How Much Should a Small Business Spend on Marketing? (And Where to Spend It First)
Short answer: There is no single right number, but the benchmarks give you a starting range. The U.S. Small Business Administration (SBA) cites one source putting the average business at about 1% of revenue on advertising, and another reporting average marketing spending near 8% of revenue. New businesses generally need to spend more than established ones. The best budget is the one you can sustain for at least six months, tied to a clear goal, and spent in the right order: your foundation first, then a steady presence, then paid ads.
Why is there no single right number?
Ask five business owners what they spend on marketing and you will get five different answers, and each of them may be right. Marketing spending depends on how old your business is, how crowded your market is, how much each customer is worth, and how fast you want to grow. A plumber with a full schedule and a brand-new bakery do not need the same budget, even if their revenue is the same.
That is why a percentage of revenue is best treated as a starting point for a conversation, not a rule. It gives you a rough range, and then your own situation tells you where in that range to land.
What do the benchmarks actually say?
The SBA’s article on getting the most from your marketing budget gathers several figures, and it stresses that the range is wide (see How to Get the Most From Your Marketing Budget). Here is what it reports, with the sources it cites:
| Benchmark | What it says | Where it comes from |
|---|---|---|
| Average advertising spend | About 1.08% of revenue | Small Business Trends, cited by the SBA |
| Retailers | About 4% of revenue on advertising | Small Business Trends, cited by the SBA |
| Average marketing spending, 2018 | 7.9% of revenue | Web Strategies, cited by the SBA |
| B2C vs. B2B | Companies that sell to consumers generally spend more than those that sell to other businesses | Web Strategies, cited by the SBA |
| New businesses | Need to budget more when just starting out | The SBA article |
Notice that “advertising” and “marketing” are not the same thing here. Advertising is paid promotion. Marketing is the broader category: your website, social media, content, design, and tools as well as ads. That difference explains much of the gap between the 1% and 8% figures.
What does that look like in dollars?
Percentages are hard to picture, so here is the arithmetic. This is an illustration using the averages above, not a recommendation for your business:
| Yearly revenue | At 1.08% (advertising average) | At 7.9% (marketing average) |
|---|---|---|
| $250,000 | $2,700 a year (about $225 a month) | $19,750 a year (about $1,646 a month) |
| $500,000 | $5,400 a year (about $450 a month) | $39,500 a year (about $3,292 a month) |
| $1,000,000 | $10,800 a year (about $900 a month) | $79,000 a year (about $6,583 a month) |
The distance between the two columns is the point. A business doing $500,000 a year could spend anywhere from a few hundred to a few thousand dollars a month and still be inside what the SBA article calls normal. Where you land depends on what you are trying to achieve.
How do you pick a number for your business?
Instead of starting with a percentage, start with these five questions:
- How old is your business? A newer business needs more marketing, because nobody knows it exists yet. The SBA advises startups to use their projected revenue as the basis for the budget.
- How competitive is your market? If a dozen similar businesses are fighting for the same customers, standing out costs more.
- How much is a customer worth? If one new customer is worth $2,000 over time, you can justify spending more to find one than if each is worth $100.
- How fast do you want to grow? Steady is cheaper than fast.
- What can you sustain? Marketing works through repetition. An amount you can keep up for six months beats a larger amount you must stop after two.
A simple way to work backward from a goal
Here is an illustration. Suppose you want five new customers a month, and each is worth about $1,000 in revenue to you. If you estimate it takes roughly ten inquiries to produce five customers, and you hope to pay no more than $50 for each inquiry, that points to about $500 a month in paid marketing. It is a rough calculation, but it turns “How much should I spend?” into “What does each customer cost, and is that worth it?” which is a much better question.
Where should the money go first?
Most small businesses waste money by spending in the wrong order. The order below gets the most from each dollar:
- Get your foundation right. Know who you are, what you do, why customers should choose you, where you work, and when you are available. See the five questions every business should answer. This costs almost nothing, and everything else depends on it.
- Make sure your website works. If it is slow, confusing, or hard to use on a phone, every other dollar you spend sends people to a leaky bucket. See how to tell if your website is working.
- Build a steady presence. Consistent social media and helpful blog content cost mostly time and are the base of your marketing. See what social media management really costs.
- Learn from competitors. A free hour of research shows you where you can stand out. See how to check them for free.
- Then test paid ads. Once your message and website are working, start with a small, capped budget and add only what produces inquiries. See programmatic ads explained.
What do outside services cost, so you can see what your budget buys?
If you plan to hire help, published pricing guides give a sense of the ranges. These come from vendor and marketing blogs, so treat them as orientation, not quotes:
- Social media management: basic management for a small business is commonly listed at about $500 to $1,500 a month, with a much wider range from about $100 to $5,000 in the same guide (see ExpertMarket’s pricing guide).
- Marketing agencies: one guide lists hourly rates of about $100 to $300 and monthly retainers of about $3,000 to $25,000 (see MarketerHire’s agency pricing models).
Compare those with the percentage figures earlier and the tension is clear. A business with $500,000 in revenue spending the average 7.9% would have about $3,292 a month, which could be used up by a single agency retainer at the low end of that range. That is a big reason a leaner service, or a mix of doing some of it yourself and getting help with the rest, is worth considering. For how those prices are built, see why agencies charge what they charge.
How do you know your marketing is working?
Do not judge by activity. Judge by results that connect to the business. Track these every month:
- Inquiries: calls, forms, messages, and bookings
- The source of each inquiry: where did they hear about you?
- Cost per inquiry: total marketing spend divided by inquiries
- Cost per customer: total spend divided by new customers
- Website visits from search: Google’s free Search Console shows this (see Get started with Search Console)
If a channel produces inquiries at a cost you can afford, keep it and add a little. If it does not after a fair test, stop it and move the money.
What are the most common budgeting mistakes?
- Spending on ads before the website and message are ready.
- Spreading a small budget across too many channels. Do one or two well.
- Stopping after a month. Most marketing needs a few months to show results.
- Letting a quote set the budget. Decide what you can spend first, then ask what it buys.
- Never measuring. If you do not know your cost per inquiry, you cannot improve it.
- Cutting marketing the moment sales dip. That is often when it matters most.
How can you start this month?
- Write down your yearly revenue and try both the 1% and 8% figures, to see the range in dollars.
- Choose a monthly amount you can sustain for six months, even if it is small.
- Pick your first priority from the order above, and spend there first.
- Start a simple tally of inquiries and where they came from.
- Review everything in 90 days. For a full plan, see a simple marketing plan for a business with no marketing department.
Frequently asked questions
What percentage of revenue should a small business spend on marketing?
The SBA’s article cites averages from about 1% of revenue on advertising to near 8% on marketing overall, and says the right figure varies by industry, business age, and competition. Newer businesses generally need to spend more.
Should a new business spend more on marketing?
Generally, yes. The SBA notes that you will need to budget more for marketing when your business is just starting out, because you are still building awareness. The SBA advises startups to base the budget on projected revenue.
Is it better to spend on ads or on content and a website?
Usually the website and content come first. Ads send people somewhere, so the “somewhere” should work before you pay to send traffic to it.
How long should I wait before judging results?
Give most marketing at least three months, and longer for content and search, which build over time. Paid ads can show early signals sooner, but still need a fair test.
Can I market my business with a very small budget?
Yes. Start with the free and low-cost steps: a clear message, a working website, a steady presence on one platform, and an hour of competitor research. Add paid ads only when you are ready.
At Sumunar we tell you the real price and the time involved for every service before we start, so you can fit it to your budget. If you would like help working out where your money would do the most good, request a free marketing audit, or see our services.
