There is no single right amount to spend on marketing. The right budget depends on your goals, your margins, how competitive your market is and how quickly you want to grow. Most businesses set their budget in one of a few ways: a percentage of revenue, a figure based on what it costs to win a customer, a budget built up from specific goals, or simply what they can afford. The best approach usually combines these, then adjusts based on results.
What matters more than the headline figure is spending it wisely: on channels that reach your customers, with tracking in place to show what each pound returns. This guide explains the common ways to set a marketing budget, how to split it and how to review it so your spend keeps working harder.
Start with your goals
A budget should follow your plans, not the other way round. Before choosing a number, be clear on what you want marketing to achieve over the next year:
- How many new customers or enquiries do you need?
- Are you launching a new product, service or location?
- Do you want to grow quickly, hold your position or improve profitability?
- How much capacity do you have to handle extra work?
A business aiming for rapid growth or entering a competitive market will usually need to invest more than one maintaining a steady, established customer base.
Common ways to set a marketing budget
Percentage of revenue
Many businesses allocate a set percentage of their current or projected revenue to marketing. It is simple, keeps spending in line with the size of the business and is easy to review each year. The right percentage varies widely by sector, margins and growth stage, so treat any rule of thumb you read as a starting point rather than a target. The drawback is that it ties spending to past performance, which can hold back growth when you most need to invest.
Cost per customer
This approach works backwards from the value of a customer. Work out the average profit a customer brings over their lifetime, decide how much of that you are willing to spend to win them, then multiply by the number of new customers you want. It links marketing spend directly to business outcomes, but it relies on reasonable estimates of conversion rates and customer value.
Objective and task
Here you list the activities needed to hit your goals, such as a new website, ongoing SEO, a Google Ads campaign or a trade show, and cost each one. It produces a realistic, goal-focused budget but takes more planning.
What you can afford
Many small businesses start here, and there is nothing wrong with being cautious. The risk is that marketing becomes the first thing cut when money is tight, even when it is the activity bringing in new work.
Matching competitors
Looking at what competitors appear to invest can be a useful sense check, but their goals, margins and costs may be very different from yours.
How to split your budget
Once you have a total, decide how to divide it. Think about:
- Foundations first. A website that loads quickly, works on mobile and converts visitors makes every other channel more effective.
- Short-term and long-term channels. Google Ads can bring enquiries quickly, while SEO builds over time and can reduce your reliance on paid clicks. Many businesses use both, as our guide to how much SEO costs in the UK helps you plan.
- Where your customers are. A local tradesperson may focus on Google Business Profile, local SEO and search ads; an online retailer may lean towards Shopping ads, email and social media.
- Proven and experimental. Put most of your budget into what you know works, and keep a small portion to test new channels or ideas.
- Seasonality. Plan for busy periods and allow extra budget where demand peaks.
- Hidden costs. Include software, content creation, photography, design and management time, not just ad spend.
Track, review and adjust
A budget is not set-and-forget. Set up tracking in Google Analytics 4 and your ad accounts so you can see which channels bring enquiries and sales. Review results monthly and move money towards what performs. Look at cost per lead, cost per sale and return on ad spend, and remember that some channels, such as SEO and brand building, take longer to show their full value. Our guide to measuring SEO returns explains how to judge longer-term investment.
Common budgeting mistakes
- Spreading a small budget too thinly across too many channels.
- Cutting marketing first when sales dip, which can make the dip worse.
- Spending on ads before fixing a website that does not convert.
- Judging success on clicks or likes rather than enquiries and sales.
- Stopping SEO or content too early, before it has had time to work.
FAQs
How much should a small business spend on marketing?
It depends on your goals, margins and competition. Start with what you need to achieve, work out what a customer is worth to you, and set a budget you can sustain long enough to see results.
Should I spend more on SEO or Google Ads?
Google Ads can generate enquiries quickly; SEO builds lasting visibility. Many businesses use ads for immediate results while investing in SEO for the long term.
How often should I review my marketing budget?
Check performance monthly and review the overall budget at least once a year, or whenever your goals or market change significantly.
What if my budget is very small?
Focus on the essentials: a solid website, a complete Google Business Profile, reviews and one channel done well, rather than several done poorly.
Plan a budget that works
Pure Marketing is a Google Partner agency in Birmingham’s Jewellery Quarter. We help UK businesses decide where their marketing budget will work hardest and track the results honestly. Get in touch to talk through your goals.
