Stop Measuring Marketing as a Percentage of Revenue

Every coach in this industry throws out the same number. "Spend 5% of revenue on marketing." Maybe 8% if you're growing. Maybe 3% if you're being careful.

It's an accounting metric. It works fine when you're a $50M company and the CFO needs a line item to model. It's close to useless when you're the one deciding whether to mail 5,000 postcards next Tuesday.

My first year in business I did $250,000 in revenue. I spent $60,000 on marketing. That's 24%. No investors, no cushion, a two-year-old and two-month-old twins at home, and a wife trusting me not to blow it up.

By the percentage-of-revenue rule, I was reckless. By the numbers that actually mattered, I was doing exactly what the math told me to do.

The Two Numbers That Matter

Customer acquisition cost. Not cost per lead. Not cost per click. Not cost per "form fill." What it costs to acquire a human being who gave you money.

Leads are not customers. A click is not a customer. If your CAC is built on anything softer than a completed transaction, you're measuring vapor.

This distinction matters more than it sounds. According to industry benchmarks compiled by WordStream and Rocket Fuel, HVAC contractors pay an average of $40–$90 per inbound lead on Google Ads. But lead-to-customer conversion rates vary from 20% to 60% depending on the company's close rate and call center performance. A contractor at 20% conversion is paying $200–$450 per customer. A contractor at 60% conversion is paying $67–$150. Same ad spend. Completely different marketing economics. Only one of them knows which contractor they are.

Customer value over time. Not the first ticket. The whole relationship.

Here's what mine looked like in Ohio. These are my internal numbers, not somebody's study:

• First 30 days: about $1,200
• End of year one: about $2,000
• End of year three: about $3,000

So if a customer cost me $250 to acquire, I wasn't spending $250 to make $1,200. I was spending $250 to make $3,000 over three years.

Which is why I was comfortable pushing that number to $300. I was buying a three-year annuity, not a one-time ticket. You can afford to lose money on the first transaction if you know what the fifth one is worth.

Most contractors have never calculated the second number, so they optimize the first one into the ground. They cut CAC to $80 and then wonder why they're stuck.

The Demand Is Already Sitting There

Before you spend a dollar, understand what's actually in the ground around you.

That's federal survey data, not a manufacturer brochure. The Energy Information Administration's 2020 Residential Energy Consumption Survey breaks out equipment age for the East North Central states, which is Ohio, Indiana, Illinois, Michigan, and Wisconsin.

Forty-five percent of air-conditioned homes in our region are running equipment that's already 10 years or older. One in four is past 15.

The demand isn't a mystery. It's not something you have to manufacture with a clever offer. It's sitting in the crawlspaces and side yards of half the houses you drive past.

The only question is whether your mail lands in those houses or the other ones.

How I Actually Found Them

When I started, the channel that produced the most was Google My Business. Google Maps, Google Plus, whatever they were calling it that quarter. It brought in the customers who spent the most in year one, and it was the cheapest thing I was buying.

But the channel wasn't the real unlock. The data was.

After I'd sold enough replacements, I had real detail on who was buying. So I took that customer list and enriched it. I didn't just want to know where they lived. I wanted to know who they were.

Two things fell out.

Tenure. My replacement customers clustered hard in years three through six of living in the home. Not the people who just moved in. Not the people who'd been there twenty years. The ones who'd settled in, stopped fixing the cosmetic stuff, and were now staring down a system that came with the house.

Home value. Thirty-eight percent of my replacements were in homes worth $250,000 to $400,000. And here's the part nobody expects: the $500,000-plus homes underperformed. They were a smaller share of my customers than they were of the general market.

I wasn't looking for rich people. I was looking for people with a specific problem, at a specific moment.

What That Did to My Mail

I stopped mailing zip codes. I started mailing people who were four to six years into a home, in a specific value band, with equipment old enough to be on borrowed time.

That's not direct mail. That's a scalpel.

And because I knew what a customer in that segment was worth over three years, I knew exactly what I could afford to spend to reach them. The budget stopped being a guess and became arithmetic.

That's the whole thing. That's the entire secret. I wasn't smarter than anybody. I just knew two numbers that most contractors have never sat down and calculated.

Run the Math Right Now

Upload a spreadsheet of your last 100 customers with what they spent at 30 days, 12 months, and 36 months. Enter your total marketing spend. The calculator does the rest.

The percentage-of-revenue rule tells you how much you're allowed to spend.

The unit economics tell you how much you should.

Once you know those two numbers, the budget stops being a guess. It becomes the logical conclusion of the math you just ran.

That's what let me spend 24% in year one without flinching.

Bill Brown is a former home service contractor and the founder of ServiceTitan Hacks. He ran Paramount Heating & Air in Ohio before selling the business and focusing on helping contractors use technology to grow.