How Much Should A Small Business Spend on Marketing

How much should a small business spend on marketing? It is one of the most common questions we hear from small business owners, and the honest answer is, “It depends.” It depends on your company’s revenue, income goals, how profitable your services are, and how much capacity your business has to grow.

This guide walks through the numbers behind that answer: what percentage of revenue small businesses spend, how to set a budget for your stage of growth, and how to tell if that spend is paying you back. Grab a coffee and let us get into it.

The Short Answer

So, how much should a small business spend on marketing? Most healthy small business budgets fall between 5% and 12% of annual revenue. Brand-new businesses building awareness from scratch often spend closer to 12% to 20%, while established businesses with strong referral flow can often get by on 4% to 6%.

The U.S. Small Business Administration puts its own benchmark at 7% to 8% of gross revenue for companies under $5 million a year. A percentage alone will not get you all the way there, though. The sections below cover the factors that move that number for your business.

Marketing Budget as a Percentage of Revenue

One of the most common pieces of advice you will find online is a flat marketing budget based on a percentage of revenue. Marketing experts generally place that range somewhere between 5% and 25% of yearly revenue, and outside data backs that up.

The U.S. Small Business Administration recommends 7% to 8% of gross revenue for companies under $5 million a year, while Gartner’s 2025 CMO Spend Survey put the average marketing budget at 7.7% of company revenue across industries.

That is a wide range, and it depends on a handful of factors specific to your business. The sections below cover the pieces we walk clients through before we land on a number.

Small Business Marketing Budgets by Industry

Industry changes the math quite a bit. A landscaping company competing on local referrals does not need the same budget as an e-commerce brand trying to build a national audience from nothing. Here is what the research shows, by business type.

This is a simple statement and it really depends on a lot of related factors. Check out the important factors to consider below and that will help you establish a marketing budget if you don’t already have one.

Marketing Budget Based On Your Business Growth Goals

The first step to consider when nailing down a marketing budget is where you’re at with your business and where you want to go. What are the business growth goals you have for your company this year?

If you’re an established company and simply looking for slight growth in your company revenue, a smaller marketing budget. However, if you’re looking to aggressively grow your company’s revenue this year, a larger percentage is warranted.

Strategy matters here.

It matters a lot. If you’re looking to dominate a local market, it might be smarter to come out of the gates with a more aggressive marketing budget to ensure you’re capturing more of the available customers every month and maximizing sales to establish your business.

If you have a competitive edge or a unique marketing message, it can be very wise to be aggressive with your marketing budget to gain as much market share as quickly as possible before other jealous competitors copy you. If you limp in slowly with a small marketing budget you run more of a risk of competitors copying your messaging before you can reach enough people.

Capacity To Grow

If you want to grow, you also have the capacity to grow. Good marketing creates operational problems in business. If however, you have the team (or can scale your team quickly), the only limit to how fast you can grow is your marketing budget.

If you don’t have the right team members and have a hard time filling important employee roles in your business, you might have to be a little more strategic with how fast you scale your marketing budget. Many of our clients increase their marketing budget in small steps and hire along the way.

Once again, there’s no one right answer to what you should invest in your marketing budget but your capacity to grow is an important thing to consider.

Marketing Budget Based On Your Return on Investment

This is a very important point so pay close attention here. When you do marketing correctly, you should have a “Marketing Machine” where you can put money in one side of it and get more money out of the back end of the machine. None of this works without a website that converts, since that is where the Marketing Machine turns a visitor into a lead.

So, if your business margins are good and you have an effective marketing machine that changes a dollar into more dollars, the question we have for you is: how fast do you want to grow?

Some businesses don’t have marketing issues because their business is inherently broken. They aren’t making enough money from what they offer, how they sell it, and how they price it to make enough money on the backend.

A popular marketing mentor once said:

“the business that can spend the most money to acquire a new customer will win.”

If you engineer your business to be more profitable for the products and services you offer, it opens up a LOT more options on how you can acquire new customers and directly affects how much you can invest into your marketing budget.

Our best clients increase their prices (where applicable and reasonable), have multiple ways to deliver more value to their customers and thus make more money than their competitors. As a result they are able to scale their marketing budgets to a much greater degree than their competitors and because of how they positioned themselves, are able to dominate their market.

Know Your CAC and LTV Before You Set a Number

Two numbers make this math real: customer acquisition cost (CAC), meaning what you spend to win one new customer, and lifetime value (LTV), meaning what that customer is worth to you over the time they stay with you.

If it costs you $150 to win a customer worth $1,500 to you over their time as a client, you have earned the right to spend more on marketing with confidence. If it costs $150 to win a customer worth $200, that is a signal to fix pricing, offers, or retention before adding marketing dollars.

A common rule many advisors use, including us, is to keep CAC at roughly a third of LTV or lower. That leaves enough margin to cover delivery costs, overhead, and profit while still leaving room to reinvest in growth.

If you want to see exactly where a business loses customers between first click and repeat buyer, our guide on the importance of a marketing funnel breaks it down stage by stage.

Your Marketing Budget Will Dictate The Marketing Strategies You Employ

When you have a set budget for your marketing (which is the case for most businesses), you’ll want to use it wisely. You’ll want to focus on strategies, or a combination of strategies, that will most importantly yield the best results.

You’ll want to work with a marketing agency that knows how to get the best possible return on your marketing investment. With a set marketing budget there are certain “marketing tools” in your toolbox that you’ll want to focus on in order to grow and acquire new customers.

If you have a smaller market budget you’ll have to be more discerning with where you put your marketing dollars.

If you have a smaller marketing budget you might have to leverage more free or inexpensive marketing strategies that require more manual labor to get some traction. Then, once you have better cash flow in your business, then you can reinvest that into more leverageable marketing strategies like Google Ads to accelerate your new customer acquisition even faster.

Then you can scale what’s working, add in new strategies and anything that delivers a return should be kept in your yearly marketing plan. This is how our agency has helped 1-person startups become multi-million dollar businesses with more team members.

Not sure your current budget matches your growth goals? We will look at your numbers with you, free of charge.

Book a Free Strategy Call

Free Marketing Tools You Can Use

If you’re looking for some free marketing tools that you can use for your business to help get you in front of your prospective customers, there are a few options. The best businesses use a variety of these methods, combined with some paid marketing tools to get the most out of their marketing efforts.

So, let’s dive into some free marketing tools that you can use to get more out of your marketing efforts.

Google Business

Even if you think you don’t know what a Google Business Page is, it’s likely that you look at them almost every time you search for a business near you on Google. These pages allow for business to tell users who are searching on Google, aka the most popular search engine in the world, what they offer, who they are, their hours, phone number, address, etc.

These pages are also a great tool to get your business showing up in the Google Maps results. Getting your Google Business Page fully optimized can be a time consuming process, but it’s one that almost always yields great results for our clients. Especially when combined with a solid Google Ads strategy.

Social Media Posts

While using social media ads can get your business showing up in front of many more users, organic posts can also keep you top of mind. For most businesses, we recommend posting at least twice a week, with 3-5 times being more ideal.

You can utilize a variety of social media marketing strategies here, but a few quick tips are always use relevant hashtags, use great images, check copy for grammar/spelling, and engage with the people who comment on your posts.

The biggest trick to doing social media marketing well is to choose the right platforms for digital advertising. Many businesses try to take on too much by using every platform that they can, but without a full-time social media marketing team, that’s too much for most businesses.

Networking

Many business owners do not use this avenue as much as they should and are missing out on a lot of business opportunities. Whether you’re a contractor, a website designer, an e-commerce shop owner, or a salesperson, there’s a lot that can come out of networking.

Whether it’s networking events within your niche, with other small business owners in your area, or national events, get yourself and your business out there.

Top Two Paid Marketing Ventures

Google Ads and Facebook Ads are the two paid marketing channels inside our traffic services that we see deliver the fastest return for small businesses.

Google Ads

Most of our clients are using Google Ads to grow their business. This is because when you run a fully optimized Google Ads campaign, your business shows up in front of your prospects in the exact moment that they’re searching for the goods or services that you offer.

We often hear that a business has “been there, done that” with Google Ads, but more often than not, the marketing campaign they ran before was not managed well, so the results were not what they could have been. If that sounds familiar, this breakdown on Google Ads for small businesses is worth a second look before you count the channel out.

Facebook Ads

Many of our clients are using Facebook Ads as well. This is because when you run Facebook Ads for your small business, you’re able to show up in front of potential customers 24×7 and meet them where they’re already hanging out.

Facebook is an “interruptive” form of online advertising, but when managed by a good NH Facebook Ads Agency, you’ll be able to get (and stay), in front of your target audience for a fraction of the cost of most other paid media campaigns.

Facebook is a powerful tool for running remarketing ads as well and can help you convert leads from other channels that just haven’t come across the line yet.

Marketing Budget Examples for Small Businesses

Percentages are useful, but seeing real dollar figures tends to make the decision click faster. Here is how these ranges play out for three types of small businesses we work with regularly.

Start-Up 12-18%

$150K revenue ≈ $1,500-$2,250/month, split across a converting website, Google Business setup, and paid ad testing.

Growing 8-10%

$750K revenue ≈ $5,000-$6,250/month, weighted toward the channel already proving itself, plus one new test.

Established 4-6%

$2M revenue ≈ $6,700-$10,000/month, since referrals and brand recognition are carrying part of the load.

How Much Should a Small Business Spend on Marketing at the Start-Up Stage?

A brand-new business with $150,000 in projected annual revenue and a goal of building awareness fast might land in the 12% to 18% range, or roughly $1,500 to $2,250 a month. At this stage, we typically split that between a website that converts, a Google Business Page done right, and a modest Google Ads or Facebook Ads test budget to see what pulls in customers.

Growing Small Business Budgets

Once you have a year or two of data behind you, the math shifts. A business doing $750,000 a year and pushing for real growth tends to land closer to 8% to 10% of revenue, or about $5,000 to $6,250 a month. By this stage, you usually know which channel works, so more of the budget shifts toward growing that winning channel while testing one new channel at a time.

Established Business Budgets

A mature business with $2 million in revenue and strong repeat and referral business can often run on 4% to 6%, or $6,700 to $10,000 a month, because brand recognition and word of mouth are doing part of the job that paid marketing would otherwise need to cover.

These are starting points, not rules carved in stone. Your industry, competition, and goals will move the number up or down. As budgets grow, many of our clients add extras like video content and product photography to build trust faster, plus email follow-up, review management, local link building, and reputation management to protect what they have already earned. We group those under additional marketing services, and they tend to pay off once the core channels are dialed in.

How to Know If Your Marketing Budget Is Working

A marketing budget means something once you know what it is producing. Track a small set of numbers on a monthly basis, so you are not guessing:

• Cost per lead, so you know what one interested prospect costs you by channel.
• Conversion rate from lead to customer, so you know how well your sales process is working.
• Customer acquisition cost, so you can compare it against your lifetime value.
• Time to payback, meaning how long it takes a new customer to cover what it cost you to win them.

You do not need an expensive dashboard to start. A spreadsheet, your Google Analytics account, and a habit of checking in monthly cover most small businesses well. As your budget grows, tools like proper SEO tracking and structured reporting through a marketing agency become worth the investment.

More recently, we have also started tracking how businesses show up in AI-generated answers on tools like ChatGPT and Google’s AI Overviews, since that is quickly becoming another place customers look before they call you. Our AI Search Visibility service tracks exactly that.

How Much Should a Small Business Spend on Marketing? It Depends on Your Business

If you are new to business, or you have been running one for years, marketing pays off when you treat it as an investment instead of an expense. The key to knowing how much is tied to how much you want to grow.

How much should a small business spend on marketing? The honest answer is enough to support the growth you want, without starving the parts of your business that keep customers happy once they arrive. Combine a well-tracked marketing strategy with the right budget, and better results tend to follow.

Frequently Asked Questions

Q: How much should you spend on marketing based on the percentage of your revenue?

Most small businesses allocate somewhere between 5% and 12% of revenue on marketing. Newer businesses building awareness often spend more, closer to 12% to 20%, and established businesses with strong referrals can often run on 4% to 6%.

Q: How much should a brand-new small business budget for marketing?

Plan for a bigger share of revenue than an established business, generally 10% to 20%. You are starting from zero brand awareness, so you need to earn your first customers fast.

Q: Should a marketing budget be based on revenue or profit?

Base it on revenue. Revenue gives you a steady, predictable number to plan against. Profit shifts with expenses and can shrink your marketing spend right when you need it most to grow.

Q: How much should a small business spend on digital marketing compared to traditional marketing?

In our experience, most of a small business’s marketing budget today goes toward digital channels such as Google Ads, Facebook Ads, SEO for service area businesses, and Google Business Page setup, since results are easier to track and adjust than print or broadcast advertising. Traditional channels still have a place for certain local businesses, in a smaller slice of the budget.

Q: When should a small business increase its marketing budget?

Increase it once you see a clear, repeatable return, meaning your cost to acquire a customer stays comfortably below what that customer is worth over time. That is a strong sign your Marketing Machine can handle more fuel.

Q: Should a small business hire an agency or handle marketing in-house?

It depends on your budget and how much time your team has to manage campaigns well. A smaller budget often stretches further with a focused in-house effort on one or two channels, and a growing budget usually benefits from agency expertise across paid ads, SEO, and website performance.