How Much Should a Small Business Spend on Marketing?

Most benchmarks put marketing spend between 5% and 9% of revenue. The CMO Survey's 2026 edition reports an average near 9% and a median of 5%, which means half the companies that answered spend 5% or less. Those figures are a sanity check. The better way to set a small business marketing budget is to work backward from what a new customer is worth to you. Both methods are below.

What the benchmarks say, and who they measured

• The CMO Survey, 2026 (Duke University's Fuqua School of Business, Deloitte and the American Marketing Association): an average of about 9% of revenue, with a median of 5%.
• Gartner's 2026 CMO Spend Survey: 7.8% of revenue. Most of the companies surveyed are very large.
• The "7 to 8%" rule: widely attributed to the U.S. Small Business Administration. It is usually quoted without its conditions: revenue under $5 million and net margins of 10% to 12%.

Why the average misleads

When the average is 9% and the median is 5%, a small number of heavy spenders are pulling the average up. For a typical owner-operated business, the median is the more honest starting point.

There are two more problems with any percentage:

• It ignores margin. Five percent of revenue is a small bet for a business with 40% margins and a large one at 8%.
• It ignores what you are trying to do. Holding steady and opening a second location do not need the same budget.

A better method: build the budget from your own numbers

1. Work out what a customer is worth. Gross profit from a typical customer over the time they stay with you.
2. Decide what you can pay to win one. Pick a share of that gross profit you are comfortable giving up to get the customer.
3. Set the number of new customers you want this year.
4. Multiply. New customers wanted, times what you can pay for each, is your budget.

An illustration with round numbers: a customer is worth $3,000 in gross profit. You are willing to spend $900 to win one. You want 100 new customers. The budget is $90,000 for the year.

Now compare that to the benchmarks. If the business does $1.5 million in revenue, $90,000 is 6%, inside the normal range. If it came out at 20%, either the growth target is too ambitious or the cost to win a customer needs to fall.

Fix the leaks before you raise the budget

The most expensive mistake we see is adding budget to a system that loses customers on the way in.

A summer camp we worked with had watched enrollment fall for four years, from 618 campers to 473. In that situation the usual reflex is to spend more on advertising. Spend was not the main problem. Lead intake was inconsistent, there was no single path from interest to registration, and the website dropped parents partway through.

Once those were fixed, new customers grew 3.4× in one season and the engagement returned 19.5× its cost. Details are in the case study.

More budget into the old process would have bought more lost inquiries. Before you add a dollar, run the 15-point marketing audit and look hard at the lead handling section.

How to split the budget

There is no universal split, but three rules hold up:

• Fund what you can measure first. Channels where you can count customers, not only clicks.
• Keep a share for existing customers. Repeat business and referrals usually cost the least to win.
• Count the people, not only the media. Agency fees, freelancers, software and staff time are all marketing spend. Many owners leave them out and think they spend less than they do.

When to spend more than the benchmark

• You are entering a new market or opening a location.
• Your margins are high and customers stay for years.
• You have a channel with a proven cost per customer and room to grow.

When to spend less

• Margins are thin.
• You cannot yet say what your current spend returns.
• Leads are not being followed up. Fix that for free first.

Common questions

Is 10% of revenue too much to spend on marketing?

Not if each new customer returns more than it costs to win and you can measure it. A percentage is not too high or too low on its own. An unmeasured one is.

Should a marketing budget include salaries and agency fees?

Yes. Count everything you pay to get customers: media, tools, vendors and the staff time spent on it.

What if I do not know my cost per customer?

Then that is the first thing to find out. Divide last year's total marketing spend by new customers for a rough figure, and improve it from there. Our guide to measuring marketing ROI covers the baseline.

Where Pattern Growth fits

We are a fractional CMO for owner-operated businesses. A senior partner works out where your budget should go and then does the work, inside a fixed scope, reporting plainly on what was spent and what it returned. If you would like a second set of eyes on your budget, ask for a growth plan or read how we work.