How Much Should a Small Business Spend on Marketing?
If you run a small business, you’ve probably asked yourself at some point:
"How much should I really be spending on marketing?"
It’s one of the most common questions business owners have, especially when it comes to digital marketing budgets. The truth is, there’s no magic number that works for every business. Your ideal spend depends on your industry, competition, goals, and how fast you want to grow.
In this guide, we’ll cover:
How to calculate a marketing budget for a small business
Recommended percentages based on your business stage
How to split your budget across different marketing channels
How to measure if your spend is really paying off
Why Setting a Marketing Budget Is Essential
A clear marketing budget helps you:
Avoid overspending or underspending on ads and campaigns
Plan your growth strategy instead of guessing what might work
Track return on investment to make better decisions
Stay consistent, because marketing works best over time, not in short bursts
Without a set budget, it’s easy to either do nothing and get lost in the noise, or spend too much without knowing if it’s working.
The General Rule of Thumb for Small Business Marketing Budgets
Industry guidelines suggest:
Established small businesses: 5–10% of annual revenue
New small businesses: 10–20% of annual revenue (to build awareness faster)
Example:
$500,000 annual revenue → $25,000–$50,000 annual marketing budget
$300,000 annual revenue → $15,000–$30,000 annual marketing budget
Factors That might Affect Your Digital Marketing Spend
The “right” number depends on:
Competition – Highly competitive industries may require more aggressive spending.
Customer Lifetime Value – The more a customer is worth over time, the more you can invest to acquire them.
Business Goals – Rapid growth requires a higher investment.
Seasonality – Retail, events, and tourism may need extra budget during peak seasons.
How to Allocate a Small Business Marketing Budget
Let’s say you’re allocating 8% of $300,000 annual revenue — that’s $24,000/year, or $2,000/month.
A balanced split could be:
40% Paid Advertising – Google Ads, Facebook & Instagram Ads, LinkedIn Ads
30% Website & SEO – Optimising for search engines, content creation, blog posts
20% Content Creation – Photography, video, design assets for campaigns
10% Other Promotions – Partnerships, sponsorships, events
For startups, it often makes sense to spend more upfront on paid ads and website improvements, then shift more budget into retention and brand building later.
How to Measure If Your Marketing Spend Is Working
Instead of asking "Am I spending too much or too little?" ask:
What’s my ideal cost per acquisition (CPA) or new customer? – How much do I spend to get one customer and make a profit?
What’s my customer lifetime value? – How much revenue does one customer bring over time?
Is my profit or return on investment positive? – Am I making more from customers than I’m spending to get them?
Example:
If you spend $1,000/month on ads and get 50 new customers, your CPA is $20. If each customer spends $100 over their lifetime, you’re making $5 for every $1 spent.
Signs You Might Be Under-Spending on Marketing
You rely entirely on word-of-mouth referrals and have periods of low or no work
Competitors are constantly advertising while you aren’t
You see slow growth or sales dips during quiet months
How to Make the Most of Your Marketing Budget
Track results with marketing analytics tools like Google Analytics
Test and optimise — small changes can improve performance without increasing your marketing spend
Be realistic and focus on your best channels instead of trying to be everywhere to maximise your budget
Invest in strong creative — great visuals and copy improve conversions
The Takeaway
There’s no single perfect figure for every small business marketing budget — but starting with 5–10% of revenue (or more for new businesses) is a reliable benchmark.
From there, track your results, refine your approach, and reinvest in what works. Over time, your marketing will shift from being “just another cost” to being one of your biggest growth drivers.
Need Help Getting the Most From Your Marketing Budget?
Knowing how much to spend is one thing, knowing where to spend it for the best return is another. At MotoDigital, we work with small businesses to build cost-effective digital marketing strategies that focus on results, not just clicks. Whether it’s Google Ads, Facebook Ads, or SEO, we’ll help you invest your budget where it counts and track the ROI every step of the way.
Get in touch with MotoDigital to find out how we can help you turn your marketing spend into real growth.
