How much should a small business spend on marketing?

Before deciding on a number, start with the goal.

Are you trying to build awareness? Generate enquiries? Bring people into a store? Make an online sale? Encourage existing customers to come back? Launch something new?

Different objectives create different marketing challenges — and different budget requirements.

If you need five good-quality leads a month, that's a very different job from trying to sell hundreds of low-cost products online.

Rather than starting with "How much should I spend?", I'd start with: What do I need my marketing to achieve?

This is a really useful number to understand.

Imagine you spend $500 a month on marketing and it generates five new customers.

Brilliant.

Or terrible.

It depends entirely on what those customers are worth.

If each customer spends $50 once and never comes back, the numbers don't look particularly attractive. If a new customer is worth several thousand dollars — or stays with you and buys repeatedly over time — that's a very different equation.

And don't just look at cost per lead. Look at how many of those leads actually become customers, and what those customers are worth to the business over time.

You don't need a perfect financial model. Even a reasonable estimate gives you something much more useful to work with.

One of the great things about digital marketing is that it has made it possible for small businesses to start with relatively modest budgets.

$100 a month isn't going to fund a huge campaign. But depending on the business, it might let you test a small paid campaign, pay for an email platform, create a useful customer asset, improve something on your website or support activity you're doing yourself.

And plenty of marketing doesn't require a large media budget at all — SEO, partnerships, referrals, customer communications, organic content and marketing to the audience you already have can all be worth exploring.

But there is an important caveat:

A $100 budget needs $100 expectations.

With a very small paid-media budget, you may not reach enough people — or generate enough data — to know quickly whether something works.

That doesn't mean you can't start small. It means you need to give it a fair chance and be realistic about what you expect to learn or achieve.

Some things are quick and easy to buy.

Others aren't.

If your product is inexpensive, familiar and easy to understand, the journey from seeing it to buying it might be very short.

If you're selling something expensive, unfamiliar or high-consideration, people may need much more time.

They might discover you through an ad, visit your website, leave, see you again somewhere else, read a few things, compare you with someone else and eventually come back weeks later.

You can think of that broadly as:

Awareness → Consideration → Conversion

Your marketing may need to support people at each of those stages.

And that can require more touchpoints, more time and potentially more budget than simply running one ad and expecting an immediate sale.

If you have $500 to spend, putting $100 into five different channels isn't automatically better than putting $500 into one.

In fact, sometimes it means you do too little in each place to learn anything useful.

I'd rather choose one or two channels that make sense based on the audience and the business, give them a proper chance, learn from what happens and then decide what to do next.

You won't always know the best marketing channel before you start.

You make an educated decision based on the audience, the business, your experience and whatever data you already have.

Then you test it.

Try something. Measure it. Learn from it. Adjust.

Provided you're actually learning from it, it's part of working out what works for your business.

Over time, you can put more budget behind the things producing a return and less behind the things that aren't.

Marketing budgets often focus heavily on acquiring new customers.

But sometimes the best return comes from the customers you already have.

Can you encourage them to come back? Buy something else? Renew? Upgrade? Refer somebody?

You've already spent the time and money acquiring them, and if they've had a good experience with you, staying in touch can be an incredibly efficient form of marketing.

It's another reason I like looking at the whole customer journey rather than reducing the budget conversation to "How much should I spend on ads?"

Your marketing budget isn't only the money you spend on advertising.

If you're spending five hours a week creating social media content, that's an investment.

If somebody in your team spends two days a month putting together a newsletter, that's an investment too.

Photography, design, software, web development, events, agencies, consultants — and your own time — all have a cost.

"Free" marketing isn't necessarily free.

I wouldn't start with an arbitrary percentage.

• I'd ask:
• What are we trying to achieve?
• What is a lead worth?
• How many leads become customers?
• What is a new customer worth?
• How long does it take them to buy?
• Where can we reach the right people?
• What can the business realistically invest?
• How much time do we have as well as money?
• What can we test and learn from?

Then set a budget you're comfortable investing, be realistic about the return you expect, and start testing.

You don't need to have the exact answer on day one.

Start somewhere sensible. Pay attention to what happens. And let the results help you decide where the next dollar should go.