Video Embed
Video Transcript
If you're not tracking all these numbers, you can’t find answers for anything because you have no idea what you’re doing. You’re shooting in the dark and hoping your business magically grows someday. Sorry to break it to you — it’s not gonna happen unless you know these numbers.
In this video, we’re gonna talk about how to plan your marketing budget, how to calculate your marketing ROI, and how to finally feel like you have control over the numbers.
There’s a lot of BS out there. One thing I think is complete BS is when gurus say you should spend five percent of your revenue on marketing to be safe, ten percent to be aggressive, or fifteen percent to be really aggressive. I don’t agree with that at all. Why? Because even if you only spend five percent — how do you know if that marketing is actually effective?
Different types of marketing work differently in different situations. It all comes down to: what are you putting into the machine, and what’s coming back out?
So let’s break this down.
Let’s say you’re a bathroom remodeler doing two projects a month. Each project is about $20k, so total sales are $40k. Out of that, let’s say your gross profit after labor and materials is $7,500 per job. That means on two projects, you’re at $15k gross profit.
But then you’ve got overhead — software, office costs, your salary, maybe managers down the line. Let’s say that overhead is $15k. That cancels out your $15k gross profit, which means your net profit is zero.
Now, if you added a third project in a month, that’s $60k in sales and $22.5k gross profit. With the same $15k overhead, you’d now have $7.5k net profit. See the difference?
But here’s the problem: most of you don’t know where you’re at. You just know, “I bring in $40k, it feels like I’m making money, but the money always goes back out.” That’s why tracking these numbers is so important. Without it, you don’t know how much to spend on marketing or where to spend it.
Now let’s take marketing. Say you spend $3k a month. That gets you 30 leads. Out of 30 leads, can you close one job? Probably — if you’re actually calling people back and following up. One job equals $20k in revenue and $7.5k in gross profit. Subtract your $15k overhead and $3k marketing, and you’re left with $4.5k net profit. That’s way better than zero.
Marketing produces results, but it has to be the right kind. If you spend $10k on a website, sure, websites have good ROI, but it might take months or years to see the return. If you need immediate leads, you should go with sources like Thumbtack, HomeAdvisor, or Angie’s List. Do people complain about them? Yes. But business is a game — if you follow up faster and more consistently than other contractors, you’ll win the job.
But again, it comes back to tracking. You need to track leads, how many appointments you set, and how many jobs you close from those leads. Referrals are great, but you should separate them out and specifically track marketing performance.
Here’s an example:
- 30 leads
- 10 appointments set (33% set rate)
- 1 closed job (10% close rate)
That works, but what if you improved those numbers? Let’s say you increase your set rate to 50%, so now you’ve got 15 appointments. Then you improve your close rate to 20%. Now you close 3 jobs instead of 1.
That’s an extra $60k in sales, bringing your total to $100k a month. At $7.5k gross per job, that’s $37.5k gross profit. Subtract $18.5k overhead (maybe you hired an assistant) and $3k marketing, and you’re left with $16k net profit.
Would you like $16k net profit a month? That’s what happens when you track your numbers and improve them.
Once you start tracking leads, set rates, and close rates across different marketing sources, you’ll see which ones produce the best ROI. That’s how you take control of your business and know exactly what needs to be improved.
Thanks for watching. Hopefully this was helpful. Subscribe to the channel, hit the notification bell, and I’ll see you in the next video.