How Much Should You Spend on Marketing? A Quick Guide

Marketing your business requires a budget. That statement may sound laughably simple, but many business owners don’t have a marketing budget in place, or even one in mind.

Without a clearly defined budget, you risk either underinvesting, which can limit your business’ growth, or overspending, which can drain resources and cause frustration. So, how do you decide what your marketing budget should be?

Factors

To establish a marketing budget that’s aligned with your business goals, it’s important to assess a few fundamental aspects:

Business Size and Industry
The size and stage of your business play a major role in determining how much you should allocate for marketing. Startups often need to invest more in marketing to build brand awareness, while established businesses might focus on sustaining brand loyalty and expanding into new markets. Your industry also matters; competitive sectors like retail and restaurants often require more substantial budgets compared to business-to-business (B2B) industries.

Marketing Goals and Objectives
What are you trying to achieve with your marketing efforts? Are you focused on building brand awareness, driving direct sales, or positioning your business as a market leader? Different goals require different levels of investment. For example, lead generation and aggressive digital ad campaigns typically demand a larger share of a marketing budget than maintaining a social media presence or nurturing existing customer relationships.

Target Audience and Market Competition
Understanding your audience and the competitive landscape helps in allocating your resources appropriately. Reaching a broad, highly competitive market will require more investment, particularly in areas like digital ads and search engine optimization (SEO). On the other hand, businesses targeting a more specific or local audience may be able to reach their goals with a smaller, more targeted budget.

Approaches

While every business is unique, there are a few common approaches to determining a marketing budget that can help with decision-making:

Percentage of Revenue
One of the most widely used methods is basing a company’s marketing budget on a percentage of its revenue. A common rule of thumb is that businesses looking to maintain their current market position should allocate around 5% of their revenue to marketing, while those looking for aggressive growth might allocate 10% or more. This method provides a flexible framework, allowing you to scale your marketing spend in line with your growth and revenue.

Scope and Cost
Another effective way to determine your marketing budget is by identifying the specific marketing activities you want to execute—whether a new website, a digital ad campaign, or a rebranding effort—and simply calculating the costs associated with those deliverables. By working backward from the desired results and their associated costs, you get a clearer picture of how much you should be investing to meet your objectives.

Competitor Benchmarking
You can also set your budget based on what your competitors seem to be spending. This method involves researching the marketing activities of competitors and estimating their spend based on available data such as ad placements, social media activity, and overall brand presence. While it’s not an exact science, competitor benchmarking offers a way to align your budget with industry standards and ensure you aren’t falling behind your competitors in terms of visibility and brand impact.

Tips

Maximizing your marketing budget calls for strategic planning and sharp decision-making. Here are a few ways to make the most of your budget:

Prioritize High-Impact Channels
Focus on marketing channels that offer the highest ROI for your business. Digital marketing strategies like SEO, social media and email marketing often provide strong returns due to their scalability and fluidity. By concentrating on these high-impact areas, you can ensure your budget is spent efficiently.

Adjust Your Budget Based on Results
The allocations in your marketing budget don’t need to be set in stone. In fact, they shouldn’t be. Regularly reviewing key metrics like cost per acquisition, customer lifetime value, and conversion rates will help you understand which parts of your marketing strategy are working and which areas need rethinking. If certain ad campaigns are performing better than expected, you can reallocate additional funds to those high-performing channels. Conversely, if a tactic isn’t delivering results, you can reduce spending in that area and direct it toward more effective methods.

Test and Optimize Continuously
Running smaller test campaigns before committing a large portion of your budget allows you to refine your approach. By gradually increasing investment in the tactics that yield the most leads or conversions, you ensure that every dollar spent delivers value. Continuous optimization also helps you stay agile and responsive to market trends and consumer behavior.

Work with a Marketing Agency
Partnering with a marketing agency like Netwave helps you maximize your budget by giving you access to a team of experts in every marketing discipline—from strategists to coordinators to creatives. Instead of managing multiple freelancers or spreading responsibilities across an in-house team, you streamline all efforts into one cohesive, cost-efficient operation. And with the ability to scale up or down based on your business needs, we help you stay agile while keeping your strategy and budget aligned.

Whether you have an established budget or need help developing one, we’re here to give you honest guidance on how to allocate your resources for the best possible ROI. And we don’t just advise—we execute the strategy for you and report on the results, so you can focus on running your business. Contact us today to get started.