How Much Should My Construction Company Spend on Marketing?

Mackenzie | August 10, 2021 | Construction Marketing

How much should you spend on your construction company's marketing budget? 
It doesn't matter where you look, everyone has a different answer. 

Average Marketing Budget for Construction Companies: The Numbers Breakdown

Some like to quote  the Small Business Association who suggests that companies should budget between 7%-8% of revenue, as long as you make less than $5 million and have a profit range of 10%-12%.

But what if you make more than $5 million a year? That's not super helpful. Others like to say, "somewhere between 7%-12%" which is actually a pretty big range, so again, not super helpful. If you're trying to figure out what your construction company's marketing budget will be, I'm sorry to say no one's going to do that homework for you. But I will give you all the information you need to make that homework as easy as possible.

What other B2Bs and Construction companies are doing:

  • The 2021 CMO Survey — One of the most trusted sources for marketing spend statistics, the 2021 CMO survey reported that B2B companies delivering a product spent an average of 10% of their revenue on marketing. B2B companies with a service (like construction, for example) spent an average of 15.5% of their revenue on marketing.

  • That said, the study further breaks those percentages down by industry, which show Mining and Construction spending just around 3% of their revenue on marketing. Wayyy less than the rest of the industry average.

So, what's a construction company to do? No one wants to give a clear answer about how much you should spend, so let's take a good, hard look at the math you'll have to do to make this decision for yourself.

How to Determine Your Construction Company's Marketing Budget

Settling on a budget for your construction company's marketing efforts is tough. There's no way around it. Too much, and you're going to get some heat from those at the top. Too little, and you won't have leads coming in. Where to start? Let's look at a few hard numbers you know to arrive at that marketing budget number you don't know yet.

01. How Much Does Your Construction Company Make Annually?

What's your yearly revenue, on average? This number shouldn't be too tough to come by, and will give you a better idea of where to go. It's true that many companies set their marketing budget as a percentage of annual revenue, and that's not a bad way to go. This method ensures your marketing team always gets a budget that's commensurate with what the company is earning. But it's not the only way to calculate a construction company's marketing budget.

02. How Much Do You Want to Make?

If the percentages are giving you a headache, I'd encourage you to look at your marketing budget this way:

  • What's your growth goal for the year? What's that revenue number your boss said the construction company wants to hit?
  • Okay, now break that growth number into customers.
  • How many closed-won sales do you need to make that goal?
  • Let's say you need to close 10 more large scope projects, and 20 more small-scope projects this year to reach your construction company's revenue growth goal.
  • Now, you just have to determine what your average cost per customer is, add 'em up, and there you go — marketing budget set.

Check out our blog: How to Determine Your Marketing Goals and Budget for a more in-depth, step-by-step breakdown of this method of calculating a marketing budget.

Wait — what if I don't know what the average cost-per-customer is for my construction company? It's back to the percentage math for you! Which, again, is a totally normal and very common way to calculate a marketing budget. It's just going to take slightly more thinking.

03. What Does Your Construction Company Currently Spend on Marketing?

Like I said, your construction company's marketing budget is probably a percentage of the company's annual revenue. Start by figuring out what that is — you might already know it. Once you have that percentage in hand, assess how your marketing efforts are performing. If you're reading this blog, I'm willing to bet it's not delivering on everything you'd hoped for. That's okay.

Construction is an increasingly competitive market. If your company has been working with a 1%-2% of revenue budget for years, it's likely that isn't cutting it anymore. If any of your goals have to do with:

  • Increasing revenue
  • Increasing brand awareness
  • Drawing in more leads
  • Improving your company's website

Then an increase to your marketing budget is warranted. Take a look at your construction company's growth goals for the year, and try to boost your marketing budget accordingly.

04. Consider 5 Key Factors that Play Into Your Construction Company's Marketing Budget

Boosting your construction company's budget isn't as simple as deciding on a percentage of your overall revenue. There are a few additional factors that may suggest you bump that budget up a little higher, or even lower it a bit. Here are 5 key factors we like to assess when we connect with our clients in construction:

01. Industry presence
Your construction company's marketing budget can fluctuate up or down depending on your company's presence in the market or your goals to break into new markets. If your reputation is good, your digital presence is strong, you won't need a budget as aggressive as a company that's looking to make it to the top. As with anything, maintenance is easier than growth.

02. Profitability
If you're calculating your construction company's marketing budget based on revenue, profitability is something to consider. The more profitable your company, the more you can afford to spend on marketing, knowing that all that money you spend is coming right back to you in the form of closed-won sales. If your company is working on boosting profit margins, your marketing budget may have to be slimmer out of necessity.

03. Company revenue
If your company makes $1 million annually, it's not out of the question to spend around $100,000 (10% of that revenue) on marketing efforts. That seems pretty reasonable. But if your company makes $10 million annually, spending a million on marketing might seem like a lot. That's one of the reasons calculating your marketing budget as a percentage can be tough. 10% for one construction company is vastly different for another depending on your company size, location, services, and the revenue you make.

04. Target markets
Every construction market is a little different. Let's say your company only works on massive, enterprise-scale projects, and you do say 10 of them a year, tops. The way you market to those clients, and the cost of those efforts is going to be significantly different from a construction company that builds mid-sized apartment buildings. A simple breakdown of this one? The greater the competition, the bigger your budget.

05. Lifetime Customer Value
Your construction company's marketing budget should account for the lifetime value of a customer. If your clients are sticky, and tend to come back for future projects and keep sending money with your construction company, you have the room to spend a little more on marketing. You know that even if your cost per conversion is a little higher, those customers are worthwhile and will give that money right back to you if you can just reel them in.

How do you break all of these factors down? Let's run through an example. Let's say you're a mid-sized construction company looking to break into a new, niche market. Here's how you might approach your new marketing budget, taking all of those factors into account. Starting with 10% of total revenue, they'll adjust their budget like this:

+ To break into that new market

+ To grow their company

- They're not super profitable on this new project type yet

- They don't know the lifetime value of these customers yet

+ This is a company priority, so they're willing to spend a little more to win

In all, this company is going to boost their marketing budget, but they want to be careful about how much they boost that number, especially considering the unknowns this new market carries. A slight boost will get them into the market. As they discover how this new market performs, they can better tailor their marketing efforts and boost that budget.

What if My Marketing Budget Doesn't Deliver Results?

Get a new provider. Seriously. If you've taken the time to do this work, and have set a marketing budget that seems reasonable, you should at least be seeing some results.

Depending on where you work in the construction industry, you might have some challenges, especially if you're in a more competitive market, but you should at least have some data to show how even smaller investments are starting to move the needle.

If your marketing strategy is dead in the water even after boosting your budget, it's time to look at what marketing strategies your construction company is implementing and why. At this point, you need to be calling in experts. You worked hard to make that money and set that marketing budget. Now you need to make sure that money is allocated in the ways that will deliver the greatest long-term results.

Not sure where to start?

We've got answers. Check out this Complete Guide to Marketing a Construction Company or just get in touch with the Evenbound team for more info. We work with construction companies daily to deliver the qualified leads you're looking for.

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