And How Contractors Can Actually Predict ROI
Most contractors, and any business trying to scale revenue via marketing, have heard the old-school advice:
“Spend 5–10% of your revenue on marketing.”
It’s simple. It’s clean. And it’s dangerously misleading.
Because here’s the truth: Marketing spend does not scale in a straight line with revenue.
Double your spend, and you might not even come close to doubling your sales. In fact, you could spend more and see your ROI drop.
If you’ve been relying on repeat customers and word-of-mouth, the gap between what you expect and what you actually get will be even bigger.
The Law of Diminishing Returns
Marketing always starts with low-hanging fruit. Your first dollars grab the highest-intent leads, the ones already in buying mode. That’s where ROI looks incredible.
But as you increase budget, you run headfirst into the law of diminishing returns. The next dollar is rarely as efficient as the first.
Example: In a UCLA study on advertising response curves, ROI fell off hard after the initial spend. The first $10K in search ads delivered a 150% ROI. The next $10K dropped to 40%. Beyond that, returns went negative.
Why?
Your best keywords and audiences are already maxed out.
You start paying more per click or impression to reach less qualified prospects.
You expand into colder, harder-to-convert audiences.
Every channel has a saturation point. Once you’ve hit it, throwing more money at it won’t scale proportionally—it’ll just drive your cost per acquisition higher.
And here’s the nuance we often forget: part of your “current year ROI” isn’t coming from this year’s spend at all. It’s coming from customers you already paid to acquire years ago.
The longer you’ve been in business and the more you’ve invested over time, the more that historical spend compounds into repeat and referral revenue. That’s great for your bottom line, but it also means that when you look at year-to-date ROI, a big chunk of it was pre-paid years ago, and your incremental marketing is doing less of the heavy lifting than the numbers suggest.
The Base Effect Nobody Talks About
On the topic of recognizing revenue for customers you’ve already paid to acquire; If 70–80% of your sales come from existing customers, most of that will show up whether you spend on marketing today or not. That’s your baseline revenue.
Let’s say you’re a $10M contractor:
$8M repeat business
$2M new customer revenue driven by marketing
$500K current marketing spend (5% of revenue)
If you double spend to $1M (10%), your repeat customers aren’t magically going to spend $16M. The only growth opportunity is that $2M slice, and even that won’t double because of diminishing returns.
Instead of $2M jumping to $4M, maybe it grows to $3M. Total revenue moves from $10M to $11M—only a 10% lift on a 100% spend increase.
Two $10M Scenarios That Prove the Point
Take two $10M contractors. Same industry. Same decision: double the marketing dollars. But watch what happens when you factor in their starting base of repeat customers, their current ROAS, and their current spend % of revenue.
| Established Base | Smaller Base | |
|---|---|---|
| Total Revenue | $10M | $10M |
| Existing Customer Revenue | $8M | $2M |
| New Customer Revenue | $2M | $8M |
| Current Spend | $500K | $1M |
| Current Spend % | 5% | 10% |
| ROAS | 4x | 8x |
| New Spend | $1M | $2M |
| New Total Revenue | $12M | $18M |
| New Spend % | 8.33% | 11.11% |
| % Growth | 20% | 80% |
Same Move, Completely Different Results
Even in this scenario where we pretend it’s a perfect world, and calculate no diminishing returns, no drop in efficiency, ROAS holds exactly the same… doubling spend still doesn’t double revenue.
Why? Because the size of your existing customer base determines how much of your total revenue is even historically buyable through marketing.
The established contractor who has been steadily branding for years, doubles spend dollars on the same mediums but only grows from $10M to $12M — a 20% lift.
The newer contractor, already heavily invested in new customer acquisition, doubles investment and grows from $10M to $18M — an 80% lift.
Completely different outcomes—because the starting point is everything.
And that’s before we layer in reality, where ROAS almost always drops as you scale, making the gap even wider.
Why “% of Revenue” is the Wrong Way to Budget
The right number depends on:
Your Goal – The revenue gap you actually need to fill with new customers.
Your Foundation – The revenue you’d still make with $0 marketing spend.
Your Pace – How aggressively you want to grow, knowing faster growth usually means lower short-term ROI.
One contractor can hit goals with 4% spend. Another needs 10%. A startup might burn 20%+ just to get market share.
The Math That Actually Works
Find your baseline (repeat customer revenue).
Set your target (total revenue goal).
Subtract baseline from target to get the new customer revenue gap.
Use your current cost per acquisition to calculate the marketing spend needed to buy that gap.
If closing a $2M gap costs $300K in ads, that’s your number—whether it’s 5%, 15%, or 50% of revenue doesn’t matter.
Tracking: The Only Way to Prove ROAS
If you blend base business with marketing-driven sales, you’ll fool yourself into thinking your spend is working better than it is.
Track every lead source in your CRM, separate new vs. existing customers when assessing your CAC, and watch marginal ROAS by channel.
When a channel’s curve starts flattening, shift budget into one with higher marginal ROAs. That’s how you scale profitably instead of just spending more.
Marketing isn’t a vending machine. You can’t put in two coins and expect two candies.
Your customer base sets the floor.
Your market saturation sets the ceiling.
And the space in between is where marketing lives—and it’s not linear.
Budget to fill the gap, not to hit an arbitrary percentage. Track every result. Move spend where the next dollar works hardest. That’s how you scale revenue without burning budget, and exactly the scale strategy we build for our clients that helped them collectively grow an average of 40% last year, with our Moneyball Marketing framework.
