Let’s start with the main question you’re asking. “How much should we actually be spending on marketing?”.

The answer isn’t a one and done equation. There isn’t a single number that works for every business.

A £1,000 monthly budget could be significant for one business and completely inadequate for another.

The appropriate budget depends on factors such as:

• Revenue 
• Growth objectives (what are your business aims for the next quarter, year, 2 years etc)
• Customer value (what is the average lifetime customer value)
• Industry (some industries typically have higher competition which can increase cost of running activity)
• Competition (how many competitors are there in your industry and what is their existing marketing activity)
• Sales cycle (how long it takes for someone to become a lead to becoming a customer)
• Existing marketing activity (awareness activity, ads running, website quality, existing content, social media presence, organic rankings)
• Current marketing performance (what is your ROI for existing performance)
• Internal resources (how much money and how many employees can you dedicate to marketing activity)

The right marketing budget is determined by what your business needs its marketing to achieve.

Is there a standard percentage of revenue businesses should spend on marketing?

The common advice is “5% / 10% of revenue but this is simply a starting point and not something that should be used as a rule. It ultimately depends on where you are in your businesses growth plan. If you’re a starting business you should ideally be spending between 10% and 20% of projected revenue on marketing. If you’re an established business then spend on marketing should usually be around the 7% to 9% of projected revenue. These however have to be amended depending on circumstances 

How much should a small business spend on marketing?

This really depends on how much you can allocate to marketing, don’t overcommit budget to this if you don’t have it. The scenarios below should help with this. 

Limited / foundation budget

• Businesses primarily focused on establishing their foundations
• Potential priorities:
• Website improvements
• Google Business Profile
• Basic SEO
• Analytics/tracking
• Content
• Brand positioning
• Growth budget
• Basic social media presence

• Businesses actively looking to generate more leads or sales
• Potential priorities:
• SEO
• Paid search
• Organic social
• Paid social
• Content
• Conversion optimisation
• CRM/email
• Testing and optimisation
• Aggressive growth budget

• Businesses with a strong growth objective, competitive market or expansion plans
• Potential priorities:
• Multiple acquisition channels
• Larger paid media investment
• Content production
• SEO
• Conversion rate optimisation
• Brand activity (awareness)
• Marketing technology
• Dedicated strategic support

This isn’t just about the money, it’s about structure. This framework will allow for movement budget wise rather than sticking to a specific investment value.

What determines your marketing budget?

1. Your revenue and growth target

Budgets should be connected commercial outcome, not just a number that’s drummed up to begin with. You need to look at where you want to be, and then re-trace that plan back to the beginning. 

For example:

If a business wants to generate an additional £100,000 in annual revenue, it needs to understand:

• Average customer value
• Conversion rate
• Number of customers required
• Number of leads required
• Cost of acquiring those customers
• This starts turning the conversation from:
• “How much should we spend?”

into:

“What investment is required to achieve our growth target?”

That’s a much more strategic question.

2. Your average customer value

Content direction

Customer value fundamentally affects what a business can afford to spend acquiring a customer.

A business selling £50 products cannot approach acquisition in the same way as a consultancy selling £10,000 contracts.

There is a key component to introduce here. Customer Acquisition Cost (CAC). How much does it cost to get a customer. 

To find your CAC, divide your total sales and marketing expenses by the number of new customers you gained during that same time.Formula:Total Sales and Marketing Costs divided by Number of New Customers Acquired. 

An example would be: If you spend $10,000 in a month and get 200 new customers, your CAC is $50 per customer.

3. Your industry and level of competition

Content direction

Marketing budget is also dictated by competition. Businesses operating in highly competitive markets may need to invest more simply to achieve visibility.

For example, competing for a highly valuable Google search term may require significantly more investment than operating in a niche market with little competition.

Some key areas that come into this are:

• Search competition
• Advertising competition
• Competitor visibility
• Market maturity
• Customer demand

Your marketing budget doesn’t exist in isolation from your market.

4. Your current marketing performance

Content direction

Don’t automatically increase spending if the existing marketing isn’t working.

Before adding another £1,000 to the budget, ask:

• Is the website converting?
• Are campaigns generating quality leads?
• Are we targeting the right audience?
• Is tracking working?
• Are existing channels profitable?
• Are there obvious conversion problems?

Sometimes the answer isn’t “spend more”. 

It might be “fix what’s already there”.

This is where businesses like Nexa come into play. You need to be able to see these challenges and identify fixes for them. Optimisation is a very underrated term in marketing.

Where should a small business spend its marketing budget?

Having an idea of what budget to spend is great, but the most important part of this process is where to spend it. The allocation of the budget should depend on the marketing strategy. 

Some main areas of focus are:

SEO – Good for building longer-term organic visibility and capturing existing search demand. The focus keywords and phrases will dictate the amount of traffic that comes to the website. Organic traffic is one of the core drivers of traffic to a website. 

Google Ads – Useful when there is existing search demand and the business needs to generate traffic/leads more quickly. Also allows you to compete with competitors for the top place in Google’s search results. 

Meta Ads – Useful for visual products, consumer businesses, awareness and demand generation. Best for use if you’re a B2C business. 

LinkedIn Ads – Potentially valuable for specific B2B audiences and higher-value professional services. The granularity of targeting within the platform is very useful too. 

Content – Content should support the customer journey rather than simply producing a fixed number of blogs every month. This needs to fit with the SEO targeting plan too. Content is about building authority around a certain subject and also growing organic keyword rankings too. 

Website and conversion optimisation – More traffic isn’t particularly useful if the website isn’t converting it. You need good quality traffic too. User experience is the secondary stage of this plan. Get people to the website and then user experience optimisation ensures those users will convert on the right pages, having also digested the right information on the website.

Why having a marketing plan without a Should you spend more on marketing or improve what you’re already doing?

The assumption is usually that growth always requires more budget. This isn’t necessarily the case. You need everything to work in tandem. You can choose to invest more money but that doesn’t always equal return. You can instead invest in one area and optimise another to make them work together nicely. See examples of this below:

How to know if your marketing budget is working?

Key metrics businesses should consider:

• Leads
• Qualified leads
• Conversion rate
• Cost per lead
• Customer acquisition cost
• Revenue generated
• Return on investment
• Customer lifetime value
• It isn’t a one size fits all situation. Different businesses will prioritise different metrics.

Additional investment might be the right route to go down if:

• A channel is producing a reliable return
• There is more demand than current capacity
• Sales targets have increased
• The business is entering a new market
• Existing channels have room to scale
• Customer acquisition economics remain attractive
• The business has fixed its underlying conversion problems

It might be worth keeping the budget the same if:

• Tracking is unreliable
• You don’t know which channels work
• Conversion rates are poor
• Lead quality is low
• The strategy isn’t clear
• You’re spending simply because competitors are
• Common marketing budget mistakes
• Content direction

There are also some very clear potential mistakes that can be made. Make sure that these are under consideration:

• Copying another business’s budget
• Treating a percentage benchmark as a rule
• Spreading money across too many channels
• Increasing spend before fixing conversion problems
• Ignoring customer acquisition cost
• Measuring activity rather than revenue
• Cutting marketing whenever sales slow
• Continuing to fund channels that don’t perform
• Having no testing budget
• Not reviewing the allocation regularly

So, how much should your business actually spend?

This isn’t a number but rather a simple framework:

1. Define your growth target.

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2. Calculate how many customers/leads you need.

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3. Estimate what you can afford to pay to acquire them.

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4. Identify the channels most likely to reach those customers.

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5. Allocate budget based on opportunity and expected return.

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6. Test, measure and optimise.

When should you speak to a marketing consultant?

A consultant can help when the question isn’t simply:

“How much money should we spend?”

but:

“Where should we invest our money to give us the best chance of achieving our growth objectives?”

That’s the strategic problem Nexa solves.

Potential reasons to seek help:

• Marketing budget is increasing but results aren’t
• You’re unsure which channels to prioritise
• Marketing is being managed reactively
• Different agencies/channels aren’t working together
• You don’t have internal strategic expertise
• You need an objective assessment of your current marketing

There is no magic marketing budget. The right investment depends on your objectives, customers, market, economics and current performance.

The goal isn’t necessarily to spend more, it’s to invest intelligently and understand what the investment is expected to produce.

Find out how Nexa can help you