Marketing notes · For local service businesses
The Cost of Marketing Calculator
One number that tells a service business whether its marketing is paying for itself, and how to work it out in an evening.
The number
Cost of marketing is everything spent on marketing in a year, divided by sales in that same year. Out of every dollar that came in, how many cents went to making the phone ring. It is the one marketing number an owner can carry in his head, compare year to year, and use to judge any vendor, because a vendor either moves it or does not.
What counts as marketing spend
The total is easy to get wrong, because the spend is scattered. Count all of it.
- Every agency, freelancer, or consultant invoice
- Listing and lead-seller fees (Angi, HomeAdvisor, Thumbtack, and the local ones)
- The website: hosting, the domain, the builder subscription, the person who maintains it
- Truck wraps, yard signs, uniforms with the logo, door hangers
- Direct mail, radio, television, print
- Sponsorships, booths, chamber events, the little league banner
- Software nobody opens: the CRM tier, the review tool, the scheduling app’s marketing add-on
- The share of any employee’s time spent on marketing, if someone in the office does it
Leave out the sales team’s pay and the cost of doing the work. Those are the cost of selling and the cost of delivery, and mixing them in makes the number useless. Use the same twelve months for both figures; a calendar year works unless the busy season straddles January, in which case a season-to-season year is more honest.
Three worked examples
The table below runs the same arithmetic at three sizes. The figures are illustrations, not benchmarks, chosen to show how the percentage moves.
| $1,000,000 in sales | $120,000 spent | 12.0% |
| $3,000,000 in sales | $210,000 spent | 7.0% |
| $5,000,000 in sales | $275,000 spent | 5.5% |
Reading the result
A service business that is holding steady typically lands between 5 and 10 percent. That range is an operating standard from the author’s years running marketing for a Northwest Ohio home services company, not a published survey, so treat it as a working range. A shop in a growth year will sit above it on purpose, and a shop coasting on referrals will sit below it, sometimes for years, until the referrals age out with the customers who made them.
The chart below shows what marketing executives at US companies report spending, by company size, for a sense of scale. Smaller companies report a larger share of sales going to marketing, and their figure includes their own salaries, so it is a reference point rather than a target.
Smaller companies report spending a larger share of sales on marketing.
Source: The CMO Survey 2026 (Duke University, Deloitte, American Marketing Association), page 53; 308 marketing leaders at for-profit US companies, surveyed January 2026; marketing expenses as a percent of company revenues. The lighter row is this guide’s working range, on the same scale.
The number that matters more
Cost of marketing for the whole company tells an owner whether the total is reasonable. Cost of marketing by source tells him what to do about it. That requires tagging each job with where it came from, which is a separate job and the reason the tracking comes before the hiring. Once it exists, the same division runs per source. The table below is what it looks like for a shop that spent $210,000 to sell $3,000,000, with illustrative figures.
| Referrals and repeat | $12,000 | $900,000 | 1.3% |
| Google listing and website | $48,000 | $1,050,000 | 4.6% |
| Trucks, signs, and mail | $30,000 | $450,000 | 6.7% |
| Lead sellers | $120,000 | $600,000 | 20.0% |
The whole-company number, 7 percent, looks fine. The last row is the decision. Nothing in the whole-company number would have found it.
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