How Much Should a Business Spend on Marketing?
By Jonathan Molina, Fractional CMO ·
Short answer
There isn't one percentage that works for every company. A useful marketing budget should consider the company's revenue, growth objectives, margins, customer acquisition economics, competitive environment and the cost of reaching its target market. From there, the company can determine what level of investment is realistic and which marketing channels deserve that investment.
Every owner has heard a version of the rule: spend five percent of revenue, or ten if you're growing. It's a comforting number and a poor decision-making tool. Two businesses with identical revenue can have completely different margins, sales capacity and acquisition costs — and therefore completely different correct budgets.
What actually determines your marketing budget
| Factor | Why it moves the number |
|---|---|
| Revenue | Sets the practical ceiling on what can be invested |
| Growth objectives | Holding position costs far less than taking share |
| Margins | High-margin businesses can absorb higher acquisition costs |
| Customer acquisition cost | Tells you what each new customer actually costs to win |
| Customer lifetime value | Determines how much you can afford to pay for one |
| Industry and market maturity | New categories require education; mature ones require competition |
| Competitive landscape | Cost of attention rises with the number of well-funded competitors |
| Available channels | Some audiences are cheap to reach, others are not |
| Sales capacity | There's no value in generating leads the business can't handle |
A practical way to build the number
- 1.Start with the revenue target and work backwards: how many new customers does it require?
- 2.Establish the average value and margin of a customer.
- 3.Estimate what you currently pay to acquire one, using real historical numbers where you have them.
- 4.Multiply required customers by acquisition cost. That's your working demand budget.
- 5.Add the fixed layer — brand, website, content, tools, people, agencies — that exists regardless of campaign volume.
- 6.Sanity-check the total against revenue and margin. If it's unaffordable, the growth target or the acquisition cost has to change.
How growth objectives change the answer
A business protecting a strong market position can often run a modest, efficient budget concentrated in channels that already convert. A business trying to enter a new region or category is paying for awareness it doesn't have yet — that costs more, takes longer, and should be budgeted as an investment with a defined runway rather than judged monthly.
How to allocate what you have
- Protect what's already producing before funding anything new.
- Keep a defined portion for testing — a fixed percentage, not whatever is left over.
- Separate the always-on layer from campaign spend so one doesn't quietly eat the other.
- Fund the conversion path — website, follow-up, sales enablement — before increasing traffic spend.
- Budget for measurement. Untracked spend can't be defended at review time.
My perspective
When I look at a marketing budget, the first thing I want to know isn't the total. It's how much of it is committed to things nobody has evaluated in the last year — tools, retainers, sponsorships, legacy campaigns. In most businesses I've worked with, somewhere between ten and twenty percent of the budget was funding activity nobody could defend. Reallocating that is usually faster and more valuable than asking for more.
Frequently Asked Questions
What percentage of revenue should marketing be?
Common ranges run from a few percent for established, referral-driven businesses to well over ten percent for companies pursuing aggressive growth. Use it as a sanity check, never as the method.
Is advertising included in a marketing budget?
Yes. Advertising is one line within a marketing budget that also includes people, agencies, technology, content, website and brand.
Should a new business spend more on marketing?
Proportionally, usually yes — a business with no awareness is paying to create it. The key is a defined runway and clear milestones rather than open-ended spend.
How often should a marketing budget be reviewed?
Set it annually, review allocation quarterly, and monitor performance monthly. Rebuilding the whole budget monthly creates churn rather than discipline.
Written by
Jonathan Molina, Fractional CMO
Jonathan Molina is a Fractional CMO and marketing advisor with more than two decades of senior marketing experience. Through twenty two., his fractional CMO practice, he provides marketing leadership to owner-operated and growing companies across Canada and the United States — from professional services and trades to sports, technology and consumer brands.
His work covers marketing strategy and planning, brand positioning and messaging, demand generation, website and content strategy, marketing team and agency leadership, and the marketing systems, AI workflows and reporting that keep it all accountable. He works with owners who need clear direction and better marketing decisions — not more activity.
