How Much Should a Small Business Spend on Marketing?

It's the question almost every owner asks eventually: how much should a small business spend on marketing? I might be a little biased, but marketing is one of the most important disciplines in a business, because it's the relationship-building one — it's how first impressions land, and how people come to understand what you actually do. So the honest answer isn't a magic percentage. It's about spending enough to be seen, not so much that you're wasteful, and moving in stages so every dollar is talking to the right people. Here's how I'd think it through.

Why spending too little — or too scattered — costs you

A lot of people skimp on marketing. They're trying not to waste money, or they've got some Mad Men illusion of what marketing is supposed to be. But when you spend too little, you lose visibility — you lose the chances to get out onto the different channels where people would find you. Spend too much too early, and you're just being wasteful.

Think of it the way a doctor talks about a cream: apply it to a small area first, see if you get a rash, before you spread it all over your body. Same concept here. You don't want to pour money into paid ads and big campaigns before any of it has been proven profitable — but you don't want to spend so little that you never get to spread your wings. Move in stages so you're sure you're talking to the right people, saying the right message, and that those people are actually receptive to it.

Marketing is an art and a science. It's not "pay a bunch of money and suddenly get shown everywhere." That's especially true in the world of AI. You have to be careful how your message gets pushed out, and if your website isn't saying the same thing as your other collateral, you're in trouble — because now you're confusing the very people you're trying to build a relationship with. That's why your branding, website, and ads should work as one system.

How we actually land on a budget number

We use a tool called the Revenue Cookbook to lay the budget out against an overall yearly revenue goal. It breaks the number down into how many small, medium, large — even really small and really large — clients you'd need to win over the year to hit that goal. When you're working backward from the revenue you actually want, the marketing spend stops being a guess.

If you don't have the Cookbook — and I'd suggest getting one — here's the rough rule of thumb: look at around 10% of your goal revenue as what you put toward marketing. It's a very rough number, but it gives you a feel for the range. You still have to measure everything from there. If you want the fuller picture, it's worth understanding how much a marketing agency costs and how to measure your marketing ROI before you lock a figure in.

The budgeting mistake I see most often

People confuse their ad budget with their marketing budget. Someone tells them, "spend ad money, be seen, get clients" — and that's fine as far as it goes. But it leaves out the client-development work and the visibility work underneath it. Nobody's asking: how do you know you're serving the right client? Is your website telling people you do Service A, or do they think you do Service C?

Here's where it goes sideways. In all our efforts to prove we know what we do for a living, we tend to speak in jargon — but the end user doesn't know our jargon. They only know, "I have a problem, and I need somebody to fix it." When your budget only funds ads and skips the message, the strategy, and the small business marketing strategy that decides who you're even talking to, you pay for attention you can't convert.

A small example of what falling through the cracks costs

I just bought a bed for my spare bedroom. Laid all the pieces out, everything looked great — and then, partway through building it, I realized one piece was missing. One piece. In the collateral they gave me, there was no brand name, no website, just a model number and an email. And the email didn't work.

So now I'm a disgruntled customer who can't get the one part I needed. My whole experience with that company is jaded, the bed is almost a waste, and the only place I can go back to is the reseller. That's what a broken relationship costs — and it's usually a budgeting choice underneath it. When nobody funds the connective tissue, those things fall through the cracks. It's exactly the real cost of disconnected marketing.

So what percentage should you actually spend?

My unexpected answer: do what's comfortable for you — but be consistent. There are DIY options, and they're fine, as long as you have honest expectations about what you'll get doing it yourself versus what you think you should be getting. Those are two very different conversations.

Do what's comfortable for you — but be consistent.

The way we try to be a good partner is to ask questions before we hand you answers, and to be ready to grow in stages. If you don't have much to spend, start small: get one stage done and in place, then build. And I'd highly suggest that first stage be a real, hardcore brand strategy — because that's what identifies your ideal client. A plumber who says "I want people with plumbing issues" is being too broad. Get specific: I'm in this city, I serve this area, I offer these specific services the customer is actually looking for. Get down to the nitty-gritty, and it'll carry you through every stage of growing the business.

The bottom line

There's no universal percentage that's right for everyone. Spend enough to be visible, not so much that you're guessing, tie the number to a real revenue goal, and fund the whole relationship — not just the ads. Start where you're comfortable, stay consistent, and grow in stages. If you'd like help setting a budget from your actual revenue goal, reach out for a free consultation and we'll build it with you.

About the author: Craig Andrews is CEO & Partner at Beholder Agency, a growth marketing agency that connects brand, digital presence, and lead generation into one measurable system for small businesses.