A percentage of revenue is the starting point. Your margins, your growth goal and your stage decide whether to go above or below it.
A common starting point is to budget a percentage of revenue for marketing, with established businesses spending less and businesses in growth mode or competitive markets spending more. The better method works backward from a goal: decide how many new customers you need, estimate what each costs to acquire, and set the budget that produces them.
Most small business budgeting advice starts with a share of gross revenue, and the ranges you will find are wide: a few percent for an established business that mainly needs to maintain its position, and a larger share for a business trying to grow quickly or break into a competitive market. The reason the ranges are wide is that the right number depends on things a rule of thumb cannot see: your margins, your customer value, your competition and how much of your growth already comes from referrals.
Use the percentage as a sanity check, not a target. If your plan comes out far below it, you are probably under-investing relative to competitors. If it comes out far above it, make sure the extra is tied to a specific growth goal with a payback you can measure.
The budget that actually makes sense is the one that produces the customers you need. Four steps:
This method also tells you when to spend more: as long as each additional customer costs less than it is worth, a bigger budget is an investment, not an expense.
Business owners often budget the agency fee and forget the ad spend, or the other way round. Both are marketing. So are the website, tools, tracking software, photography and the time anyone on staff spends on it.
Budget them together so the total is honest, but track them separately, because they behave differently. Ad spend is variable and buys leads now; you can turn it up or down monthly. Agency fees, SEO and the website are investments that build assets and pay back over a longer period. Agency fee vs ad spend covers why the split matters when you compare proposals, and how much does a digital marketing agency cost covers the fee side.
A new business has no revenue to take a percentage of and no cost-per-customer history. Budget in order of return instead.
Concentrate a small budget rather than spreading it across every channel. One channel done well beats four done thinly. The small business marketing services page describes this order in more detail, and the hub page on full-service digital marketing covers what it looks like when the channels are run together.
REALTOP founder Nik Tsoukales on the same question, from the agency’s YouTube channel.
Published guidance ranges widely, with established businesses at the low end and growth-stage or highly competitive businesses higher. Treat the percentage as a sanity check and set the real number by working backward from customers needed and cost per customer.
Yes. Ad spend, agency fees, website costs, tools and staff time are all marketing. Budget them together so the total is honest, but track ad spend separately because it is variable and buys leads immediately, while fees and SEO build longer-term assets.
Spend in order of return: a converting website and complete Google Business Profile first, then a one-quarter test ad budget with tracking to learn your cost per lead, then SEO targeting the searches that proved they produce customers. Concentrate rather than spread.
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