How Much Should a Small Business Spend on Marketing?

Every business owner eventually has to answer the same question: how much should we actually be spending on marketing?

There is no percentage that works for every company. A business trying to open a second location has different needs from one with a full schedule and a strong base of repeat customers. Margins, competition, growth goals, industry, and current visibility all affect the number.

Still, you need somewhere to start.

Start With a Percentage, Then Check It Against the Business

For an established small business, roughly 5 to 10% of annual revenue can be a useful planning range. Treat it as a starting point for the budget conversation rather than a rule.

Say a landscaping company in Summit County expects to do $1.2 million in revenue this year.

• At 5%, its annual marketing budget would be about $60,000.
• At 8%, it would be about $96,000.
• At 10%, it would be about $120,000.

The right number depends on what that company is trying to accomplish. A landscaping business with a full schedule and strong referral network may have little reason to spend aggressively. A competitor trying to expand into Akron, hire another crew, and add a new service line may need considerably more visibility.

That is why Lake Spur builds local business marketing strategies around the goals of the business rather than starting with a predetermined mix of tactics.

Growth Usually Requires a Bigger Budget

A business trying to grow quickly will usually need to invest more than one focused primarily on maintaining its current position.

There may be a new market to introduce the company to. Search visibility may need to be built. Advertising campaigns need creative and media. The website may need work. Social media, video, traditional advertising, local outreach, and other channels can all become part of the plan.

A new business faces an even bigger challenge because very few people know the name yet.

In those situations, a budget toward the higher end of your range, or sometimes beyond it, may make sense if the revenue potential and cash flow support it.

Established Businesses May Be Able to Run Leaner

A company with years of local recognition, repeat customers, strong reviews, healthy organic search visibility, and steady referrals has already built assets that a newer competitor does not have. That can reduce the amount required simply to stay visible.

It does not mean marketing stops being important. The budget may shift toward protecting what already works, supporting important seasons, introducing new services, and keeping the brand active in the market.

For some Northeast Ohio businesses, that could mean maintaining SEO throughout the year while increasing paid, social, traditional, or other advertising during periods when demand matters most.

Look at Your Margins Before Settling on a Percentage

Two businesses can generate the same revenue and have completely different marketing budgets.

A company doing $1 million a year with healthy margins has more flexibility than one doing $1 million while struggling with labor, material, equipment, or inventory costs.

Run the marketing percentage through your actual financials. Ask whether the business can support the investment, how much additional revenue would justify it, and how long you can reasonably give the strategy to work. That last question matters. Some marketing channels can produce data and leads quickly. Others build value over a longer period. Your budget has to support the timeline too.

Customer Acquisition Cost Can Tell You More Than a Percentage

Once you have enough data, percentage of revenue becomes only one way to look at the budget. You also want to know:

How much does it cost to acquire a new customer?

Then compare that with:

How much is that customer worth to the business?

Imagine a service company spends $200 to acquire a new customer. If the average customer produces $3,000 in profitable revenue over the course of the relationship, that acquisition cost may make excellent financial sense.

If the same $200 produces a one-time $250 sale with very little margin, the numbers look very different.

This is where good reporting becomes important. Lake Spur’s digital marketing services connect campaign strategy with analytics and reporting so businesses can evaluate where their marketing dollars are actually producing value.

Decide What the Marketing Budget Has to Accomplish

Before deciding whether the budget should be $40,000 or $140,000, define the job you expect it to do.

Are you trying to:

• Generate more qualified leads?
• Enter a new city or service area?
• Launch a product or service?
• Increase appointments?
• Grow a particular department?
• Improve local search visibility?
• Recruit employees?
• Build awareness in Northeast Ohio?
• Increase repeat business?
• Support a new location?

Those goals affect where the money should go.

A business trying to generate immediate leads may devote more of the budget to paid advertising. A company that depends heavily on Google searches may need a larger investment in SEO, website content, and local search. Another business may benefit from radio, outdoor, direct mail, sponsorships, or other traditional marketing.

Most businesses will end up using a mix.

Be Careful About Cutting Marketing Without Looking at the Numbers

When revenue slows down, marketing is often one of the first expenses businesses consider reducing.

Sometimes a reduction is justified. The important part is knowing what you are cutting and what that channel is producing first.

If a campaign consistently spends $5,000 to generate $25,000 in profitable business, cutting it solely to reduce expenses can create a larger revenue problem.

If another campaign has been consuming budget without producing qualified leads, that money may be better moved somewhere else.

Review the performance, customer acquisition cost, seasonality, margins, and business goals before making the decision.

A slower period may call for less spending, more spending, or simply a different allocation.

How to Build a Small Business Marketing Budget

You can get surprisingly far with a few basic numbers.

Start with your expected annual revenue and choose a reasonable percentage as an initial planning figure.

Then ask:

1. What are our growth goals for the next 12 months?
2. Which products or services do we most want to grow?
3. Where do our customers currently come from?
4. Which marketing channels are already producing results?
5. Where are we losing visibility to competitors?
6. How much can we spend while protecting healthy cash flow?
7. How will we measure whether the investment is working?

From there, divide the budget among the channels that have a clear role in reaching those goals.

The percentage gives you a starting number. The business strategy determines what happens to it.

How Much Should Your Business Spend?

There is no universal marketing budget for a small business in Akron, Cleveland, or anywhere else in Northeast Ohio.

A stable company may be comfortable around 5% of revenue. Another business may decide that 8 or 10% better reflects its growth plans. A company entering an aggressive expansion period may need to invest more.

What matters most is whether the spending makes sense for your margins, goals, customer value, market, and expected return.

Lake Spur Marketing helps Northeast Ohio businesses look at the full picture and build a marketing plan around where they are now and where they want to go.

If you are trying to determine what your marketing budget should look like, get in touch with Lake Spur Marketing and we can walk through it with you.

Frequently Asked Questions

What percentage of revenue should a small business spend on marketing?

There is no percentage that works for every small business. A range of roughly 5 to 10% can be useful for initial planning, but the final budget should account for margins, growth goals, competition, industry, current visibility, and cash flow.

Should a new business spend more on marketing?

Often, yes. A new business has to build awareness and visibility without the benefit of an established customer base, search presence, reviews, referrals, or local name recognition. The right amount still depends on available capital and the economics of the business.

Should I cut my marketing budget during a slow season?

Look at performance before making an across-the-board cut. Some marketing may be producing profitable business even during a slower period, while other campaigns may be candidates for reduction or reallocation. Seasonality should be part of the annual marketing plan.

What if I cannot afford 5% of revenue for marketing?

Start with the amount the business can realistically support and prioritize the work with the greatest potential impact. For a local business, that may include improving the website, Google Business Profile, reviews, important service pages, and other local SEO fundamentals before expanding into additional paid channels.

How do I know whether my marketing budget is working?

Track the outcomes tied to your business goals. Depending on the strategy, that may include qualified leads, appointments, sales, cost per lead, customer acquisition cost, conversion rate, revenue, organic visibility, and return on advertising spend. The goal is to understand what the business is getting back from its investment.