How much should a small business spend on marketing?
Set it two ways and compare. The first is a share of revenue. The second is your goal: new customers you need times what you can afford to pay for each. The two numbers rarely match, and the gap tells you whether your goal or your spending needs to change.
The percentage most often quoted comes from an SBA.gov community blog post by Caron Beesley, a marketing communications consultant who wrote for SBA.gov, first posted 4 June 2012 (read in the Internet Archive copy from July 2014). It is a 2012 blog post, not current SBA guidance; the SBA's marketing and sales guide today gives no percentage (checked 5 Nov 2026). The post says:
- Many businesses allocate 2 to 3 percent of actual or projected gross revenue for run-rate marketing, and up to 3 to 5 percent for start-up marketing.
- As a general rule, small businesses with revenues under $5 million should allocate 7 to 8 percent of revenue to marketing, assuming margins of 10 to 12 percent after all expenses.
- Retail businesses can spend up to 20 percent of sales in their early brand-building years.
For a more recent survey, the 2026 CMO Survey topline report (Duke University's Fuqua School of Business, Deloitte and the American Marketing Association; in the field 7 to 29 January 2026) asked US marketing leaders what share of revenue marketing takes. Of 308 respondents, 154 answered: the median was 5% and the mean 8.96%. Respondents are senior marketing leaders (97% are VP level or above), so read it as a range, not a rule for a five-person business.
| Annual revenue | 2 to 3% (run rate, SBA blog) | 5% (CMO Survey median) | 7 to 8% (SBA blog, under $5m) |
|---|---|---|---|
| $250,000 | $5,000 to $7,500 | $12,500 | $17,500 to $20,000 |
| $600,000 | $12,000 to $18,000 | $30,000 | $42,000 to $48,000 |
| $1,500,000 | $30,000 to $45,000 | $75,000 | $105,000 to $120,000 |
How do you set a marketing budget from your goals?
Start from the customers you need, then work back to money. The goal-based budget is one line of arithmetic:
To find the most you can pay per customer, take the gross profit one new customer brings in during the first year and decide what share of it you will spend to win them. Spending a third of first-year gross profit leaves room for error; spending all of it means a customer only pays back what it cost to win by the end of year one. That share is your call, not an industry rule.
Then check each channel against that number. If a channel's cost per customer is above your ceiling for three months, change it or stop it. The SBA's guide makes the same point in its own words: plan to compare your marketing and sales costs with the revenue they generate.
Worked example: a $600,000 business
Here is the method for an invented business. Northwind IT Support is a sample company, and every number is an assumption chosen to show the sums.
Now compare it with the percentages for $600,000 revenue: $20,000 ÷ $600,000 = 3.3%. That is above the 2 to 3% run-rate range, below the 5% median ($30,000) and far below the 7 to 8% rule ($42,000 to $48,000). Northwind's goal costs less than the rules of thumb suggest, so it can either keep the $20,000 or raise the goal. If the goal had needed $60,000 (10%), that would be the warning sign: either the target is too high for the cash, or the ceiling per client is unrealistic.
Turn the ad line into a daily setting before you launch. Google's average daily budget help page says to divide a monthly budget by 30.4, so $850 a month becomes $850 ÷ 30.4 = $27.96 a day.
How should you split the budget across channels?
Split by how sure you are, not by channel fashion. We use a 70-20-10 rule: 70% to channels that already bring customers, 20% to one channel you are growing, and 10% to small tests you can stop. Here is Northwind's $20,000 (sample):
| Bucket | Line (sample) | Year |
|---|---|---|
| Proven, 70% ($14,000) | Google search ads, $850 a month × 12 | $10,200 |
| Fixed costs: website, email tool, design | $2,000 | |
| Referral partner events and lunches | $1,800 | |
| Growing, 20% ($4,000) | LinkedIn ads, three months at $1,000 | $3,000 |
| One filmed customer story for sales and the website | $1,000 | |
| Testing, 10% ($2,000) | Four 90-day tests at $500 each | $2,000 |
| Total | $20,000 |
Check: $10,200 + $2,000 + $1,800 = $14,000; $3,000 + $1,000 = $4,000; $14,000 + $4,000 + $2,000 = $20,000.
Two facts to plan around. LinkedIn's budget page says the minimum daily budget to start is $10 for any ad format and suggests $25 for new advertisers, without saying whether that suggestion is daily or lifetime. And keep some money for existing customers: in the CMO Survey, 66.1% of 162 companies said their acquisition budget is larger than their retention budget, and 16% said the two were equal. A monthly email to past clients is a low-cost retention line; in the example, its tool sits inside the $2,000 fixed costs.
If the budget is close to zero, a free Google Business Profile and the steps in our $0 marketing plan for bootstrapped teams come first.
What should you cut first when money is tight?
Cut in this order, so you lose the least revenue per dollar saved:
Tests with no result after 90 days
The 10% bucket exists to be cut. Stop any test that hasn't produced a qualified enquiry.
Channels above your ceiling
Any channel costing more than your ceiling per customer (Northwind: $1,200) for three months running.
Brand work you can't measure
Sponsorships, print and redesigns. Pause them; don't delete the files.
The growing channel
Cut it back to the minimum that keeps learning going, rather than to zero.
Proven channels and customer email last
These bring the customers that pay for everything else.
Expect pressure on this line. In the 2026 CMO Survey, when profits fall short and the focus is on cutting costs, marketing leaders said executives cut marketing over other areas a median 50% of the time (mean 45.42%, 160 answers). Having the order written down before a bad quarter makes that conversation shorter.
Fill-in marketing budget template
Copy this into a spreadsheet. Fill the top block first, then the lines, and check that the lines add up to the total.
| Bucket | Channel or line | Monthly | Year | Customers expected | Cost per customer | Keep, change or stop (check monthly) |
|---|---|---|---|---|---|---|
| Proven (70%) | ||||||
| Proven (70%) | ||||||
| Growing (20%) | ||||||
| Testing (10%) | ||||||
| Fixed costs | Tools, website, design | n/a | n/a | |||
| Total |
This week: fill the top block with last year's numbers and see which of the two budgets is higher. Then put the budget into a plan with a calendar using our one-page small business marketing plan. If no one owns the work, our guide to marketing without a marketing team shows a weekly routine for one to five people.
Frequently asked questions
What is the 70-20-10 rule in marketing?
It is a way to split a budget by confidence: about 70% to channels that already win customers, 20% to one channel you are building, and 10% to small experiments. The exact shares are a starting point, not a law. Move money between buckets each quarter based on cost per customer, and cut the experiments first when cash is short.
What is the average advertising budget for a small business?
We found no official average for very small firms (checked 5 Nov 2026). The 2026 CMO Survey found a median of 5% of revenue across 154 answering US companies. A 2012 SBA.gov blog suggested 7 to 8% for firms under $5 million with healthy margins. For a $300,000 business, those give $15,000 and $21,000 to $24,000 a year.
Should the marketing budget be based on gross or net revenue?
The 2012 SBA.gov blog post bases its percentages on actual or projected gross revenue, meaning sales before costs. Use gross revenue for the percentage check, then test the result against your goal-based budget, which works from gross profit per customer. If the two disagree badly, adjust the goal or the spending before the year starts.
Should a new business spend more on marketing?
Often, yes, because nobody knows you yet. The 2012 SBA.gov post says retail businesses can spend up to 20% of sales in early brand-building years, while its typical start-up figure is 3 to 5% of revenue. A new firm without revenue history should budget from its customer goal and the cash it can afford to lose while it learns.
How often should you review a marketing budget?
Check spend and cost per customer every month and move money between buckets every quarter. The SBA's marketing guide says plans should be maintained annually at minimum. A monthly check catches a channel that has stopped working before it uses up a quarter of the year's money.
Sources
- SBA.gov community blog, How to Set a Marketing Budget (Caron Beesley, 2012), Internet Archive copy (posted 4 June 2012; archive copy 29 July 2014; checked 5 Nov 2026)
- U.S. Small Business Administration, Marketing and sales (checked 5 Nov 2026)
- The CMO Survey 2026, Topline Report (fielded 7-29 Jan 2026; checked 5 Nov 2026)
- Google Ads Help, Set and change an average daily budget (checked 5 Nov 2026)
- LinkedIn Marketing Solutions, How to prepare for your first LinkedIn ad campaign (checked 5 Nov 2026)
- Google Business Profile (checked 5 Nov 2026)