How much should a small to medium sized business spend on marketing?

How much should a small to medium sized business spend on marketing?

Marketing is essential for every business, no matter the size or industry. Without it, potential customers may never know your brand exists. Marketing not only increases visibility and sales but informs potential customers about your products or services. It also helps to build trust and credibility in your business.

The amount a small to medium-sized business (SMB) should spend on marketing can depend on various factors, but a common benchmark is 5% to 10% of gross revenue.

5% if you’re aiming to maintain your current position or 7% to 10%+ if you’re wanting to grow or expand into new markets.

Factors that can influence your marketing budget

Business Stage and Revenue: Startups or growing companies may spend up to 20% to gain visibility faster. Established businesses can spend less, around 5–10%, focusing on maintaining their market share. Larger companies naturally have larger marketing budgets.

Marketing Goals: If a business is looking to increase brand awareness, launch a new product or drive sales and leads, the spend can temporarily be higher. As you can imagine, the more ambitious the goal, the higher the spending required.

Industry Type: Competitive industries, such as fashion or fitness, often require a higher marketing spend, whereas niche businesses or the B2B sector may rely more on targeted or relationship-based marketing, which can be at a lower cost.

Marketing Channels: Different channels come with different costs and challenges. For example, Paid Ads on Google & Meta require recurring payments which can be scalable. SEO and Content Marketing require a more long-term investment. The proven Return on Investment (ROI) and effectiveness of each channel can be a major factor in deciding which is best.

Customer Acquisition Cost (CAC): Knowing your CAC and comparing it to Customer Lifetime Value (CLTV) helps you budget smarter. A bank or insurance company can afford to spend more on customer acquisition than an online shoe store. This metric can help you reverse-engineer your marketing process to arrive at a budget.

Competitors: Heavily saturated markets require more spending. Companies may need to spend more to outspend their competitors. For example, if competitors are heavily investing in certain channels like Google Ads, it may require additional investments within the same channel to stand out and to stay competitive.

What to focus on

Here’s a breakdown of the services and marketing channels a small to medium-sized business could focus on. Prioritisation can depend on goals, audience and budgets.

  • Agency Support & Strategy: 5–10%
  • Paid ads (Google, Meta, etc.): 30–50%
  • Content marketing & SEO: 20–30%
  • Email & CRM: 5–10%
  • Events, sponsorships, PR: 5–10%
  • Influencer or Partner Marketing: 5-10%
  • Branding/design: 5–10%

Tips to keep on top of your marketing budget

Staying on top of your marketing budget is key to avoiding overspending and ensuring every dollar works hard for your business. Here are some practical tips to manage your budgets:

  • Start with a clear strategy.
  • Define what success looks like.
  • Tie each goal to a specific budget allocation.
  • Break the budget down by channel.
  • Use tools like analytics platforms to measure the effectiveness of campaigns and adjust budgets dynamically.
  • Stay flexible. Consider reallocating funds between channels based on performance.
  • Track spending in real time. Use a spreadsheet or marketing software.
  • Track ROI to ensure efficient spending.

If you have any questions or want to learn more, feel free to reach out to one of our senior consultants. Our office is based in Cheltenham, Bayside Melbourne. We have been helping businesses with marketing, website design and ecommerce development for over 25 years.