How much should a small business spend on marketing?

When you're growing a business, there are plenty of tough questions you'll run into. Among them: How much should a small business spend on marketing?

This is one of the most common and most misunderstood questions new founders face. The problem is that most guidance around marketing spend speaks to it as a percentage of revenue, and this is either too generalized or too aggressive for early-stage businesses. 

The truth is, there is no universal number for how much you should spend on marketing. The right budget depends on your stage, your goals, your business model, and how clearly you understand what is driving return. That is where marketing spend optimization comes in. Not just spending more or less, but spending smarter.

“Founders often want to do everything — Google, social media, influencers, events, billboards, and partnerships,” says Rachel Moncton Oatway, Vice President of Marketing at Mercury. “But that’s a fast way to spend a lot of money without learning anything. Instead, you should start with a channel that fits your product and go-to-market motion (self-serve sign-up vs. sales), and that your target audience is paying attention to.”

This guide walks through how to build a marketing budget that makes sense for your reality. Whether you’re mapping out your first plan or trying to refine an early strategy, this will help you move from vague intuition to informed decision-making.

When founders search for marketing spend benchmarks, they usually end up with a wide range of answers. That range isn’t wrong. It just needs context.

In 2025, Gartner’s CMO Spend Survey revealed that the average marketing spend as a percentage of revenue is 7.7% — meaning if your business makes $1M in a year, it should spend $77,000 on marketing. But this survey includes established enterprise organizations in the sample, so how does this translate to a startup or small business? 

As a common rule of thumb, most small businesses can plan to spend between 5% and 20% of revenue on marketing. The exact number varies by growth stage, industry, and goals.

Typical marketing spend by business stage

• Early-stage or pre-revenue: 10% to 20% of projected revenue. This stage prioritizes awareness, validation, and learning what channels convert. There’s a lot of upfront work to do. 
• Growing small business: 7% to 10% of revenue. Focus shifts toward building repeatable acquisition (new customers) and early optimization.
• Stable or mature businesses: 4% to 7% of revenue. Growth is often more predictable, with brand strength and referrals supplementing paid efforts.

But context matters. A bootstrapped company might prefer to sit comfortably at the lower end of this range and focus on low-cost growth strategies, like word of mouth or partnerships. A venture-backed SaaS company with proven product-market fit might push well above it because it's raised capital specifically to spend on fast growth.

Benchmarks by business model

Real-world marketing spend as a percentage of revenue varies meaningfully by industry. According to 2024 research, here is how much businesses spend on marketing across sectors, and the logic behind it:

Again, these ranges are just reference points and should be used as a gut check rather than a rulebook. Your job is to build a budget that supports sustainable growth without putting unnecessary pressure on cash flow.

Benchmarks are useful for context. But they don’t answer the most important question: How much should you spend on marketing for your business, right now? That answer comes from your fundamentals.

“There will be — and should be — a lot of experimentation as you build and scale your early marketing plan,” confirms Oatway. “There is often no silver bullet, and you’ll have to find the channels and campaigns that resonate most with your audience within your budget.”

Start with runway, not ambition

Before you decide how much you want to spend, get honest about what you can afford to spend without placing stress on your business.

Ask yourself:

• How many months of runway do we realistically have?
• How much capital can we allocate to growth without jeopardizing operations?
• Are we in survival mode, stability mode, or growth mode?

If your spend shortens your runway faster than your ability to learn and adapt, you’re just burning cash.

Understand your CAC, LTV, and breakeven point

If you want clarity on how much your small business should spend on marketing, you need at least a directional sense of three numbers:

• Customer acquisition cost (CAC): What you spend to acquire one customer
• Lifetime value (LTV): What a customer is worth over time
• Breakeven point: When revenue from a single customer covers the cost of acquiring that customer

Even rough estimates are valuable here. If it costs you $200 to acquire a customer who brings in $2,000 over a year, your marketing budget can scale with confidence. If it costs $300 to acquire a $250 customer, that's a sign to take a step back and reconsider your approach. You need to either lower CAC, improve your conversion rates, or increase what customers spend with you. 

This is the part that many early founders get wrong. They ask how much to spend before understanding what that spend is expected to return.

Funnel math: Reverse engineer the outcome

Instead of starting with a budget and hoping for results, flip the order.

Start with this series of questions:

1. How many customers do you need this quarter?
2. What is your realistic conversion rate?
3. How many leads does that require?
4. How much does it cost to generate those leads?

This funnel math creates a much clearer sense of what to spend on marketing when your goals are mapped to reality instead of assumptions.

Example:

• Goal: 20 new customers
• Conversion rate: 10%
• Leads needed: 200
• Cost per lead: $25
• Required budget: $5,000

Suddenly, your marketing budget is a logical outcome of your growth plan instead of a guess.

Creating a healthy marketing budget is a first step. After that, you have to decide where your marketing dollars should go. 

As a small business, you don’t need to overcomplicate things, but you should make sure you are investing in three core buckets: brand, performance, and lifecycle.

Brand investment supports visibility and trust

This includes your website, messaging, content, and the overall experience someone has when they encounter your business. It doesn’t always produce immediate leads, but it shapes buying decisions over time.

Performance spend focuses on direct growth

Paid ads, targeted campaigns, and demand capture efforts help drive measurable action and early traction. But paid investment should come once you’re confident about your product and positioning.

“Often, business owners think they should get paid channels going right away, but having a great product with strong product-market fit and positioning should come first,” underscores Oatway. “If people aren’t buying your product through your network, referrals, or organic channels, you’re unlikely to convince someone with an ad.” 

Lifecycle and retention spending strengthens customer relationships

Just because you’ve successfully acquired a customer doesn’t mean that they stop being a focus of yours. Email communication, onboarding, and retention efforts are often overlooked but play a major role in maximizing CLV.

In the early stages, expecting perfect ROI clarity is unrealistic. What matters more is building a simple system that helps you understand what is working and what is not.

“You should prioritize channels with a fast payback period, especially early on when you’re strapped for cash,” says Oatway. “There will be a ramp-up period, but good campaigns should drive conversions in the first few weeks and gain efficiency in the first few months.”

When thinking about how to measure ROI on marketing spend, focus on a few core signals:

• Cost per lead or acquisition 
• Conversion rate by channel
• Revenue tied to specific campaigns
• Time to payback

You don’t necessarily need enterprise analytics to start. A basic setup using Google Sheets, Google Analytics, and simple attribution tools can provide enough visibility to make smarter decisions. 

Ultimately, you’ll want to ask: 

• Is this channel growing more efficient with time?
• Are we learning something useful?
• Does this align with our growth goals?

If you can answer "yes" to at least two of these questions, keep going — refine and scale with intention. If you're only hitting one or striking out entirely, it's time to reassess or cut it.

Here are a few example marketing budgets. But remember, these scenarios are just snapshots to help ground what a realistic budget can look like in practice.

$5K/month: Solo founder or early-stage business

This budget prioritizes learning and traction without overextending cash.

• $1,800 brand: Website updates, basic content, positioning clarity
• $2,200 performance: Paid search or social tests to validate demand
• $1,000 lifecycle: Email setup, onboarding basics, light retention efforts

At this level, the goal is learning what resonates, which channels convert, and where future investment should go.

$20K/month: Growth-stage team

This budget supports structured experimentation and early optimization.

• $6,000 brand: Content, messaging refinement, design, credibility assets
• $10,000 performance: Multi-channel campaigns with testing and optimization
• $4,000 lifecycle: Automation, customer retention, re-engagement flows

Here, the focus shifts from discovering channels to refining efficiency and building repeatable growth. 

In both scenarios, the number is less important than whether or not your marketing spend is creating clarity, momentum, and direction.

So, how much should a small business spend on marketing? The honest answer is: Enough to support growth, learn quickly, and stay financially grounded. As your business evolves, so should your spend. What matters is staying intentional, responsive, and aligned with what growth actually costs.

If you want more control over how marketing spend impacts your cash flow, tools like Mercury make it easier to track, organize, and allocate funds with real-time visibility. Not just for marketing, but for the health of your entire operation. Because smart growth is about spending with purpose.