Most small businesses that market seriously spend somewhere between a few hundred and a few thousand dollars a month, and a common rule of thumb puts marketing at roughly 5 to 10 percent of revenue, higher for growth pushes and new businesses, lower for established shops living on repeat customers. The right number for you depends on your goals, your margins, and your market.
Rules of thumb are a starting point, not an answer. We have watched owners quote the “7 percent of revenue” figure like scripture while their competitor down the street spends double and takes the phone calls that used to be theirs. So let’s talk about how to actually set the number.
Why the percent-of-revenue rule exists, and where it breaks
The percentage rule survives because it scales with your ability to pay. A $300,000 business spending 7 percent puts about $1,750 a month into marketing. A $2 million business at the same rate spends closer to $12,000. Both are sane numbers for their size. The rule keeps you from spending like a company you are not.
But it breaks in three common situations. New businesses have to spend ahead of revenue, because nobody can buy from a business they have never heard of; that is why launch budgets often run well above the settled rate for a year or so. Businesses in aggressive growth mode also deliberately overspend the rule, treating the extra as an investment with a payback period rather than an expense. And businesses with a genuine referral machine can sometimes spend under the rule for years, until the founder slows down and the machine slows with them.
The three questions that set your real number
1. What is a customer worth?
Everything starts here. If your average customer is worth $500 over a couple of years, you can afford to pay a certain amount to acquire one. If they are worth $8,000, the arithmetic changes completely. High-value businesses, think HVAC installs, remodeling, legal work, can sustain much higher budgets per customer than businesses selling $15 lunches, because one win covers a month of spend.
2. What does your goal actually require?
“More business” is not a goal you can budget for. “Ten more service calls a month” is. Work backward: if leads in your trade cost somewhere in the range you have seen historically, and you close a third of them, you can estimate what ten new jobs requires in ad spend before any agency fee. If the resulting number is far beyond your budget, adjust the goal rather than pretending the math will bend. It never does.
3. What can you sustain for a full year?
This one gets skipped the most. Marketing results compound: month five builds on month two. A budget you can hold steady for twelve months at $1,500 will nearly always outperform $4,000 for three months followed by panic and cancellation. Set the number low enough to survive your slow season. If you have to choose between impressive and sustainable, choose sustainable every time.
How the money typically splits
Owners often ask what the spend should look like inside the budget, so here is the honest pattern we see across small businesses. Some of it goes to management, whether that is an agency fee, a freelancer, or your own time. Some goes to media, the actual ad dollars paid to Google or Meta or the local paper. And some goes to assets, the website, the photography, the email system, the things you build once and use for years. A budget that is all media with no working phone system or credible website leaks money at the point of contact. A budget that is all fee and no media buys you a lot of meetings and very few customers. How agencies structure and price those pieces is its own topic, and our guide to how marketing agencies actually price breaks it down model by model.
Signs you’re spending the wrong amount
- Underspending: your revenue has been flat for three years, competitors keep appearing above you on Google, and your newest customers all say “my neighbor told me about you.” Referral-only is a compliment and a warning at the same time.
- Overspending: you cannot name what last month’s budget produced, the reports are all impressions and clicks with no customer counts, and the fee got set by what the agency proposed rather than what your math supports.
- Misallocated: you are paying for six channels at token levels instead of two channels at effective levels. Thin spend everywhere loses to focused spend somewhere, almost every time.
The Twin Shores answer
When someone asks us what they should spend, we ask the three questions above before quoting anything, because a budget built on your numbers survives and a budget built on our template does not. Sometimes the answer is “less than you expected, focused on one channel.” Sometimes it is “you are not ready to spend at all until the strategy is fixed,” which is a conversation, not a retainer. That is what our marketing strategy consulting is for. And if you want to see real pricing before you ever get on a phone, the pillar guide on what marketing agencies cost publishes the numbers most agencies keep behind a sales call.
Want a budget built on your math?
Bring your average job value and your goal. Scott will walk the numbers with you and tell you what spend actually makes sense, even if the answer is smaller than what we’d charge. Owner’s cell, no obligation.