How to Set Your Marketing Budget as a Small Medium Business (SMB)
When it comes to growing your small or medium-sized business (SMB), marketing isn’t optional - it’s essential.
But you may find yourself asking - how much should I actually be spending on marketing?
There are several factors to consider when setting your budget, including your business stage, goals, and the types of marketing that will bring the highest return on investment (ROI).
Here’s how to set the right marketing budget for your business that fuels growth without overspending.
4 Considerations When Setting Your SMB’s Marketing Budget
1. Start With the 15-20% Rule for Starting Marketing Budget
A good baseline for small and medium-sized businesses is allocating 15-20% of your revenue to monthly marketing. Here’s why:
It ensures consistent visibility. Marketing isn’t just about lead generation; it’s about staying top-of-mind with potential clients.
It helps you scale faster. The more strategic your marketing spend, the more deals you can close, fueling continuous growth.
It keeps marketing spend at a reasonable level for your business. Almost all businesses should be running at a minimum of 20-25% margin after major expenses like labor, rent, and COGS, so spending 15-20% means you won’t be paying more than you have.
So, if your business generates $15,000 in monthly revenue, your marketing budget should fall between $2,250 to $3,000.
However, this is just a starting point - your budget should be tailored to your business needs and market conditions.
2. Consider Your Business Stage & Growth Goals
Your marketing budget should reflect where you are in your business journey. Some rules of thumb include:
If you’re a new business or in a growth stage, you may need to invest more heavily in marketing to get traction. Expect higher costs in lead generation, branding, and social media presence.
If you’re operating in a luxury market or a niche that generally requires a lot of marketing spend like beauty, ecommerce or any physical product, your marketing needs to reflect that. High-quality branding, professional video content, and targeted ads may require a slightly higher budget.
3. Track ROI & Adjust as Needed
The key to smart marketing spending is tracking your return on investment (ROI). Here’s how to do it:
Calculate your cost of acquisition by client (CAC). To do this, follow these steps:
Track your spending by channel (social media, paid ads, email marketing, etc).
Track how many signed leads you’re getting from each channel. This can take a bit of setup but is SO worth it as you grow your business.
Divide the spend by channel by the number of leads converted by channel. This is your CAC, or the cost of getting a new client.
Calculate your client's lifetime value (LTV). You’ll want to look at how much profit you make per client purchase and how many purchases those clients make on average. For example, if your client, on average, purchases $100 per month, with a 40% margin on those purchases, and stays with you on average for one year, your LTV is $100 * 40% * 12 = $480.
You want to be where your LTV is greater than your CAC. Ideally, it is 2-3x or more than the CAC.
Working with a marketing professional is the best way to track this properly over time, as it can get a little complicated!
4. Be Strategic, Not Reactive
One of the biggest mistakes of business owners is randomly throwing money at marketing without a clear plan.
Instead, take a strategic approach:
Set clear marketing goals. Do you want more buyer leads? More luxury listings? More social media engagement? Tailor your budget accordingly.
Invest consistently. Marketing isn’t a one-time expense; it’s an ongoing investment. Cutting back too much can slow your business growth.
Test & optimize your marketing. If something isn’t working, adjust your strategy rather than cutting marketing entirely. Small tweaks can make a big difference.
Setting the right marketing budget is all about balance—spending enough to fuel growth without overextending yourself.
You can build a sustainable, profitable business by allocating the right percent of your revenue to marketing, tracking results, and focusing on the most effective strategies.
Need help executing your marketing strategy to maximize your marketing budget?
At The Boutique COO, we specialize in marketing. From social media management to marketing execution - we handle everything so you can focus on growing your business, not running ads.
Let’s chat about how we can help you maximize your marketing budget! Book a free strategy chat to get started.
