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Levelling up a building increases its CPS by 1% per level and may have other benefits depending on the building, i.e. unlocking a minigame for farms, wizard towers, banks and temples.
Unlocking the minigames tends to be a priority over increasing your base dps though, as they usually have effects many times greater than the costs (depends how you use them).
In other words, until you hit the cap of 100 unspent sugar lumps (100% cps boost) spending lumps will always decrease your total CPS.
I think thats why the guides mostly recommend spending sugar lumps to unlock the minigames, then max the farm plots, then save for 100 unspent, then gradually upgrade other stuff to cap (always staying > 100 unspent)