The 5x rule: how much a contractor should spend to win one job
A simple rule to set your marketing budget per job, per sit-down and per lead from your own ticket, margin and close rate, with worked examples for roofing, HVAC and remodeling.
Remodeled kitchen with white cabinets, dark island and stainless appliances. Illustrative photo: Lotus Design N Print / Unsplash
The 5x rule says that everything it costs you in marketing to win a job should stay under one fifth of the gross profit that job brings. If a job leaves $5,000 in gross profit, you can spend up to about $1,000 in marketing (ads, agency, leads, everything) to win it, and still make five times what you spent.
It is a planning rule, not a law. But it turns vague questions like “is $150 a lead expensive?” into clear answers based on your own numbers.
The formula
- Gross profit per job = average job × gross margin.
- Max marketing per signed job = gross profit ÷ 5.
- Max marketing per sit-down = max per job × close rate.
- Max per lead (optional) = max per sit-down × the share of leads that turn into sit-downs.
Try it with your own numbers in the calculator.
Worked examples
These are examples to show the math, not industry averages.
| Trade | Average job | Margin | Gross profit | Max per job (5x) | Close rate | Max per sit-down |
|---|---|---|---|---|---|---|
| Roofing | $14,000 | 35% | $4,900 | $980 | 30% | $294 |
| HVAC replacement | $12,000 | 40% | $4,800 | $960 | 35% | $336 |
| Kitchen remodel | $45,000 | 30% | $13,500 | $2,700 | 25% | $675 |
Why five?
At less than 5x, the marketing eats too much of the profit once you count overhead, callbacks and warranty work, and owners feel it. Between 5x and 10x most companies are comfortable and keep investing. Above 10x they usually want more volume. Five is a sensible floor for planning.
How to use it
- Compare offers. Turn any pricing (per lead, per appointment, retainer) into cost per signed job and check it against your 5x ceiling.
- Set targets. Give your marketing a maximum cost per sit-down, not a vague “get us more leads”.
- Fix the right thing. If your cost per sit-down is over the ceiling, the problem might be the ads, but it is often follow-up speed or show rate. See response time and show rate.
How Booked Contractor uses the 5x rule
We set each client’s price per sit-down from their real ticket, margin and close rate so they make at least 5 times what they spend with us, ads included, and we review it after 30 days with real numbers. See pricing.
Related: Pay per lead vs pay per appointment · 5x rule calculator
David Sierra is the founder of Booked Contractor. In 10+ years of digital marketing and lead generation he has worked with 300+ clients, generated thousands of qualified sales calls and invested more than US$30M in ads.