Stop Spending 10% On Marketing Blindly

We bust the “10% of revenue on marketing” myth and explain why that advice can crush profit when it’s used without context. We use GP to CAC as the simple growth compass that tells us when marketing spend is smart and when it’s just burning cash.
• why a fixed marketing percentage can wreck profitability 
• the GP to CAC metric and the simple formula to calculate it 
• a clear example of gross profit per job vs acquisition cost 
• benchmark targets for outbound growth campaigns at 3:1 
• benchmark targets for inbound channels like SEO and referrals at 5:1 
• the low-spend exception for GC-fed work and commission-based CAC 
• red flags when the ratio drops below 3:1 and what it usually means 
• why we fix pricing, margins, and acquisition strategy before scaling 
• how strong GP to CAC unlocks hiring sales reps and increasing ad spend 
If you want the full framework for profitability, cash flow, debt, owner pay, and growth, grab the book for free by clicking the link in the description. Just cover the shipping. 
If this video helped, watch my next video on four numbers that every painting business owner must know to scale profitably.

This episode was originally recorded as a video for YouTube.

If you hear me say things like “in this video” or reference visuals, don’t worry —
the content still works perfectly in audio form.

And if you ever want to watch the video version, you can find it on the
 Profitable Painter YouTube channel.

https://www.youtube.com/@BookkeepingForPainters

Transcript

SPEAKER_00 0:00

In this video, I'm busting one of the worst growth myths in the painting industry that you should automatically spend 10% of revenue on marketing if you want to grow. If you clicked on this video, you're probably wondering three things. Should I really spend 10% on marketing? How do I know whether my marketing is actually profitable? And what number should I check before

The 10% Marketing Myth

SPEAKER_00 0:20

I spend another dollar? If we haven't met, I'm Daniel Honan. I'm a CPA and former painting business owner. I've helped over 500 painting businesses from a startup to 20 million in revenue, know their numbers, and save big in tax. I was at the PCA Expo recently, which by the way is a great event for owners who want to grow. And I overheard several owners saying something like this if you want to grow, you should expect to pay 10% on marketing. And look, there's some truth to that. If you want to grow aggressively, especially if you're trying to create real demand, build awareness, and keep leads flowing, you may need to spend around 10% on marketing. But here's the problem taking that advice without any context can absolutely wreck your profitability because spending 10% on marketing is not automatically smart. It's only smart if your numbers support it. Before you increase your marketing spend to hit some arbitrary percentage, you need to review one of the most important growth numbers in your business, your GP to CAC ratio. Quick pause. If this is the kind of thing that you want to get better at, that is exactly why I wrote my book, Profitable Painter. It is specifically built for painting business owners who want to

GP To CAC Explained Simply

SPEAKER_00 1:27

scale without profit leaks, cash surprises, and financial guesswork. If you want the full framework for profitability, cash flow, debt, owner pay, and growth, grab the book for free by clicking the link in the description. Just cover the shipping. GP to CAC stands for gross profit to customer acquisition cost. This number tells you how efficiently you turn your marketing and sales spend into gross profit. The formula is simple. Gross profit divided by customer acquisition costs equals GP to CAC. Here's an example. Let's say your gross profit per job is $4,500 and it costs you $750 to acquire that customer. And that includes marketing spend and sales commissions per job. So $4,500 divided by $750 gives you a six to one GP to CAC ratio. And that is excellent. Now here's how you should think about the benchmarks. If you're pursuing aggressive growth through outbound marketing, like poll calling, door knocking, direct mail, or lead buying, your costs are usually higher and your conversion rates are usually lower. In that case, I want to see at least a three to one GP to CAC ratio. That's a reasonable floor if

Benchmarks For Outbound And Inbound

SPEAKER_00 2:36

you're in growth mode and intentionally reinvesting hard into customer acquisition. But if you're growing mostly through inbound marketing, things like SEO, Google reviews, referrals, and word of mouth, your lead should be warmer and cheaper. In that case, I want to see at least a five to one GP to CAC ratio. Because if you're getting mostly warm leads and still not producing strong profit per acquired customer, something is off. Now let's talk about an exception because this is important. Let's say you're a contractor-based painting business and you rely heavily on general contractors to feed you work. You may spend almost nothing on marketing. In that case, your acquisition cost may mostly be sales commissions. So imagine

Low Marketing Spend Exception

SPEAKER_00 3:21

this: you do a $10,000 job, your gross profit is 35%. So that's $3,500. You pay a sales rep 7% commission. So your customer acquisition cost is $700. That gives you a GP to CAC ratio of five to one. That means even with a relatively modest gross profit margin, you can still be in a healthy position because your acquisition cost is so low. And that's the key insight. You can operate profitably with lower margins if your CAC is extremely low. And that's often true for businesses with repeat GC relationships, strong referrals, or organic lead flow. Now, here are the red flags. If your GB to CAC ratio is dipping below three to one, something is broken. Usually it means one or more of these things are happening. You're overspending on leads that don't close, you're underpricing jobs and leaving profits on the table, you're paying too much in commissions or bonuses, you're getting too few jobs per campaign, or you're

Red Flags And What To Fix

SPEAKER_00 4:21

booking low gross profit jobs just to keep the guys busy. If that's you, do not scale yet. Do not throw more money into marketing just because somebody said 10% is normal. Pause. Dial in your pricing, dial in your margins, dial in your acquisition strategy. Then scale. Because once your GP to CAC ratio is consistently five to one or better, now you've got options. Now you can confidently increase marketing spend. Now you can hire sales reps to convert more leads. Now you can launch outbound campaigns knowing they have a real shot at paying off. Now you can reinvest in branding, SEO, or Google Ads without wondering whether you're just burning cash. And that's why I say GP to CAC is your compass for growth. Your gross profit per job is your fuel. Your customer acquisition cost tells you how efficiently you're getting that fuel. Track this monthly, improve it continuously. Because when this ratio is dialed in, you're not just getting

When To Scale Marketing Confidently

SPEAKER_00 5:18

more work, you're building a scalable, profitable machine. So here's the takeaway the myth is that you should spend 10% on marketing to grow. The truth is, maybe, but only if your GP to CAC ratio supports it. If you're outbound heavy, aim for at least three to one. If you're inbound heavy, aim for at least five to one. And if you're below that, don't spend

Final Takeaway And Next Video

SPEAKER_00 5:42

more, fix the machine first. Don't use a rule of thumb as a growth strategy. Use your numbers. If this video helped, watch my next video on four numbers that every painting business owner must know to scale profitably.