Marketing a building business is very different from marketing most other industries. The construction industry is a high-value, low-volume sector, meaning a single lead might take months to move through the pipeline, and even a small change in conversion rate can have a big impact on your annual revenue.
That’s why having a clear, measurable marketing budget is so important. Most builders are flying blind on their marketing spend. Instead of guessing how much to spend or copying what competitors are doing, you should be using data to determine exactly what your business needs to hit its revenue goals.
Here at Gordon Digital, we’re the construction industry specialists helping builders take the guesswork out of marketing. We’ve designed a calculator to give you a rough idea of what your marketing budget should be based on revenue goals, project values, conversion rates, CPL (cost per lead), and acquisition costs.
Below, we’ll take you through the steps using an example to show you what the process looks like. But keep in mind there’s a gap between knowing your numbers and actually hitting them, so if you want help applying these numbers to your own business, reach out to our experts for tailored guidance.
How to Calculate Your Marketing Budget
Step 1: Define Your Annual Revenue Target
Some industries use a generic benchmark like 5–12% of revenue when calculating marketing budgets.
But building isn’t most industries.
A builder may sign 10 projects one year and 5 the next simply because project sizes and timelines vary. That’s why revenue goals are a better starting point than generic percentages.
If you want predictable growth, you must decide:
- What annual revenue you want to achieve
- How many projects you need to hit that number
- What marketing investment will support it
Example:
Annual revenue target = $10,000,000
Step 2: Determine Your Average Project Value
Your average project value shapes almost every marketing decision. Many builders work off an ideal project value rather than a real one, which skews their numbers and creates unrealistic expectations. Builders with high project values often need fewer projects to hit revenue goals, but their cost per lead is usually higher due to increased buyer research, competition, and longer sales cycles. To calculate your true average:
- Add your total revenue from projects in the past 12–24 months
- Divide by the number of projects completed in the same period
Your project value affects:
- How many projects you need per year
- How many leads you need to hit those project numbers
- How much you can profitably spend to acquire one customer
Example:
Average project value = $800,000
Step 3: Work Out Your Conversion Rate
Your conversion rate is one of the most overlooked numbers in the building industry.
Conversion Rate Formula:
Conversion Rate = Signed Contracts ÷ Qualified Leads
A qualified lead is someone who fits your build type, budget, timeline, and location, not just a general enquiry. Your conversion rate depends on a number of factors, and the benchmarks can vary depending on builder type.
Typical conversion rates in the home building sector sit between 2–5%. Custom home builders could see conversion rates of 2-4%, while renovation and extension builders might see slightly higher rates of 3-5%. High-performance builders with clear messaging and a strong sales process can significantly improve on the average with total conversions of around 8%.
For this example, we’re using a conversion rate of 3%
Step 4: Calculate How Many Projects You Need Per Year
Now that you know your revenue target and project value, you can forecast how many jobs you need annually:
Annual Projects Needed = Revenue Target ÷ Project Value
This gives you a baseline for:
- Revenue forecasts
- Pipeline planning
- Staff and subcontractor scheduling
- Marketing and sales workload
Builders should also factor in seasonal downturns, such as slow enquiry periods around Christmas or EOFY. Planning earlier helps ensure consistent lead flow.
Using our example:
$10,000,000 ÷ $800,000 = 12.5 projects per year
Step 5: Calculate How Many Leads You Need
You now know:
- How many projects you need
- What your conversion rate is
From that, you can calculate your required leads.
Total Leads Needed Per Year = Annual Projects Needed ÷ Conversion Rate
Monthly Leads Required = Annual Leads ÷ 12
Many builders underestimate how many quality leads they need to maintain consistent work. This often reveals whether your current marketing system is capable of supporting your revenue goals or whether you need to increase your lead-generation efforts.
Using the example:
- Annual leads needed: 417
- Monthly leads required: 34.72
Step 6: Determine Your Cost Per Lead (CPL)
CPL tells you how much it costs to generate a single lead across all marketing activities.
CPL Formula:
Total Marketing Spend ÷ Total Leads Generated = CPL
CPL varies significantly between builders depending on:
- Location (competition affects ad costs)
- Build type
- Brand strength
- Website quality
- Lead qualification filters
- Ad platforms used (Google Ads, Meta Ads)
The stronger your brand and conversion rate, the more profitable your marketing becomes, even if your CPL is on the higher end. In the next step, we’ll calculate your project acquisition cost (PAC). Once you know that, you can work backwards to calculate the maximum CPL you can afford
Example:
CPL = $240 per lead
Step 7: Calculate Your Project Acquisition Cost (PAC)
Your project acquisition cost (PAC) shows how much you must spend on marketing to secure one signed project.
PAC Formula:
PAC = CPL ÷ Conversion Rate
As a rule of thumb, the building industry recommends keeping PAC at around 3% of project value to maintain 20–25% gross margins and 8–12% net margins. If your PAC climbs above 3–4%, profits compress quickly.
PAC is also a powerful number for long-term forecasting. Once you know your average PAC, you can model your growth. Want to grow by $5 million next year? You know exactly how many projects you need and how much it will cost to acquire them.
Using the example:
$240 CPL ÷ 3% conversion rate = $24,000 per project.
Step 8: Set Your Monthly and Annual Marketing Budget
Once you’ve calculated your PAC and you know how many projects you need for your building business, you can now determine your overall marketing budget:
Annual Marketing Budget = PAC × Projects Needed
Monthly Marketing Budget = Annual Budget ÷ 12
It’s important to understand that marketing budget ≠ ad spend.
Your marketing budget usually includes:
- Google Ads / Meta Ads
- SEO for Builders
- Content creation
- Website development
- CRM and marketing software
- Photography and videography
Ad spend is simply the portion allocated directly to paid advertising. A balanced marketing ecosystem with ads, SEO, content, and automation helps reduce long-term CPL and stabilise lead flow.
Using the example:
Monthly marketing budget: $25,000
Monthly ad spend recommended (approx. 30%): $8,333
Common Mistakes Builders Make When Setting Their Marketing Budget
Many builders fall into the same traps when planning their marketing investment, so here are some of the common ones we see.
- Picking a random % of revenue without doing the maths – Benchmarks can be a guide, but they shouldn’t replace actual calculations based on lead volume and conversion rates.
- Setting ad spend based on costs, not on revenue goals – Your budget must align with the number of leads needed, not what feels affordable.
- Underestimating CPL – If your goal requires 35 leads per month but your current channels only produce 10, either your budget or your strategy needs to change.
- Not tracking leads or conversion rates – Without accurate data, your marketing numbers will always be wrong.
- Treating sales and marketing as separate – Your conversion rate is affected by both, including follow-up speed, qualification process, brand trust, and even quoting quality.
- Relying too heavily on referrals – Referrals are excellent but inconsistent. A scalable marketing budget ensures stability.
- Spending without strategy – No amount of ad spend can fix a flawed strategy. You might have all the numbers worked out, but if you target the wrong audience with the wrong messaging, you’re wasting money.
Builder Marketing Budget Calculator
We’ve made this process simple with our interactive Marketing Budget Calculator, designed specifically for the construction industry. But knowing your numbers is just the beginning. If the calculator gave you some solid targets but you’re not sure how to hit them, we can help you bridge the gap.
The number one mistake we see builders make is jumping into ads without taking the time to map out who their ideal customers are and where they spend their time. As marketing specialists for the construction industry, we help you build a strategy that actually reaches your ideal customer. We also help you set up the right tracking and test and refine everything until you’re getting leads at or below your target PAC.
Builders working with us have seen costs per lead drop up to 50% in the first 90 days, all while maintaining lead quality. If you’re serious about getting high-quality leads and building a long-term growth strategy, Gordon Digital can help you make it happen.
Book your free strategy call and start building a marketing system that supports your revenue goals all year round.
