40 leads.

40 leads × $40 = $1,600 a month.

Same jobs. Half the budget. You didn't touch the ads, and you didn't get cheaper clicks. You booked more of the people who were already calling you.

Most businesses have a lot of room here. Missed calls, slow callbacks, and nobody asking for the job all push your booking rate down and your ad budget up. If you're not sure whether your results problem is the marketing or what happens after the lead, read is it your marketing agency or your sales process.

So before you ask how much to spend, ask how many of your leads you're actually booking.

How to check if your ad budget will pay off

Divide your cost per lead by your booking rate. That's what each booked job costs you in ads.

In the first example, $40 ÷ 25% = $160 per job.

If your average job makes you a few hundred dollars after costs, that works. If your average job makes you $100, it doesn't, and you need to fix your booking rate or raise your prices before you spend more. For more on why cost per job matters more than cost per lead, see cost per lead vs. cost per acquisition.

What's the minimum ad budget that works?

If your math comes out to a few hundred dollars a month, that may be too little for Google to learn who to show your ads to. In a lot of markets, plan on at least $1,000 to $1,500 a month for one service in one area.

Below that, start smaller and more focused, or put your time into your Google Business Profile and reviews first.

Not sure which platform to put that budget on? Start with which paid ads a home service business should use.

Figure out your booking rate first

The Revenue Leak Calculator takes a few numbers from your business and shows you where money is leaking and roughly what it's costing you. Run it before you set your budget.

FAQ

How much should a small business spend on ads?

Work backward from the jobs you need. Divide your monthly job goal by your booking rate to get the leads you need, then multiply by your cost per lead. A business that wants 20 jobs, books 25% of leads, and pays $40 a lead needs about $3,200 a month.

How do I calculate my advertising budget?

Use this formula: jobs you want ÷ booking rate = leads needed, then leads needed × cost per lead = monthly budget. Then divide your cost per lead by your booking rate to see what each booked job costs you in ads.

What is a good cost per lead for home services?

For a lot of home service businesses, cost per lead falls somewhere between $30 and $80, depending on the trade and market. Judge it by cost per booked job, not cost per lead alone.

What is the minimum budget for Google Ads?

In a lot of markets, plan on at least $1,000 to $1,500 a month for one service in one area. Below that, Google may not get enough data to learn who to show your ads to.

How can I lower my ad budget without losing jobs?

Raise your booking rate. If you book 50% of your leads instead of 25%, you need half as many leads for the same number of jobs, which can cut your ad budget in half. Answer every call, call back fast, and ask every lead to book.