What a small business should actually spend on marketing

The quick answer is 7–8% of gross revenue if you do under $5M a year (SBA), and somewhere in the 5–20% range across the board. The real answer is that the right number depends on your stage — and a budget you can't tie back to what a customer is worth isn't a budget, it's a wish.

An owner asks us “what should I spend on marketing?” almost every week, and almost always wants a single percentage back. We could give one. Most people online will. But a number with no context is useless — the honest version of the answer starts with two questions back: what stage is your business in, and can you trace a sale to the money that made it happen?

So what's the actual number?

If you want a benchmark to anchor on, here it is. The U.S. Small Business Administration recommends roughly 7–8% of gross revenue on marketing for businesses doing under $5M a year (SBA). Across all sizes and models, the common range is 5–20% of revenue. Gartner's annual CMO Spend survey puts marketing budgets at about 7.7% of company revenue — and notes that businesses under $10M in revenue allocate around 15.6% of their total budget to marketing (Gartner CMO survey).

Those are averages, which means they're wrong for almost everyone specifically. The number that fits your shop moves with two things: how mature your business is, and what kind of business it is.

Find the row that's actually you, not the average of all the rows. A growing B2C shop and a mature B2B supplier are looking at numbers that are three or four times apart, and both are right.

Does the percentage change as I grow?

Yes — and it should drop as you mature. Early on you spend a higher share of revenue, 10–20%, because you're buying something other than sales: you're buying learning. You don't yet know which channel works, which message lands, or what a customer is worth. That early spend is tuition. Some of it will be wasted, and that's the point — you're paying to find out what works before you pour real money into it.

A mature business spends less, 4–7%, for the opposite reason. By then the brand is doing free work for you. Past customers come back without being re-acquired. Word of mouth and reviews bring in people you didn't pay for. The expensive part — earning a stranger's first purchase — is increasingly handled by the customers you already won. That compounding is exactly why the percentage falls: you're not buying every sale anymore, so you don't need to spend like you are.

Early-stage spend isn't buying sales. It's buying the answer to which channel works — and that answer is worth paying for.

Why CAC and LTV beat any percentage

A percentage tells you how much to spend. It tells you nothing about whether that spend is working — and that's the part that actually matters. The better lens is two numbers most owners never write down: customer acquisition cost (CAC), what it costs you to win one new customer, and lifetime value (LTV), what that customer is worth to you over the time they stay.

Here's why it beats the percentage. Say a customer is worth $1,200 to you over a year, and it costs you $150 in marketing to acquire one. You're turning $150 into $1,200. The percentage framing would tell a shop your size to spend, say, 7% of revenue and stop there. The CAC/LTV framing tells you something far more useful: spend more. Every $150 you can find buys $1,200 back. The cap isn't a percentage — it's how many profitable customers you can reach before the math stops working.

Now flip it. If a customer is worth $1,200 and it costs you $1,400 to acquire one, no percentage in any table saves you. You're losing money on every sale, and spending “the recommended 7%” just means losing it on schedule. The percentage can't see this. CAC and LTV can.

This is the reframe: the percentage is a starting guess for owners who don't yet know their numbers. The moment you do know them, you stop budgeting by percentage and start budgeting by return. You spend up to the point where the last dollar in still earns more than a dollar back, and not a dollar past it.

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A budget you can't tie back to what a customer is worth isn't a budget. It's a wish with a dollar sign in front of it.

— WHAT WE KEEP SAYING ON ADVISOR CALLS

Where should the money actually go?

Before you spend a dollar on ads, spend nothing on the fundamentals — because most of the highest-return marketing for a small shop is free. A complete, accurate Google Business Profile. A steady trickle of recent reviews. An email to the customers you already have, who already trust you and cost nothing to reach. These are the things that quietly raise the value of every paid dollar you spend later, and most shops skip straight past them toward ads.

The order matters. If you're not capturing the demand that already exists — people searching for you, past customers ready to come back — paid spend is pouring water into a leaky bucket. We laid out the free channels and the order to attack them in over in lead generation without paying for ads. Get those working first. Once they are, paid channels become a question of math, not faith — which is exactly when something like Google Ads is worth weighing for a small business, and not a moment before. And if you're still deciding whether to run marketing yourself, hand it to an agency, or use a platform, we mapped all three honestly here.

How to actually set yours

Start with the benchmark — pick the row that matches your stage and model from the tables above — then immediately try to replace it with something better. The benchmark is a placeholder you use until you know your CAC and LTV. The day you know those two numbers, the percentage becomes training wheels you can take off.

If you don't know where your next marketing dollar should go for your specific shop, that's exactly what the free scan at /start is built to tell you. It takes about 60 seconds, it's free, and instead of handing you a generic percentage it tells you where the next dollar would actually move the needle — the free fundamentals you're missing, the paid channels worth testing, the order to do them in. A number you can act on beats a number you can quote every time.

The percentage is where the conversation starts. It was never supposed to be where it ends.