How Much Should a Small Business Spend on Marketing? A Comprehensive Guide

How Much Should a Small Business Spend on Marketing? A Comprehensive Guide

Navigating the marketing landscape for a small business is akin to a pilot flying through turbulent skies. There are moments of smooth sailing, but it also requires constant attention and adjustment. This is particularly true when it comes to determining the optimal marketing budget. While there's no universal formula, various principles can guide your decision-making process, much like how a pilot uses instruments and weather forecasts to chart the best course.

The Traditional Rule of Thumb

Think of the traditional rule of thumb, which suggests allocating 7-8% of gross revenue to marketing, as your North Star. This recommendation, cited by the U.S. Small Business Administration, serves as a reliable initial guiding point. However, it's important to recognize that even the North Star’s guidance isn't absolute; sailors also have to account for winds, tides, and obstacles in the water.

Similarly, your industry, competition level, and business stage can significantly influence your marketing budget. For example, a study from CMO Survey indicates that companies in the consumer services sector typically spend about 15% of their budget on marketing—well above the 7-8% guideline.

Understanding Business Types and Their Marketing Needs

The marketing budget that suits a local bakery won't necessarily befit a high-tech software startup. Each business type has its own "financial ecosystem," requiring a unique approach to resource allocation.

Service-Based Businesses

Local service-based businesses range from plumbers, electricians, and HVAC contractors to law firms, dental practices, and accounting services. The list goes on to include landscape architects, real estate agents, physical therapists, and even pet grooming services. For these diverse yet locally focused enterprises, think of your marketing budget as your storefront. Just as a clean, inviting physical location draws more customers, so does a robust marketing strategy.

Building a strong local presence and stellar reputation is akin to constructing a solid foundation for your house. Online reviews, local SEO, and community engagement are the building blocks. For these types of companies, allocating around 10-15% of revenue can serve as a sturdy foundation for a comprehensive marketing plan, according to Small Business Trends. Within this budget, investments should go toward strategies that build local visibility, encourage customer reviews, and provide helpful content. Your aim is to position your company as the go-to local expert in your field.

Retail and eCommerce Businesses

Retail and eCommerce businesses often find themselves in a marketing environment similar to a crowded marketplace. Imagine you’re at a bustling bazaar; you'll need to shout louder and offer more eye-catching deals to get noticed. Consequently, a marketing budget of around 10-15% of gross revenue is often necessary, which aligns with data from the National Retail Federation.

The budget should not just focus on customer acquisition but also customer retention, akin to not only inviting guests to your party but also ensuring they’re entertained enough to stay and return for future events.

SaaS and Tech Startups

For SaaS and tech startups, the marketing budget can be likened to rocket fuel. These businesses often need to spend a large chunk—20-30%—of their revenue to break through the Earth’s atmosphere (market noise) and reach orbital velocity (sustainable growth). Forester Research confirms that high-growth companies often have such elevated marketing spends.

The focus here is often on content marketing, digital ads, and other online strategies, which serve as the propulsion system for this metaphorical rocket. The fuel needs to be high-grade, targeted, and capable of delivering a strong ROI.

Local Businesses

For local businesses like coffee shops, gyms, or hair salons, your community is your ecosystem. A marketing budget of 5-10% of revenue often suffices. It’s like planting a garden; you don’t need to cover the entire field, just the plots that will yield the most beautiful flowers or nutritious veggies.

Collaborating with other local businesses can also offer mutual benefits. It’s akin to crop rotation; the benefits one crop leaves in the soil can help nourish the next one.

Factors to Consider When Setting a Budget

Business Stage

The stage of your business lifecycle can drastically affect your marketing spend. In the startup phase, you're essentially launching a ship into uncharted waters. You’ll need plenty of supplies—akin to a robust marketing budget—to ensure you don’t get lost at sea or starve before reaching your destination. In contrast, a business in the growth or maturity stage might already have established trade routes, needing only maintenance and occasional expansion.


Your goals serve as the compass that guides your marketing spend. Are you looking for a 20% sales increase or a specific number of new customer acquisitions? These goals can serve as your North Star, helping you navigate through budgeting complexities.


In terms of ROI, think of your budget as an investment portfolio. Some stocks (marketing channels) will outperform others. Track your portfolio’s performance religiously and adjust your investments according to yield. Tools like Google Analytics and CRM software can provide invaluable insights here.

Available Resources

Finally, don't overlook your available human resources and skill sets. If your team lacks expertise in digital marketing, for example, you might need to hire outside help, just as a manufacturer might need to outsource specialized components. This is an additional cost that must be factored into your overall budget.

Adapting Over Time

Think of your marketing budget as a living, breathing entity. Just like a pilot adjusts the course based on real-time feedback, so should you. According to the Marketing Insider Group, high-performing businesses are twice as likely to adjust their marketing budgets regularly based on ROI and market changes.


Determining an appropriate marketing budget for a small business involves taking a journey through complex terrains and fluctuating weather patterns. Whether you're a local service provider or a tech startup, different factors, such as business type, growth stage, and objectives, will influence your budgeting decisions. With meticulous planning, constant adjustments, and a keen eye on ROI, your investment in marketing will serve as the wind in your sails, propelling your business toward success.