Many contractors believe that pay-per-click advertising is a waste of money, that it’s not a viable long-term strategy, and that it simply doesn’t work.
These beliefs are only true for contractors who don’t understand their numbers.
Knowing your numbers is the single most important factor for making PPC advertising work for your business. In this guide, we’ll help you figure out those key metrics so you can decide, with certainty, whether or not PPC is the right marketing tactic to help you grow.
By the end of this article, you will have a clear understanding of your business’s financial health, allowing you to either:
- Confirm that you have the right numbers to grow profitably with PPC.
- Or, identify exactly what you need to improve to make it a powerful lead-generation tool.
Here is your straightforward guide to profitable contractor advertising.
The 5 Essential Steps to Profitable PPC Campaigns
Step 1: Calculate Your Average Ticket Price
Your journey to profitable PPC starts with understanding your average ticket price.
If you sell a single product at a fixed price, this number is straightforward. If you offer a variety of services, like asphalt, slate, and metal roofing, you’ll need to determine an accurate average.
A simple way to do this is to divide your total sales revenue from a given period by the number of jobs you completed in that same period.
For example, if you generated $1,000,000 in revenue during a quarter by installing 54 new roofs, your average ticket price is approximately $18,500 ($1,000,000 ÷ 54).
Pro Tip: Average Ticket Price = Total Sales Revenue ÷ Number of Jobs
Step 2: Determine Your Average Profit Margin
Next, you need to calculate your average profit margin per job.
This is the profit you make after subtracting all related costs, including labor, equipment, materials, and overhead. If your profit margins vary from job to job, be conservative and use an average that reflects your most common projects.
Pro Tip:Average Profit Margin = Total Profit – Total Costs
Step 3: Know Your Sales Closing Rate
Most contractors overestimate their sales closing rate. They might believe they close one in every three leads, but the reality is often closer to one in five or six.
To find an accurate sales closing rate, follow these steps:
- Tally up all new leads from the last 90 days.
- Subtract any referrals, as their closing rates are typically much higher and can skew your numbers.
- Count how many of the remaining leads became paying customers.
For example, if you generated 152 non-referral leads in 90 days and closed 38 of them, your accurate closing rate is 25% (38 ÷ 152).
Pro Tip: Sales Closing Rate = Signed Customers ÷ Total Leads (excluding referrals)
Step 4: Figure Out Your Average Cost Per Lead
This is a crucial metric, especially if you’re new to pay-per-click advertising. The average cost per lead varies significantly across industries and regions.
The good news is that your cost per lead is a number you can directly influence by optimizing your campaigns.
To calculate your current average, simply divide your total annual marketing spend by the number of new leads you generated in that same period.
Pro Tip: Average Cost Per Lead = Total Marketing Spend ÷ Total New Leads
Step 5: Decide on a Monthly Ad Budget
Finally, you need to determine how much you are willing to spend each month on PPC to generate leads.
The key is to start with a comfortable amount and then adapt as you see results. Over time, you’ll discover a predictable cost per lead that allows you to remain profitable.
From there, you can scale your monthly budget as long as your campaigns continue to deliver leads at or below your target cost. We have clients with unlimited budgets because they know their numbers, and the math consistently proves a profitable return.
The Bottom Line: Your Path to Profitable PPC
Effective contractor advertising is all about seeing your ad spend as an investment, not a cost.
The goal is to invest a dollar in ads and get enough in return to cover your costs and generate a strong profit. If you can achieve this, you can:
- Spend more on ads.
- Generate more leads.
- Close more sales.
- Make more profit.
- And ultimately, grow your business.
By knowing your numbers, you transform PPC from a gamble into a predictable growth engine that can help you book up to 5X more jobs.
