How Much Small Businesses Should Spend on Marketing

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Companies, big or small, often ask how much budget they should allot for marketing strategies. There are rules of thumb to follow if you want to develop a manageable marketing plan. However, for a more efficient budget, there are numerous factors to consider. Simply put, there is no quick answer to how much you should spend on your marketing efforts.

Setting Up a Budget for Marketing: The Rule of Thumb and Calculation

In truth, the rules of thumb for setting up a budget for marketing depend on a company’s revenue. If your business is already at the six-figure revenue income, rules of thumb will apply.

In general, the rule of thumb for a marketing budget is 5% of a company’s gross revenue. This is to increase your brand’s visibility and raise awareness for your products or services. But, if you want to gain a greater share of your market, you should set aside a larger percentage, typically around 10%.

Using the 5% rule of thumb for basic marketing strategies can generate a formula of gross revenue multiplied by 5% is equivalent to the marketing budget. In effect, the 10% rule results in this formula: gross revenue multiplied by 10% equals the marketing budget.

On the other hand, setting up a marketing budget can be challenging if your business is earning below the six-figure mark. It will depend on how much your competitors are spending. Unfortunately, and of course, competitors are not willing to share this information. You’ll need to make a guess and estimate.

Hopefully, this will not convince you to back out from investing in marketing. You can’t depend solely on word of mouth to promote your business. You’ll eventually need to market your products or services. Here is where this article can help. Learn about the factors that can affect how much budget you should set aside for your marketing.

Marketing Channels


The pandemic has changed consumer behavior. The majority of purchases today are done through mobile devices, overtaking desktop and even laptop traffic. It would be best to use web analytics to determine which digital channel generates the most traffic for your business. This way, you can focus most of your efforts on leading channels.

However, this doesn’t mean that you should focus your marketing efforts on mobile traffic. Still, it would help if you explored other marketing channels.

According to, a leading digital marketing agency in the U.K., it’s essential to make your business mobile-friendly. However, you should also tap into other marketing tools such as digital, print, and radio advertisements. Likewise, it would help to explore other channels, including social media, public relations, events, trade shows, marketing automation, and promotional giveaways. The key to setting up a sufficient budget is creating a good balance of different marketing channels.

It’s unlikely that all of these marketing channels will work for you. Exploring them, however, can help you decide which ones to use more. And for those that are effective, they can improve your company’s visibility and brand awareness.

Business Tenure

How long has your business been in operation? Since when did you start selling your products or services?

Business tenure has a direct effect on your marketing budget. If your business is new, you need to spend more on marketing your brand. Otherwise, your marketing budget will depend on how long your products have been in the market. This means that if you have several products or services, the marketing budget for each will be different.

For example, you have two products: A and B. Product A was launched just a week ago, while product B has been in the market for a year. Considering product A is new, you need to spend more to increase its visibility. You’ll be paying less for product B, then.

External Costs

According to WebFX, an industry leader in digital marketing in the U.S., external costs also play a
role in determining an adequate marketing budget. It can help you decide what services to invest in and set a baseline for your return on investment (ROI).

For example, you spent $20 on production for product B and sold it for $60. Based on these costs, you can choose marketing channels that can still enable your business to profit. With this information, you can use strategies that will give you the best ROI.

WebFX suggests considering the following external costs: shipping, production, production staff, and utilities. The list is exhaustive, but these elements will give you an idea of what external costs to consider.

Focus-driven Marketing

Remember that each company is unique. There is no set formula for a marketing budget, only a set of quantifiable factors, which differs for each business. Use these factors to help you set up a marketing budget and reach your marketing goals.

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