LSA for Contractors and Its Potential for Your Business
How to Set Your Budget for LSA
How much should your company invest in Local Services Ads? Your LSA budget should be based on the services you want to sell, the market where you compete, and your team's ability to handle new requests.
It’s the first question almost every contractor asks—and also the one that’s easiest to answer incorrectly. A figure based on what “the neighbor spends” or what “sounds reasonable” says nothing about your business. What does work is building the number from the inside out: what you sell, how much profit you make, and how many opportunities you can handle effectively.
Distinguish between guidelines and administration
This breakdown refers to advertising spend on Google. If you hire an agency, setup or management fees are a separate expense. Ask for a proposal that details both amounts, their time frames, and what the management services include. This allows you to know the total cost before you begin.
Mixing these two concepts is a common source of confusion. The campaign is what’s designed to generate leads for your ad, and, according to Google’s documentation, you’re charged when you receive a lead [2]. Fees are the payment for the work involved in setting up and maintaining the account. If the proposal combines both into a single figure, ask them to break it down.
Before signing, it's important to be clear about the following:
- What is the amount of the advertising investment, and over what period is it allocated?
- How much are the setup fees, if any, and are they a one-time charge?
- How much are the management fees, and how often are they charged?
- What exactly does the management service include: lead review, adjustments, reports, and support.
Work with scenarios
The cost per lead can vary depending on location, service, contact type, and bid settings [1]. To estimate a scenario, divide your ad spend by a benchmark cost per lead derived from your market or account data. The result serves as a guide for planning; actual performance must be validated through the campaign.
An example with illustrative figures (these are not actual costs from any market) shows why it makes sense to think in terms of ranges rather than a single number:
| Scenario A | Scenario B |
Advertising spending | $2,000 | $2,000 |
Cost per referral lead | $40 | $60 |
Estimated leads | 50 | alrededor de 33 |
With the same investment, a higher cost per lead reduces the expected volume. That is why planning is based on a range and validated through the actual campaign [1].
Google also clarifies that the platform does not promise a fixed price or volume. With the target cost-per-lead option, for example, each lead may cost more or less than the target, and the system attempts to keep the average close to that figure [3]. Furthermore, it notes that it takes about two weeks for the results to become more accurate as the system learns about your business [2]. The first month is not enough to make a judgment.
What bidding options does Google offer?
La forma en que configures la puja cambia cómo se reparte tu presupuesto. Google describe tres modos [2]:
Maximize leads | Automated bidding: Google sets the bid to get the most leads within your budget. This is the option Google recommends [2][4]. |
Cost per Target Lead | Automated, with an optional average cost-per-lead target. You can use Google's recommended target or set your own [2][3]. |
Maximum per lead | Manual bidding: You set the maximum amount you're willing to pay for a single lead [2]. |
Google states that the number of leads you can expect depends on the bidding mode, the bid amount (in target or cap modes), and the budget, and that a higher budget can result in more leads [2]. For “Maximize Leads,” it recommends a budget that allows for at least 10 leads per week [2].
Keep in mind that Google's documentation is inconsistent when referring to the budget period: some pages mention a weekly budget, while others mention a monthly budget [2][3]. Before you start planning, check your account under “Profile & budget” to confirm which period applies to your settings.
Link your contacts to your profitability
Consider how many inquiries you can respond to and how many quotes you can prepare. Then compare that investment to the jobs you’ve actually closed and their profit margin. A high-value service and a maintenance service may require different business expectations.
A systematic way to do this is to follow the entire chain, from the contact to the margin:
- Estimated leads: advertising spend divided by the cost per referral lead.
- Leads you can handle: How many can you respond to in a timely manner with your current team?
- Possible quotes: How many can you prepare and send while maintaining quality?
- Completed jobs: How many turn into projects, based on your history.
- Profit Margin per Job: How much profit each type of service generates after costs.
Ultimately, the bottom line is simple: what you invested in advertising and management versus what the completed projects brought in. A high-ticket service may justify a higher investment per lead than a recurring maintenance service with a lower margin, which is why it’s not advisable to apply the same expectations to all services.
What else influences how many contacts you receive?
The budget doesn't work on its own. Google points out that the likelihood of your ad generating a lead is one of the factors in the auction, so how you manage your leads can affect your ad's position [4]. Among its recommendations are:
- Respond quickly: Your average response time can be displayed for message-based leads, and Google notes that responding quickly can increase customer interest [4].
- Activate text-based leads: According to Google, they typically cost less than call-based leads and allow you to capture leads when you can't answer the phone [4].
- Pay attention to reviews: Google recommends having at least 5 reviews [4].
- Clearly define your services and service areas: select all the types of work you do and define broad service areas, such as an entire county [4].
This reinforces the central idea: a larger budget doesn't always mean better results if the attention, reviews, and configuration aren't up to par.
Before increasing the budget
Before increasing the budget, check to see if you're capitalizing on current opportunities and what's happening with them. That information helps you decide whether it's better to increase your investment or improve your sales efforts first.
Ask yourself three simple questions: How many of your current leads did you respond to on time? How many received a quote? How many were closed? If the answer to the first question is already “few,” adding more leads will only increase the number of leads you’re not following up on.
More funding won't fix a process that isn't yet ready to handle what's already coming in.
Common Mistakes When Setting a Budget
- Set the figure based on what other companies are investing, rather than on what your operation needs.
- Combine advertising spending with management fees.
- Plan using a single cost per lead rather than a range.
- Judging the results before the system has had time to learn.
- Increase the budget without reviewing how many current contacts are being handled.
- Applying the same standard to margin and value services that are very different.
Frequently Asked Questions About the LSA Budget
References
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