Strategy
How Much Should a Small Business Spend on Marketing?
7 min read
The common answer — spend 5% to 10% of revenue — is useful only as a sanity check. A construction firm with a $40,000 average project and a restaurant with a $28 average ticket cannot follow the same rule. Budget from your own numbers instead.
Start with the value of one customer
Calculate the average revenue from one customer over their lifetime, then multiply by your gross margin. That figure is what you are allowed to spend to acquire them, minus the profit you want to keep.
If your average customer is worth $4,000 with a 45% margin, you have $1,800 of gross profit. Spending $400 to win them is a 4.5x return — healthy in almost any sector.
Work backwards from your growth goal
Decide how many new customers you need this year. Multiply by your target acquisition cost. That number, plus the fixed cost of brand assets you only build once, is your budget.
- New customers needed × target acquisition cost = variable budget
- Add one-off brand, website, and content investment
- Add 15% for testing new channels
Split the budget across build and demand
Businesses that spend everything on ads and nothing on brand and website plateau quickly, because paid traffic lands on a page that does not convert. As a default we recommend roughly 40% to durable assets — brand, website, content, SEO — and 60% to demand capture in year one, flipping toward demand as the assets mature.
Benchmarks by sector
For context: professional services typically run 6% to 10% of revenue, restaurants 3% to 6%, e-commerce and consumer products 10% to 20%, and construction or trades 3% to 8%. New businesses and new locations run higher for the first 12 months because they are buying awareness they do not yet have.
