Wizard of Ads™ · Home Services

Ad Budget Calculator

How much should an HVAC, plumbing, or electrical company spend on advertising?

Projected Annual Revenue $1,000,000
Total revenue across all service lines
Profit Margin 48%
Markup: 92.3%
This formula requires markup, not margin. Most home service company owners know their margin but never their markup. They sound similar but produce very different numbers.
Margin is gross profit as a percentage of what the customer pays.
Markup is gross profit above cost, as a percentage of your direct costs.
Example — A Service Call
1
You charge the customer
$350
2
Your direct costs (parts, labor, truck roll)
$175
3
Gross profit on that call
$175
→
Margin = $175 ÷ $350 customer charge
50.0%
→
Markup = $175 ÷ $175 direct costs
100.0%
Same $175 profit — but 50% margin vs. 100% markup. The difference matters when calculating your ad budget.
Your Numbers
1
Annual Revenue (what customers pay)
2
Direct Costs (parts, labor, materials)
3
Gross Profit
→
Your Margin = Gross Profit ÷ Revenue
→
Your Markup = Gross Profit ÷ Direct Costs
Formula: Markup = Margin ÷ (1 − Margin)
Annual Cost of Occupancy $36,000
Shop or warehouse rent — rarely seen by your customers

Your Ad Budget

Minimum
$56,300
$4,692/mo
Maximum
$74,760
$6,230/mo
Your cost of occupancy has consumed most or all of your exposure budget. For most home service companies, this is unusual — your shop or warehouse does almost no advertising for you, which typically means more budget should go toward advertising, not less. Double-check your margin and projected revenue.
1a
10% of projected revenue
1b
12% of projected revenue
2
Margin → Markup
3a
3b
4a
4b
Cost of Exposure Breakdown

Where your total exposure budget is allocated

"A business with a good sign in a high-visibility location will need to advertise significantly less than a similar business in an affordable location."

— Roy H. Williams, The Wizard of Ads

This is why home service companies typically need to advertise more aggressively than retail businesses. Your shop is in an industrial park — nobody drives by and thinks "I need to call a plumber." Your advertising has to do all the heavy lifting that a storefront location would do for a retailer.

 

Craig Arthur

Wizard of Ads Australia

Call +61 0417780882 or Send Me An Email