How Much Should a Small Business Spend on Marketing Each Month?

By KATIE THOMPSON 

Senior Impact Specialist, Larison Media

If you own a small business, chances are you’ve asked yourself this question before: “How much should I actually be spending on marketing?” And if you’ve looked online for answers, you’ve probably seen completely different opinions everywhere.

Some people say, “Spend 5% of your revenue.” Others say, “You need to be on every social media platform.” And some claim: “Just run Facebook ads and you’ll grow.”

The truth is, there’s no universal number that works for every small business.

A local coffee shop has very different marketing needs than a law firm, landscaping company, gym, contractor, or ecommerce brand. But there is a smarter way to approach your marketing budget so you stop guessing and start making intentional decisions.

At Larison Media, we’ve seen one thing over and over: The businesses that grow consistently usually aren’t randomly spending money on marketing. They understand their numbers.

In this article, we’ll break down:

• What impacts a small business marketing budget

• What most successful businesses spend

• How your goals should determine your budget

• Which marketing channels make sense for different businesses

• And how to calculate your marketing budget using simple math

Because marketing shouldn’t feel like gambling. It should feel measurable.

The First Question Isn’t ‘What Can You Afford?’

It’s: “What Are You Trying to Achieve?”

This is where many small businesses get stuck. They build a marketing budget around what feels comfortable instead of what they actually want their business to accomplish.

For example:

• A business trying to maintain steady sales may only need a modest marketing budget.

• But a business trying to hire employees, expand locations, increase revenue, or dominate locally will need a larger investment.

Marketing and growth are directly connected. The faster you want to grow, the more intentional your marketing usually needs to become.

A Good Rule of Thumb for Small Businesses

Most successful small businesses spend somewhere between 5-12% of revenue on marketing. But that number depends heavily on the stage of the business.

Established Businesses (Stable Growth)

5-7% of revenue

• Strong referral network

• Existing customer base

• Consistent repeat business

• Lower urgency for rapid growth

Growth-Focused Businesses

8-12% of revenue

• Expanding into new markets

• Hiring aggressively

• Launching new services

• Investing heavily in lead generation

New Businesses

10-20% of revenue

• Building awareness from scratch

• Generating initial customers

• Establishing online visibility

• Competing against established businesses

The important thing to understand is this: Your marketing budget should reflect your goals, not someone else’s formula.

Your Industry and Location Matter More Than You Think

A small business in a rural town may spend very little and still dominate locally. A business in a highly competitive city may need significantly more investment just to stay visible.

For example:

• Google Ads cost more in competitive industries

• SEO takes longer in crowded markets

• Social media ads become more expensive where competition is high

• Some industries naturally have higher customer acquisition costs

This is why comparing your marketing budget to another business online usually doesn’t help much. Your market conditions are different.

Where Should Small Businesses Spend Their Marketing Budget?

Different marketing channels serve different purposes. Here’s how most small businesses should think about it:

1. Social Media Ads: Best for Awareness

Facebook, Instagram, TikTok, and LinkedIn ads can all work well depending on your audience. 

But social media ads work differently than Google Ads. People on social media usually aren’t actively searching for your service. You’re interrupting attention instead of capturing intent. That means creative messaging, targeting, and offers matter.

Best for:

• Brand awareness

• Retargeting

• Promotions

• Ecommerce brands

• Local businesses building visibility

Common mistake:

Boosting random posts and expecting consistent results.

2. SEO: Best for Long-Term Growth

SEO helps your business appear organically on Google over time. Unlike ads, you don’t pay for every click. But SEO requires consistency.

That usually means:

• Optimizing your website

• Creating helpful content

• Building service and location pages

• Earning reviews

• Improving your Google Business Profile

The biggest advantage of SEO is sustainability. Once your business ranks well, leads can come in consistently without paying for every inquiry.

Best for:

• Long-term visibility

• Building trust online

• Predictable lead flow

Common mistake:

Expecting SEO to work overnight. SEO is more like building equity than renting attention.

3. Google Ads: Best for Immediate Leads

Google Ads work well because they capture people actively searching for products or services. Someone searching:

• “roofing company near me”

• “best coffee shop downtown”

• “family lawyer near me”

• “marketing agency for small business”

…already has intent. That makes Google Ads one of the fastest ways to generate leads and sales.

Best for:

• Businesses wanting fast lead flow

• Service-based businesses

• Companies with strong sales systems

Common mistake:

Running ads without tracking conversions or following up quickly.

4. Organic Content & Social Media: Best for Trust

A lot of customers research businesses online before buying.

They want to see:

• Reviews

• Consistency

• Helpful content

• Real people

• Professionalism

Organic content helps build trust. And trust is often what separates businesses customers choose from businesses they ignore.

The Biggest Marketing Mistake Small Businesses Make

The biggest mistake usually isn’t spending too little. It’s spending inconsistently.

Many businesses:

• Start marketing for a month

• Stop when results slow down

• Change strategies constantly

• Chase trends instead of building systems

That creates unstable lead flow. Good marketing compounds over time. The businesses that grow steadily usually commit to a strategy long enough for it to work.

So… How Much Should You Spend?

Here’s the honest answer: You should spend enough on marketing to hit your growth goals profitably.

Not emotionally. Not based on fear. Not based on what another business spends.

The good news is: You can actually calculate a realistic marketing budget using simple math. And honestly, this is how every small business should approach marketing.

The Simple Marketing Budget Formula

Instead of asking: “How much should we spend?”

Start asking: “How many new customers do we need, and what does it cost to acquire them?”

That changes everything.

Step 1: Determine Your Growth Goal

Start with your actual business goal.

For example:

• You want 20 new customers per month

• You want to increase monthly revenue by $15,000

• You want enough work to hire another employee

• You want to expand into a new market

Get specific. Vague goals create vague marketing results.

Step 2: Know Your Close Rate

Next, figure out how many leads it takes to generate one customer.

For example: If you close 25% of your leads and want 20 new customers, you’ll need around 80 leads monthly. Because: 80 leads × 25% close rate = 20 customers

This is one of the biggest numbers businesses overlook.

Step 3: Understand Your Cost Per Lead

Now estimate your average cost per lead depending on your marketing channels.

Typical examples:

• Google Ads: Higher cost, faster results

• Facebook Ads: Lower cost, colder traffic

• SEO: Lower long-term cost, slower ramp-up

• Referral programs: Often lowest acquisition cost

• Direct mail or traditional ads: Highly market dependent

For example, if your average lead costs $75 and you need 80 leads: 80 × $75 = $6,000/month. That becomes your estimated marketing budget.

Step 4: Factor in Customer Value

This is where smart businesses think differently. Too many owners focus only on: “What does the lead cost?” Instead of: “What is a customer actually worth?”

For example: If your average customer spends $5,000 over their lifetime with your business, spending $300–$500 to acquire them may make complete sense.

The best businesses focus on customer lifetime value, not just immediate ROI.

We Want To Help You Get Started!

To help you get started, we've created a simple Lead Generation Target Planner that takes the guesswork out of setting marketing goals. By working backward from your revenue target, you can quickly calculate how many leads you'll need to generate to reach your goals. Click the link below to try it out and start planning with confidence!

Lead Generation Target Planner

The Real Goal Isn’t Spending Less

The goal isn’t finding the cheapest marketing possible. The goal is:

• Predictable lead generation

• Profitable growth

• Stable revenue

• Long-term visibility

• Consistent customer acquisition

Because when marketing works consistently, your business becomes far less dependent on referrals, seasonality, or random word-of-mouth. And that creates a much more scalable business.