How Much Should a Small Business Spend on Marketing?

January 23, 2024

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Picture this: You’ve just opened your dream business. The paint on the sign above the door is fresh, and the inventory is fully stocked. But there are nagging questions at the back of your mind: How do I get people in the doors? And better yet, how do I tackle marketing for my business? How much should a small business spend on marketing, anyway? 

Fortunately, you’re not alone. Every business owner has to answer this question eventually because like it or not, marketing is a must-have for any small business in today’s market. But learning how much you should budget for your marketing takes time and experience. Thankfully, we’re here to help.

Let’s dive into that million-dollar question that can make or break your small business. How much should you spend on marketing? And how should you break it up?

What is the Average Marketing Budget for Small Businesses?

So, what’s the golden number? Well, it isn’t a one-size-fits-all answer. On average, B2B companies spend between 2% to 5% of their revenue on marketing, while their B2C counterparts usually spend between 5% to 10%. So, a B2B company that makes around $100,000 per year should spend up to $5,000 on marketing. Similarly, a B2C company that makes $100,000 yearly should spend closer to $10,000 on marketing.

That being said, these percentages are more of a guideline than a strict rule. For instance, if your business is in its infancy or you’re launching a new product, you may need to invest more money to attract new customers. In fact, we recommend spending as much as possible in those early days to get a foothold in your industry. Once your business has gained some traction, you can reevaluate and adjust your budget.

Not All Marketing Budgets Are Created Equal

It’s also vital to remember that you can’t just photocopy the marketing strategy of an industry giant and expect it to work for your small business. Not all marketing budgets are created equal, so you should try to create a budget and strategy unique to your business that reflects your goals, your audience, and your growth stage.

So, How Much Should a Small Business Spend on Marketing?

The short answer is between 2% and 10%, but it depends! Creating a marketing budget isn’t about splashing money around aimlessly. It’s about understanding your goals and strategically allocating your budget to maximize returns. If we compare it to high-stakes games, it’s more like chess than roulette. 

That’s why we recommend going beyond the “how much” and delving into the “where to spend.” Because you can have all the marketing money in the world, but if you don’t know where to spend it, you’re out of luck! 

A Breakdown: How to Allocate Your Marketing Budget as a Small Business

Once you have your marketing budget, you’ll need to divide it among various areas. And the percentages you allocate to each will depend on your industry, goals, and target audience. For some businesses, investing heavily in content marketing may be key, while others may prioritize paid advertising. 

Like most things in business, it depends on your industry, goals, and individual strengths. That said, if you’re looking for a general breakdown of how to allocate your marketing budget, we’ve created one that seems to work for most small businesses. Let’s check it out!

Content Marketing (30-40%)

Why should you allocate a substantial part of your marketing budget to content marketing? Well, it’s simple – content is king. In this digital age, investing in quality content creation and social media marketing is super important, and that includes influencers, graphic designers, videographers, photographers, and more.

Now, the type of content you post depends heavily on your industry, but there’s a reason 91% of businesses are embracing short-form video content in 2023, and 65% of social media marketers still use Instagram. You need to go where your audience lives, whether that’s YouTube, TikTok, Instagram, Facebook, Pinterest, or even your own blog.

Like all marketing, there is no tried-and-true template for the perfect marketing plan. In a lot of ways, it’s all just an educated gamble. But the more you know about your audience and industry, the better your chances of success. 

Paid Advertising (20-30%)

Paid advertising can offer a quick return on investment by increasing visibility and driving traffic to your website, social media platforms, or physical location. And before we go any further, let’s clarify. Paid advertising includes:

  • PPC (pay-per-click)
  • Social Media Ads
  • Print Ads
  • Billboards
  • Television/Radio Commercials
  • And more!

By targeting your ideal customer demographic where they exist most often, you can boost conversions, attract new customers, and establish a firm foothold in your industry. This is like an express elevator to success – it gets you to your destination faster, but remember, there’s a cost. 

For another expert opinion, the US Small Business Administration highly recommends spending between 7% and 8% of gross revenue on paid advertising, especially when you’re just getting started.

Creative Design and Branding (5-10%)

Ever heard the saying, “Don’t judge a book by its cover?” Well, in the business world, that’s precisely what customers do. That’s why a portion of your budget should be dedicated to creative design and branding. 

If you don’t have a graphic designer helping you create your business’s logo, typography, color story, website, and more, we highly recommend you start doing that now. Branding is that important. Remember, first impressions count and good design might mean the difference between a customer choosing you or your competition.

Public Relations and Events (5-10%)

Public relations and events are crucial for networking and creating buzz around your business. It’s all about relationship-building, and that includes customers, industry influencers, and the media. By hosting or participating in events, you create an opportunity to interact directly with your audience, so it’s definitely worth your time and a portion of your budget.

Analytics and Tracking (5%)

Numbers speak louder than words. So, allocating a portion of your budget to analytics and tracking is vital. Your analytics should serve as your compass in the business world, guiding you toward what works and steering you away from what doesn’t. And by understanding your campaign metrics, you can fine-tune your marketing and make informed decisions that will ultimately lead to your brand’s success.

Tools and Software (10%)

Many analytics platforms often fall into this category, but let’s not forget there are tons of tools out there that can make marketing your business super easy. They range from social media scheduling and productivity boosters to customer relationship management and email marketing tools. 

There’s so much available online, both free and paid, that can make your life as a small business owner much easier. So, it’s definitely wise to allocate part of your budget to these tools and software to help you streamline your processes, automate your marketing, and ultimately save you money. The goal here is to work smarter, not harder.

Let Your Business Guide Your Marketing Budget

As you create your own marketing budget and strategy, remember to let your industry, goals, and strengths as a business guide your hand. There’s no right or wrong amount to spend on marketing. The key is to find the balance that works best for your business.

If you’ve found a type of marketing that’s working wonders for you, lean into that. If there’s a unique specialty your business has, use it to your advantage. Ultimately, it’s about taking a proactive, strategic approach to maximize every dollar you spend.

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