How Much Should a Small Business Spend on Marketing?
A practical way to set a marketing budget based on your revenue, your margins, and how fast you want to grow.
TL;DR
Most small businesses spend somewhere between 5% and 15% of revenue on marketing, with newer companies at the higher end and established ones lower. The right number depends less on a rule of thumb and more on your gross margin, your growth goals, and what each channel actually returns. Start with a percentage of revenue, then adjust based on measured results.
Most small businesses spend between 5% and 15% of revenue on marketing. Newer companies trying to build awareness sit at the higher end; established ones with repeat customers sit lower. That range is a starting point, not a verdict. Your real number depends on gross margin, how fast you want to grow, and what each channel actually returns when measured against sales.
Here's how to move from a rough percentage to a budget you can defend.
What percentage of revenue should go to marketing?
Start with a percentage of gross revenue, then adjust.
The U.S. Small Business Administration suggests small businesses under $5 million in revenue allocate roughly 7% to 8%, assuming margins in the 10% to 12% range. That figure covers total marketing cost: advertising, promotion, tools, and the people running them.
A reasonable frame looks like this:
- Under $1M in revenue and building awareness: 10% to 15%
- $1M to $5M and growing steadily: 7% to 10%
- $5M and up with strong repeat business: 5% to 8%
These are ranges, not targets. A business with fat margins and an aggressive growth plan can justify more. A business with thin margins should spend less and prove each channel before adding to it.
Why does gross margin matter more than the percentage?
Because a marketing budget is paid for out of margin, not revenue.
If you spend 10% of revenue on marketing but your gross margin is only 15%, there's almost no room for error. At 60% margin, that same 10% is far easier to sustain and leaves room to test.
A simple check: take what one customer is worth over time, subtract the cost to serve them, and compare that to what it costs to acquire them. If a customer is worth $400 in gross profit and costs $90 to acquire through a given channel, that channel earns its place. If acquisition runs $350, it doesn't, regardless of what the click reports say.
This is why two businesses with identical revenue can have very different correct budgets. Higher margins and higher customer lifetime value mean you can spend more to win each customer.
Want this working on your numbers?
Viewmedia makes marketing you can prove, matched to real, closed sales.
How should the budget change as revenue grows?
Early on, spend more as a share of revenue. You're buying attention you don't yet have.
A new business has no repeat customers, no word of mouth, and no search demand for its name. Nearly every sale has to be bought. That's why the 10% to 15% range fits early stages, even when it feels high.
As you grow, three things reduce the share you need:
- Repeat customers buy again without new acquisition cost.
- Referrals and reputation bring customers you didn't pay for directly.
- You learn which channels work and stop funding the ones that don't.
The dollar amount usually keeps rising as revenue grows. The percentage tends to fall. A mature business spending 6% of a large revenue base is often spending more in absolute terms than a startup burning through 15% of a small one.
Where should the money actually go?
Split the budget between channels that capture existing demand and channels that create it.
Demand capture reaches people already looking: search ads, retargeting visitors who came to your site, and email to customers you already have. These typically cost less per sale and pay back faster. Display Retargeting sits here, re-engaging people who already showed interest.
Demand creation reaches people who aren't looking yet: streaming TV, social video, broader display. These build awareness and feed the capture channels over time. OTT and CTV advertising falls in this group, putting your brand in front of viewers on connected televisions.
A common early move is to weight demand capture heavily, since it proves out fastest, then layer in demand creation once the capture channels are working and measured. How you coordinate buys across these channels matters as much as the split itself. Media Buying done well keeps you from paying twice to reach the same person.
One channel worth its cost for most consumer businesses is email. No media cost beyond the platform, and it speaks directly to people who already chose to hear from you. Viewmedia guarantees a 15% open rate on consumer email campaigns, giving you a measurable floor to plan against.
How do you know if you're spending the right amount?
Measure against sales, not clicks or impressions.
Set your budget, run it for a defined period, and track how much revenue each channel produced relative to what it cost. Move money toward what worked; cut what didn't. The right budget is the one where the last dollar spent still brings back more than a dollar in profit.
If you can't yet trace spend to sales, fix that before adding budget. Spending more into a channel you can't measure is how businesses quietly waste money for years. Matchback Reporting is one way to connect what you spent to what actually sold, even when customers don't convert online.
Start conservative, prove the channels, then scale the ones that earn it. A budget built that way survives a bad quarter, because you know which parts are pulling their weight.
Sources
Founder, Viewmedia
Brian Wroblewski is the founder of Viewmedia. For more than two decades he has helped local and regional businesses turn marketing spend into provable, closed sales.
