How much a small business should spend on marketing
This guide shows what published sources say businesses spend on marketing, and how an owner can set the figure from the business’s own numbers.
Owners usually ask for a percentage of revenue. The published percentages differ widely with the kind of business and its size, and the first step lists them with their sources.
The later steps set a small business marketing budget from three figures the owner already has. Each step shows its arithmetic, and you can redo it with your own numbers.
Firefly is a fractional CMO practice. Its fee is one of the costs a marketing budget has to carry, and the last section says so.
The four steps, in order
- Read what the published sources say
Two published sources report marketing spending as a share of revenue.
- Test a percentage against your own margin
A percentage of revenue weighs more on a business with a low margin.
- Set the number from your own figures
The budget follows from the revenue target, the value of a new customer and the cost of winning one.
- Divide the budget and review it
The budget is divided between the routes that bring customers, and it is reviewed each quarter.
1. Read what the published sources say
Two published sources state what businesses spend on marketing as a share of revenue.
The first is a Canadian development bank. The second is a yearly survey of marketing leaders at companies in the United States.
- BDC’s rule of thumb
- The Business Development Bank of Canada gives a common rule of thumb of 2% to 5% of revenue for companies that sell to other businesses. It gives 5% to 10% for companies that sell to consumers.
- BDC’s survey of Canadian businesses
- BDC surveyed more than 1,400 Canadian businesses in 2019. It reports that the marketing costs of a small business averaged just over $30,000 a year, and that businesses with 20 to 49 employees spent twice that amount.
- The CMO Survey, all companies
- The CMO Survey collected answers from 308 marketing leaders at for-profit companies in the United States in January 2026. Marketing budgets stood at 9.0% of company revenue.
- The CMO Survey, by kind of company
- The same report gives 7.0% of revenue for companies that sell products to other businesses and 10.1% for companies that sell services to them. It gives 12.0% for companies that sell products to consumers and 7.2% for companies that sell services to consumers.
- The CMO Survey, by size of company
- Companies with revenue under $10 million reported 13.3% of revenue. Companies with revenue of $10 million to $25 million reported 17.4%, and companies with $26 million to $99 million reported 11.1%. The survey had 308 respondents across seven size groups, so each group holds few companies.
A figure of 7% to 8% of revenue is often credited to the U.S. Small Business Administration. The SBA’s guide page that covers marketing stated no percentage when we read it on 8 October 2026, so this guide does not use that figure.
None of these sources reports what the spending returned to the companies that made it.
We read these three sources on 8 October 2026.
- What is an average marketing budget for a small business? BDC (Business Development Bank of Canada) · updated 1 August 2023
- The CMO Survey: Highlights and Insights Report, 2026 (pages 5, 6, 51 and 53) The CMO Survey, sponsored by Duke University’s Fuqua School of Business, Deloitte and the American Marketing Association · survey in the field 7 to 29 January 2026
- Manage your business (the section on marketing and sales) U.S. Small Business Administration · read 8 October 2026
2. Test a percentage against your own margin
A percentage of revenue leaves out three things that differ from one business to the next.
The arithmetic in this step uses invented round numbers, and you can redo it with your own.
- Margin
- Take two businesses that each have revenue of $2,000,000 a year. After the direct cost of what it sells, the first keeps 60 cents of each dollar and the second keeps 25 cents. A budget of 8% of revenue is $160,000 for each of them. That sum is about 13% of the first business’s gross profit of $1,200,000, and it is 32% of the second’s gross profit of $500,000.
- Stage
- A percentage is taken from last year’s revenue. A business that plans to open a second location needs a budget for customers it does not yet have, and last year’s revenue does not measure them.
- How customers arrive
- A business that wins most of its customers by referral usually pays less for each new customer than a business that depends on paid advertising. The same percentage of revenue therefore buys the two businesses different numbers of customers.
A percentage is still useful as a check at the end. If the budget from step three falls far outside the published figures for your kind of business, look at your assumptions again.
3. Set the number from your own figures
The budget follows from three figures that the owner already has or can estimate.
They are the revenue target, what a new customer is worth and what it costs to win one.
- The revenue target
- Write down the revenue you want next year and the revenue you expect from the customers you already have. The difference is the revenue that has to come from new customers.
- What a new customer is worth
- Work out the average revenue a new customer brings in the first year. Multiply it by your gross margin, which is the share of each dollar of sales left after the direct cost of what you sell.
- What it costs to win one
- Divide last year’s marketing spend on winning customers by the number of new customers it brought. If the business has no record of this, start one now and use an estimate until a year of figures exists.
- The budget
- Divide the revenue needed from new customers by the average revenue from one of them. Multiply that number of customers by the cost of winning one, and add what you spend on marketing to existing customers.
An illustration with invented numbers
| Line, and how it is worked out | Amount |
|---|---|
| Revenue target for next yearset by the owner | $2,400,000 |
| Revenue expected from existing customersthe owner’s estimate | $1,900,000 |
| Revenue needed from new customers$2,400,000 − $1,900,000 | $500,000 |
| Average first-year revenue from one new customerfrom last year’s invoices | $5,000 |
| New customers needed$500,000 ÷ $5,000 | 100 |
| Cost of winning one customerlast year $96,000 won 80 new customers | $1,200 |
| Budget to win 100 new customers100 × $1,200 | $120,000 |
| Marketing to existing customersthe owner’s estimate | $20,000 |
| Marketing budget for the year$120,000 + $20,000 | $140,000 |
In the illustration the budget of $140,000 is 5.8% of the revenue target of $2,400,000. A business with a different margin or a different cost of winning a customer reaches a different percentage by the same method.
The cost of winning a customer has to stay below the gross profit that customer brings. In the illustration a new customer costs $1,200 to win and brings $5,000 of revenue in the first year. At a gross margin of 50% that revenue is $2,500 of gross profit.
4. Divide the budget and review it
The owner or the marketing lead divides the budget between the routes that bring customers.
The division is then checked against results each quarter.
- Divide by what each route returned
- List the routes that brought customers last year, such as search, advertising, email, referrals and local listings. Give the larger shares to the routes that brought customers at the lowest cost.
- Keep a part for tests
- Set aside a small part of the budget for one or two routes the business has not tried. Give each test a fixed amount, a fixed period and a figure that decides whether it continues.
- Count people and tools
- A marketing budget covers staff time, agency fees and software as well as advertising. A budget that counts advertising alone understates what the marketing costs.
- Review each quarter
- Compare what each route cost with the customers and the revenue it brought, using the figures in your own systems. Move money away from the routes that did not return it.
The review depends on a record of how each new customer found the business. Our page Too early for a fractional CMO? describes how to start one.
Where a fractional CMO fits in the budget
The owner decides the size of the marketing budget. A fractional CMO decides how it is divided between channels and directs the people who spend it. Our page on the outsourced CMO sets out what is handed over and what stays with the owner.
Firefly’s fee is part of the marketing budget, and the owner should count it there. The terms are listed here, and our page on what a fractional CMO costs compares them with published market rates.
Firefly considers a business ready for a fractional CMO at two or more locations and roughly $5,000 a month in marketing spend. Our page on a fractional CMO for small business shows when a business is ready and when it is too early.
- Rate
- $100 an hour
- Standard engagement
- $2,000 a month
- Time
- About five hours a week
- Minimum term
- Three months
- Fee for the minimum term
- $6,000
Results from fractional CMO engagements
Each result is measured in the client’s own system, over the period shown.
- Two Boots New York pizza, since 1987 +12% same-store net salesyear over year · Toast POS
- YYZ Law Aviation and travel law, Toronto 4.3× organic search clicksover three years · Google Search Console
- Boqueria Spanish tapas, multi-city US +73% private-events revenueyear over year · Tripleseat
- Paperchase Accounting and CFO advisory, NYC and London +69% website visitsyear over year · Google Analytics
Questions and answers
How much should a small business spend on marketing?
No single percentage fits every business. The Business Development Bank of Canada gives a rule of thumb of 2% to 5% of revenue for companies that sell to other businesses, and 5% to 10% for companies that sell to consumers. An owner gets a more useful figure from the revenue target, the value of a new customer and the cost of winning one.
What percentage of revenue do companies spend on marketing?
In The CMO Survey of January 2026, marketing budgets stood at 9.0% of company revenue among 308 for-profit companies in the United States. Companies with revenue under $10 million reported 13.3%.
Why is a percentage of revenue a weak rule?
A percentage leaves out the margin of the business, its plans for growth and the way its customers arrive. Two businesses with the same revenue and different margins can afford very different budgets.
How do I set a marketing budget from my own figures?
Work out the revenue that has to come from new customers, and divide it by the average revenue from one new customer. Multiply that number of customers by the cost of winning one, and add what you spend on marketing to existing customers.
What does a marketing budget include?
A marketing budget covers advertising, staff time, agency fees and software. The fee of a fractional CMO is also part of the marketing budget.
Who decides the budget when a business has a fractional CMO?
The owner decides the size of the budget. The fractional CMO decides how it is divided between channels and directs the people who spend it.
Does the Small Business Administration recommend 7% to 8% of revenue?
That figure is often credited to the U.S. Small Business Administration. The SBA’s guide page that covers marketing stated no percentage when we read it on 8 October 2026, so this guide does not use it.
Book a call, or write first
You can book a discovery call on Saad Afsar’s calendar.
If you prefer to write first, send a few details in the form and Saad will reply within 24 hours.