Determining a Marketing Budget for a Construction Company

A quick Google search and you'll find different opinions and guidelines for the percentage of revenue required to support a marketing budget for a construction company. Here, we remove the vagueries and give you something concrete to start with.

Maximizing Your Construction Company’s Marketing Investment

In the dynamic world of construction, determining the ideal marketing budget for a construction company is a complex task. Do you need marketing? What should you spend it on? How will you know what’s working? How much should you spend each month? There’s a lot to consider.

Therefore, finding a tailored, effective strategy for your construction company requires a nuanced approach. In the content below, we’ll lay out some practical steps and considerations to ensure your marketing investment not only aligns with your financial capabilities, but that it also propels your business towards its strategic goals.

Understanding the Marketing Budget Landscape

Construction Industry Benchmarks and Considerations

The Small Business Administration suggests allocating 7%-8% of your revenue to marketing if your annual earnings are below $5 million. This is a vague number that, in the context of the construction industry, offers little to no strategic insight. So, we look to a more trusted source for marketing spend statistics.

Construction companies are categorized in the B2B-Services economic sector. According to the 2023 CMO survey, the B2B-Services sector is spending 10.3% of their revenue on Digital Marketing. But when this sector is broken down further, the Construction industry is only spending about 3% of its revenue on Digital Marketing. And that number may even be too high when revenue is over the $5M mark.

Additionally, of that 3% budget, the construction sector is spending 14.9% – 18.8% of its marketing budget on social media alone (this includes LinkedIn, Facebook and Instagram). Because of the rise of social media platforms and mobile devices, traditional advertising spend is taking a significant hit. Almost gone are the days of printed postcards, flyers, tv and radio spots for returns on your investment. We are partial to a big billboard here and there, though!

Keep in mind, that your marketing budget should be based on the (attainable) goals for your revenue, not your existing revenue.

How to Determine a Realistic Budget

If you’re trying to determine the marketing budget for your construction company, there are several things to consider. And while only you can truly know how much to spend, there are several guidelines that will help you get there. So, below, we outline more details about how to determine your marketing budget and where it should be spent. Let’s jump into the specifics of the construction industry and your company’s unique position within it.

The Role of Revenue and Profitability

Your company’s annual revenue provides a starting point for budget planning. While a simple 3% investment of revenue into marketing works for the construction industry overall, a more refined strategy involves considering your desired revenue growth and the necessary customer acquisitions to achieve this target. For instance, understanding the number of large and small-scale projects required to meet your yearly goals can offer a clearer perspective on your marketing investment needs. Those marketing dollars can then be strategically directed toward helping reach those goals.

Analyzing Current Expenditures

Evaluating your current marketing spend relative to annual revenue offers insights into your existing strategy’s effectiveness. In a competitive sector like construction, a budget that’s too conservative might hinder lead generation and brand visibility, while an excessive spend could strain your financial resources without guaranteeing proportional returns.

Key Factors Influencing Your Marketing Budget

Industry Presence: Your market position and expansion ambitions significantly impact your budgetary needs. A well-established construction company might require a less aggressive budget compared to a newcomer aiming for rapid market penetration.

Profitability: A higher profit margin allows for greater flexibility in marketing spend, enabling more aggressive customer acquisition tactics.

Company Revenue: The scale of your operations and the revenue you generate influence your marketing budget. A percentage-based approach needs to be adjusted according to the size and financial health of your business.

Target Markets: Your specific market segment dictates your marketing approach and budget. High-competition areas might necessitate a larger budget to stand out. For example, we’re writing from the Charleston, South Carolina area. If you’re a general contractor or specialty subcontractor in the region, a small budget may make it no easy task to lead the pack considering the amount of competition here. In comparison, the budget needed here to lead the pack would seem small in locations like New York or Boston.

Lifetime Customer Value (LCV): This handy standard measures the total revenue a business expects to generate from a single customer over the entire course of their relationship. A budget should consider the LCV of your clients. Higher LCV allows for increased marketing spend, knowing that customer retention will offset initial acquisition costs.

For example, at Studio Barn Creative, we recently had a client tell us “What you’re doing is working. We were aiming for attention from (ideal client) and they called us, said they saw what we’ve been doing, and asked us to bid on a $1MM+ job“. Ultimately, this client won the job, too. The potential LCV here is off the charts. For them, it’s been money well spent.

Crafting Your Ideal Marketing Budget

Setting Realistic Goals

Establishing clear, achievable goals is the first step in defining your marketing budget. Whether it’s increasing revenue, enhancing brand awareness, or driving more leads, your objectives should guide your financial planning.

Incremental Adjustments and Monitoring

Start with a baseline percentage of your revenue, then adjust based on the unique factors affecting your business. For companies venturing into new markets or aiming for significant growth, an initial increase in the marketing budget is advisable, with ongoing adjustments based on performance and market feedback.

Ensuring Flexibility and Responsiveness

A successful marketing strategy requires agility. Be prepared to modify your budget in response to market changes, competitive pressures, and the effectiveness of your current marketing initiatives.

Try the 70-20-10 Rule

Navigating your marketing budget without formulating a strategic plan is a common misstep. Many people start using tactics (e.g., social media) before they have a goal, objective or strategy in place. Try adopting the 70-20-10 rule for budgeting: allocate 70% to reliable strategies, 20% to new growth tactics, and 10% to experimental approaches.

Reliable and effective strategies include enhancing your website, optimizing SEO, creating engaging content, and leveraging social media.

New growth tactics may include email automation and seasonal promotions.

Or, try experimenting by focusing more on persona-based email automation.

This 70-20-10 approach ensures a balanced, goal-oriented marketing plan.

Leveraging Expertise for Maximum Impact

If your marketing efforts are not yielding the desired results, it’s crucial to reassess your strategies and possibly seek external expertise. Partnering with marketing professionals specializing in the construction industry, like Studio Barn Creative, can bring fresh perspectives and innovative approaches to your campaigns.

Leave Room for the Non-Digital Marketing Pieces, Too

While digital marketing is getting the lion’s share of a marketing budget these days, remember to leave room in your marketing budget for items like:

  • Branded Apparel
  • Equipment Wraps and/or Signage
  • Client Gifts
  • Events (Career Fairs, Job Fairs, Community Events)

Conclusion: Determining a Marketing Budget for a Construction Company

Determining the right marketing budget for your construction company is a dynamic process that combines industry insights, company-specific factors, and ongoing performance analysis. In the construction industry, a good rule of thumb is 2-3% of your revenue. By adopting a strategic, flexible approach, you can ensure your marketing investment effectively supports your business goals, drives growth, and enhances your competitive edge in the market.

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