"How much should I spend on marketing?" is one of the most common questions business owners ask, and the honest answer is that there is no single correct number. Many sources quote a single-digit percentage of revenue as a starting point, but your best figure depends on your margins, your growth goals and how well your marketing converts. Treat any rule of thumb as a starting point and build your own number from the ground up.
Step 1: Start with the goal
Write down what you want in the next 12 months. For example: 400 new customers, or $300,000 in new revenue, or 50 qualified leads a month. A budget without a goal is just a guess.
Step 2: Work out what a customer is worth
Estimate your average order or job value, your gross margin and how often customers buy again. If an average new customer brings $120 in gross profit over their first year, you can't afford to pay $150 to win them, unless you have strong evidence they'll keep buying for years.
Step 3: Set your allowable cost per customer
Customer acquisition cost (CAC) is your marketing and sales cost divided by the number of new customers. Decide the most you can pay and still earn a profit, then compare it to your goal.
Illustrative example: you want 100 new customers this quarter and can pay up to $40 each. That points to roughly $4,000 for the quarter, plus the cost of tools, creative and any agency fees.
Step 4: Adjust for your stage
- Launching: you usually spend more relative to revenue because nobody knows you yet
- Growing: invest in what's proven and test carefully
- Established: protect your base and keep a share for new ideas
Step 5: Split across channels
A common heuristic is to put most spend on proven channels, a smaller share on promising ones and a small share on experiments. For example, roughly 70/20/10, adjusted to your business. Proven channels might be Google Ads, your Google Business Profile or marketplace ads. Experiments might be a new platform or format.
What belongs in the budget
- Ad spend (Google, Meta, marketplaces)
- Content and creative (photos, video, copy)
- Website and tracking costs
- Software (email, analytics, scheduling)
- Agency or freelancer fees
- A small buffer for testing
Pace and review
Set a monthly budget, review results every month and shift money toward what works. Avoid starting big and stopping early. Many channels need weeks of data before you can judge them.
Common mistakes
- Cutting marketing in a slow month and losing momentum
- Spreading a small budget across too many channels
- Spending before tracking is set up
- Forgetting that the website and offer also need investment
- Judging by clicks rather than customers and profit
A simple budgeting checklist
- Write your 12-month goal
- Calculate gross profit per customer
- Set a maximum cost per customer
- Choose one or two proven channels and one test
- Set up tracking for calls, forms and orders
- Schedule a monthly review
A worked example (illustrative numbers)
A home-services company wants 20 extra jobs a month. Each job brings about $400 in profit. It turns about one in four leads into jobs, so it needs about 80 leads. If it can pay up to $50 per lead and still be comfortable, a lead budget of about $4,000 a month is the starting point, before creative, tools and fees. If actual cost per lead is higher, the options are to improve the website and offer, narrow the targeting or accept fewer jobs.
How to stretch a small budget
- Focus on one or two channels until they work
- Use assets that cost little: your Google Business Profile, reviews and email list
- Reuse content across your site, social media and ads
- Test small before scaling
- Fix tracking so no spend is wasted blind
Questions owners ask
Should I spend more in my slow season?
Sometimes. Slow periods can be cheaper to advertise in and good for building your list and content, but only if you can afford it and your offer works. Plan around your cash flow.
What counts as an agency fee versus ad spend?
Ad spend goes to the platforms. Agency fees pay for strategy, setup and management. Keep them separate on reports so you can see the true cost.
When should I increase my budget?
When a channel is profitable at the current level, tracking is trustworthy and you have the capacity to handle more customers. Increase in steps and watch efficiency.
Where an agency fits
An agency can help set the plan, run the channels and report honestly, but they can't replace clear goals. Ask the questions in our agency checklist. If you'd like a second opinion on a budget, contact us. For the key numbers, read ROI, ROAS, CAC and LTV explained.