I talked to a garage door company owner in San Antonio last month who was spending $4,200/month on marketing. Facebook ads, a website retainer, an SEO company, and a print mailer. When I asked him how many leads each channel produced, he had no idea. He was writing checks because someone told him to, not because he could see results.

A week later I talked to a landscaper spending $0 on marketing. All word-of-mouth. Business was good, but it hadn’t grown in two years. He was stuck at the same revenue because he was only getting referrals from the same circle of people.

Both of these are common. Most small businesses either spend nothing or spend without measuring. The right answer is somewhere in between, and it depends on math, not feelings.

The standard rule and why it’s only half-right

The U.S. Small Business Administration recommends that businesses with revenue under $5 million spend 7-8% of gross revenue on marketing. That’s the number you’ll see quoted everywhere.

For a service business doing $500,000 a year, that’s $2,900-$3,300 per month. For a business doing $200,000, that’s $1,150-$1,330 per month.

The SBA guideline is a reasonable starting point, but it doesn’t account for two things that matter a lot: your customer lifetime value and your growth goals.

The math that actually matters

Instead of starting with a percentage of revenue, start with what a customer is worth.

A residential HVAC company in Texas has an average service call of $300-500. But if that customer signs up for a maintenance plan and calls the same company every time, the lifetime value might be $3,000-5,000 over several years. A roofer’s average job might be $10,000 with a one-time relationship.

Now work backwards. If a new customer is worth $3,000 to you over their lifetime, and you’re willing to spend 15-20% of that to acquire them, your target cost per acquisition is $450-600. If your marketing spends $2,000/month and brings in 5 new customers, you’re paying $400 per customer. That works.

If you’re spending $2,000/month and can’t attribute a single new customer to it, that’s a problem — no matter what percentage of revenue it represents.

What to spend at different stages

Under $200K revenue — spend $500-1,000/month. Focus on your Google Business Profile (free), reviews (free), and maybe one paid channel. Google Ads with a $15-25/day budget targeting your exact services and city is the highest-return paid option at this level. Don’t spread $500 across five channels. Pick one and do it well.

$200K-$500K revenue — spend $1,000-2,500/month. You should have a professional website, active Google Business Profile, a review generation system, and either Google Ads or LSA (Local Services Ads). This is where most single-location service businesses should be. You’re spending enough to compete but not so much that a bad month kills you.

$500K-$1M revenue — spend $2,500-5,000/month. Add content marketing, broader ad coverage, possibly a part-time or outsourced marketing person. At this level you should be tracking cost per lead by channel every month. If a channel can’t prove its ROI within 90 days, cut it.

Over $1M revenue — spend $5,000-10,000/month. You’re a real operation now. Multiple lead sources, possibly multiple locations, and you need someone (in-house or agency) managing it full-time. Video content, retargeting ads, and reputation management all make sense at this scale.

Where the money should go first

If I had to build a marketing budget from zero for a local service business, I’d allocate it in this order:

First $0-200/month: Google Business Profile. Completely free. Fill out every field, add photos weekly, post updates, and ask every customer for a review. BrightLocal’s 2026 data shows 87% of consumers read Google reviews before choosing a local business. This is the single highest-ROI activity for any service business. Most of your competitors have half-empty profiles.

Next $200-500/month: Google Ads or LSA. Target your specific services in your specific city. “AC repair San Antonio” not “HVAC services.” Keep the geographic radius tight. A $15/day Google Ads budget targeting high-intent searches generates 10-30 calls per month for most service businesses in mid-sized markets.

Next $500-1,000/month: Website content. Build pages for every service you offer and every city you serve. A plumber with pages for “water heater installation San Antonio,” “drain cleaning Boerne,” and “slab leak repair New Braunfels” will capture searches that a single homepage never will.

After that: everything else. Social media, email marketing, print, sponsorships — these all have their place, but only after the basics are covered. I see too many businesses posting on Instagram five times a week but haven’t updated their Google profile in six months. That’s backwards.

The one number to watch

Regardless of how much you spend, track one metric: cost per lead by channel. Every month, count how many leads came from Google Ads, how many from organic search, how many from referrals, how many from social. Divide your spend by the lead count.

If your Google Ads cost per lead is $35 and your Facebook Ads cost per lead is $120 for the same service, shift money from Facebook to Google. This sounds obvious, but I’d estimate 70% of the small businesses I talk to don’t track this at all. They’re guessing.

A marketing budget without measurement is just a donation.

Not sure if your current marketing spend is working? Get a free audit — we’ll look at what you’re spending, where your leads are actually coming from, and whether your money is going to the right places.