You know you need to spend money on marketing. You just don’t know how much.
Should it be $500/month? $2,000? More? And where should that money go?
Here’s how to create a marketing budget that makes sense for your small business, without guessing or wasting money.
Start With Revenue, Not Random Numbers
Most small businesses pick a marketing budget out of thin air. “Let’s try $1,000/month and see what happens.”
Bad approach.
Your marketing budget should tie directly to your revenue and goals.
The basic formula:
Small businesses typically spend 5-12% of gross revenue on marketing.
- 5-7% if you’re established and maintaining steady growth
- 8-12% if you’re actively trying to grow or you’re new
Example:
- Your business makes $500,000/year
- 7% = $35,000/year = roughly $3,000/month
- 10% = $50,000/year = roughly $4,200/month
That’s your starting range.
But What If You’re Brand New?
If you’re just starting out and have no revenue yet, work backwards from your goals.
Ask yourself:
- How much revenue do you need to make this year?
- How many customers does that require?
- What’s a customer worth to you?
Example:
- You need $100,000 in revenue
- Average customer spends $2,000
- You need 50 customers
- You’re willing to spend $200 to acquire a customer
- Your marketing budget = $10,000 for the year ($833/month)
Now you have a number based on reality, not guesswork.
Where to Allocate Your Budget
You can’t do everything. Pick 2-3 channels and do them well.
Here’s a realistic breakdown for a $2,000/month budget:
Option 1: Focus on Paid Ads
- $1,200 ad spend (Google or Facebook/Instagram)
- $600 landing page optimization and creative
- $200 email marketing tool
Option 2: Focus on Content + SEO
- $800 content creation (blog posts, videos)
- $400 SEO tools and optimization
- $600 ad spend to amplify best content
- $200 email marketing tool
Option 3: Mix It Up
- $600 ad spend
- $400 content creation
- $400 website improvements
- $400 email marketing and automation
- $200 tools and software
The point: Commit real money to fewer things rather than spreading $100 across ten channels.
What to Spend On First
If you’re starting from scratch, prioritize in this order:
1. Your website (one-time cost) Get this right before you drive traffic anywhere. Budget $2,000-$5,000 for a professional site, or $500-$1,000 if you DIY with a good template.
2. One primary lead generation channel Pick the channel where your customers actually are:
- Local service business? Google Ads
- Visual product? Instagram/Facebook ads
- B2B service? LinkedIn + content
- E-commerce? Facebook/Instagram ads
3. Email marketing Once you have leads coming in, you need somewhere to nurture them. Start with a free or cheap tool ($0-50/month).
4. Content creation Blog posts, videos, social media. This builds long-term value but takes time to pay off.
5. Everything else Only add more channels once you’ve maximized the first ones.
Monthly vs One-Time Costs
Split your budget into two categories:
Monthly recurring costs:
- Ad spend
- Email marketing software
- SEO tools
- Social media management
- Content creation
One-time investments:
- Website build/redesign
- Logo and branding
- Photography
- Video production
- Marketing strategy session
Budget tip: Save 10-20% of your monthly budget for one-time projects. Some months you’ll spend it, some months you won’t. It adds up.
The 70/20/10 Rule
Once you know what’s working, use this allocation:
- 70% on tactics that are already working (double down)
- 20% on tactics that show promise (optimize them)
- 10% on testing new ideas (experiments)
Example with $2,000/month:
- $1,400 on your Facebook ads that are converting
- $400 on your new email campaign that’s getting decent opens
- $200 testing TikTok or a new landing page
This keeps you focused on results while still trying new things.
Red Flags You’re Overspending
Watch for these warning signs:
You’re spending more to acquire a customer than they’re worth. If a customer is worth $500 and you’re spending $600 to get them, your math is broken.
You can’t tell if it’s working. If you don’t know your cost per lead or ROI, you’re probably wasting money.
You’re locked into long contracts. 12-month commitments for unproven tactics is a red flag.
Your marketing budget is bigger than your profit. If you’re spending $5,000/month on marketing but only netting $3,000/month in profit, something’s wrong.
Red Flags You’re Under-spending
Yes, this is also a problem.
Your competitors are everywhere and you’re invisible. If you’re trying to compete with a $100/month budget while they’re spending $5,000, you’ll lose.
You’re doing everything yourself and it’s taking all your time. Your time has value. If marketing is eating 20 hours/week, you’re probably underspending on help.
You’ve been “testing” with tiny budgets for months. $200/month in Facebook ads isn’t enough to learn anything. Either commit real money or don’t do it at all.
How to Adjust Your Budget
Your marketing budget isn’t set in stone. Review it quarterly.
Increase your budget when:
- You’re getting a positive ROI and could scale
- You’re turning away customers (you need more capacity)
- Competitors are outspending you and it’s hurting
- You have a new product or service to launch
Decrease your budget when:
- You’re not seeing any return after 3-6 months of consistent effort
- Your sales pipeline is full and you can’t handle more leads
- You’re in a slow season (if your business is seasonal)
- You need to shift money to operations or hiring
Don’t change it every month. Marketing needs time to work.
What If You Have Almost No Budget?
If you can only spend $200-500/month, focus on:
Time over money:
- Write your own blog posts
- Film your own social media content
- Build your own email list
- Engage in relevant online communities
Free and cheap tools:
- Canva for graphics
- Mailchimp free plan for email
- Google Analytics for tracking
- Social media organic posting
One paid thing: Pick one small paid ad test ($200-300/month) on the platform where your customers are. See if you can make it profitable before scaling.
Be patient. With a small budget, results take longer. Don’t give up after 30 days.
The Bottom Line
Your marketing budget should be based on your revenue and goals, not random numbers.
Start with 5-12% of gross revenue. Allocate 70% to what works, 20% to what shows promise, 10% to testing.
Pick 2-3 channels and commit real money to them. Don’t spread $100 across ten platforms.
Track everything. If you can’t measure ROI, you can’t improve it.
And remember: the right budget is the one that brings in more money than it costs. Everything else is just a guess.