Most small business marketing budgets are a guess, not a plan.
The owner spends what feels comfortable, panics in a quiet month, cuts everything, then wonders why the enquiries dried up. A small business marketing budget works better when it comes from your own numbers, so you can say what you spend, why you spend it and what it should bring back.
You can build one in an afternoon. Here is how.
Start with the rule of thumb, then adjust it
A common rule of thumb is to set aside roughly 5 to 10 percent of revenue for marketing. Newer businesses and those chasing growth often go higher. Established businesses with plenty of repeat and referral work can often go lower. Treat it as a starting point, not a law.
Picture a business turning over $400,000 a year. Five to 10 percent is $20,000 to $40,000 a year, or about $1,700 to $3,300 a month. That is a useful range to test against, and it will be wrong in some directions, which is fine.
Then adjust for your situation:
Thin margins? Hospitality and retail often feel 10 percent more than a consulting business does, so lean towards the lower end.
Launching or recovering from a slow patch? You may need to push higher for a while, but only with a plan to measure it.
Flat out already? Spend less on getting new customers and more on keeping the good ones.
The before and after is simple. Before: 'We spend whatever is left at the end of the month.' After: 'We spend about 6 percent of last year's revenue, and we review it every quarter.' The second version is one you can defend, and adjust.
Build your small business marketing budget backwards from customers
The percentage tells you what you can afford. Working backwards tells you what you need. It takes about 30 minutes and three numbers.
First, decide how many new customers you want each month. Second, work out roughly how many enquiries it takes to win one. Third, estimate what an enquiry costs you to generate today.
Here is an illustration with made-up figures. You want 8 new customers a month. About one in three enquiries turns into a paying job, so you need around 24 enquiries. If your marketing currently produces an enquiry for about $40, you would budget about $960 a month. If you do not know your cost per enquiry yet, that is normal. Run your first 90 days as a measured test and find out.
Now sense-check it against what a customer is worth. If the average customer brings in $500 in gross profit over a year, eight new customers is $4,000. Spending under $1,000 to get them looks sensible. If a customer only brings in $60 once, the maths needs a harder look.
The common mistake here is using the price of the job instead of the profit from it. Use profit, or you will overspend.
Decide what actually counts as marketing spend
Many owners only count ads and forget the rest, which makes the budget look smaller than it is. Write down everything that helps people find you, trust you or come back to you:
- Website hosting, maintenance and updates
- Google Business Profile work and photos
- Paid ads on Google, Facebook or Instagram
- Email or SMS software
- Printing, signage, uniforms and vehicle graphics
- Sponsorships, markets and local events
- Freelancers, designers or agencies
- Your own time, if you are paying yourself or someone else to do it
Add up the last three months of these from your bank statements and subscription emails. Most people find at least one subscription they forgot they were paying for. That alone can fund something more useful.
A simple way to split the money
Once you have a total, give every dollar a job. This is a rough starting split, not a formula:
- Foundations (about 30 to 40 percent): your website, Google Business Profile, decent photos and a process for asking for reviews.
- Capturing demand (about 30 to 40 percent): search ads, local SEO and directory listings that put you in front of people already looking.
- Staying in touch (about 10 to 20 percent): email, SMS, thank-you cards and a simple referral thank-you for past customers.
- Testing (about 10 percent): one new thing at a time, such as a short video series or a local partnership.
Foundations come first for a reason. If your website is slow, confusing or hard to use on a phone, ads simply send paying traffic to a leaky bucket. Fix the bucket, then turn the tap up.
Mistakes that quietly burn the budget
Spreading it across too many channels
Five platforms at a tiny spend each usually means none of them gets enough attention to work. Pick two or three, do them properly and ignore the rest for now.
Cutting spend the moment things go quiet
Quiet months are when it is tempting to switch everything off. Sometimes you have to, and you should never spend money you cannot afford. But if you can, protect the low-cost basics, like your Google profile and your email list, because they keep working while you are not looking.
Not knowing what worked
If you cannot tell where enquiries came from, you cannot spend wisely next quarter. Put a 'How did you hear about us?' question on your enquiry form and ask it on every phone call. It is not perfect, but it is far better than guessing.
Mixing up GST
If you are registered for GST, you can generally claim credits on business purchases, so many owners plan their budget using ex-GST figures. Check how this applies to you with your accountant or bookkeeper.
Paying for activity instead of results
A monthly retainer with vague deliverables is a red flag. Ask what you will receive, how it is measured and when you can expect to see a change.
Review it every 90 days
Set a 30-minute meeting with yourself every quarter. Ask three questions: what brought in enquiries, what cost more than it returned, and what is worth a bigger test?
Then make one of three decisions for each item: keep it, cut it or increase it. Give anything new a full 90 days before judging, because most marketing needs a little time to settle. After that, be ruthless. Money tied up in something that does not produce enquiries is money you could be spending on something that does.
Things to do this week
- Pull last financial year's revenue and calculate 5, 7 and 10 percent of it, so you have a range.
- Write down your average customer value and roughly how many enquiries it takes to win one.
- List everything you currently spend on marketing, including small subscriptions.
- Add 'How did you hear about us?' to your enquiry form and your phone script.
- Put a 30-minute review in your calendar for 90 days from now.
If you suspect your website is the weak link holding back the rest of your marketing spend, have a look at our small business website design packages to see what a solid foundation costs. And if you are not sure, just ask us. We are happy to give you an honest opinion.