How Much Should a Small Business Spend on Marketing?
As a broad reference point, the Business Development Bank of Canada (BDC) cites marketing budgets of roughly 2–5% of revenue for B2B businesses and 5–10% for B2C businesses. But those ranges are context, not a formula.
There is no universal percentage of revenue that tells a small business exactly how much to spend on marketing. The right budget depends on what growth you are trying to achieve, the economics of acquiring customers, your margins, your competitive environment, and whether your business can actually convert and serve the additional demand that marketing creates.
A useful marketing budget therefore starts with the business objective and works backward to the investment required — not the other way around.
Marketing Budget Benchmarks Are a Starting Point, Not the Answer
Benchmarks can help establish a reference range, but they vary significantly depending on the businesses being studied and how marketing expenditure is defined.
BDC provides a commonly cited guideline of approximately 2–5% of revenue for B2B businesses and 5–10% for B2C businesses. A separate BDC survey of more than 1,400 Canadian businesses, conducted in 2019, found that small businesses spent an average of approximately $30,000 per year on marketing, while businesses with 20–49 employees spent roughly twice that amount. Because this survey dates from 2019, the dollar figures are best viewed as historical Canadian context rather than a current recommended budget.
Larger-company surveys provide different reference points. Gartner’s 2025 CMO Spend Survey reported average marketing budgets of 7.7% of company revenue. However, the survey primarily represented companies with annual revenue of $1 billion or more, making their operating environment very different from that of most small businesses. The CMO Survey reported marketing spending at approximately 9.4% of company revenue.
These figures are also not perfectly comparable. The surveys cover different company sizes, geographies and business models, and they may define marketing expenditure differently.
That is precisely why no single benchmark should determine your budget. Benchmarks can tell you what other businesses are spending. They cannot tell you what your business can economically justify.
What Should Actually Drive Your Marketing Budget?
Before settling on a number, consider the factors that determine whether a particular level of marketing investment makes sense for your business.
Growth objective. A business trying to maintain its current revenue and one trying to increase its customer base by 30% within a year will require very different levels of marketing activity.
Margins and unit economics. Businesses with stronger margins generally have greater flexibility in what they can afford to spend to generate a customer. Thin-margin businesses have less room for inefficient acquisition.
Customer acquisition cost relative to customer value. Where reliable data is available, compare the cost of acquiring customers with the economic value those customers create. If acquisition costs consistently exceed customer value, increasing marketing spend is unlikely to be sustainable without changes to pricing, margins, retention, conversion or the acquisition model.
Sales cycle. Businesses with long sales cycles may need to sustain marketing activity for months before revenue can reasonably be attributed to the investment.
Competitive intensity. Entering or competing in a crowded market may require greater investment simply to achieve meaningful visibility and consideration.
Existing demand and brand strength. A business with strong referrals, organic search visibility or an established reputation may have different acquisition requirements from a new entrant starting with little market awareness.
Delivery capacity. This is frequently overlooked. If staffing, production, scheduling or service capacity is already constrained, increasing marketing spend can generate demand the business cannot serve effectively. The result may be longer lead times, declining service quality or lost opportunities rather than profitable growth.
Marketing decisions therefore cannot be separated entirely from the operating capacity of the business.
A Practical Framework for Setting Your Marketing Budget
Instead of starting with “What percentage of revenue should we spend?”, work through the decision in sequence.
Define the business objective. Decide what the marketing investment is expected to achieve. This may be additional revenue, more customers, entry into a new market, increased repeat business or stronger awareness in a priority segment.
Translate the objective into required growth. Estimate how many additional customers, opportunities or sales would be required to reach that objective.
Evaluate the acquisition economics. Where sufficient data exists, estimate what it reasonably costs to acquire those customers and whether that cost is sustainable relative to their value to the business.
Determine the marketing activity required. Identify the channels, content, campaigns, systems and supporting capabilities needed to generate and convert that demand.
Assess financial and operational capacity. Confirm that the business can afford the investment and can actually deliver on the demand it is intended to create.
Build in measurement and reallocation. Decide in advance what will be measured and under what circumstances spending will be increased, reduced or moved elsewhere.
If reliable customer-acquisition data is not yet available, avoid turning assumptions into false precision. Start with conservative estimates, controlled tests and clearly defined measurement before committing substantially more budget
This approach puts the business objective first and the budget number last.
What Should Be Included in a Marketing Budget?
A marketing budget is broader than advertising spend.
Depending on the business, it may include:
paid advertising and media;
SEO and content development;
website and landing-page improvements;
email marketing and CRM systems;
creative and content production;
marketing software and analytics platforms;
market research;
events or sponsorships;
freelancers, agencies or specialist support; and
internal marketing staff or employee time where the business is measuring its fully loaded marketing investment.
It can also help to distinguish between two types of investment.
Demand-generation investment is intended primarily to reach prospects and generate opportunities. Paid media, campaigns, SEO, content and email activity often fall into this category.
Marketing capability and infrastructure makes those activities more effective. Websites, CRM systems, analytics, research, conversion infrastructure and supporting processes may not generate immediate leads themselves, but they can materially affect how efficiently marketing performs.
A business that funds campaigns while underinvesting in the systems needed to convert and measure demand may appear to have a marketing problem when the real constraint is elsewhere.
How Should You Allocate the Budget Across Channels?
There is no universal channel allocation that works across businesses.
A better approach is to consider:
where customers actually spend time and research their options;
how different channels contribute across the buying journey;
which channels already demonstrate credible performance;
current strategic priorities; and
where controlled experimentation could produce useful new evidence.
Proven channels should not automatically be underfunded simply to create a more diversified marketing mix. At the same time, committing heavily to an untested channel without sufficient evidence creates unnecessary risk.
New channels can usually be tested at a controlled scale first. If they produce promising economics and the business can handle additional demand, investment can then be increased.
How to Know Whether Your Marketing Budget Is Working
The appropriate metrics depend on the business model.
Useful measures may include:
customer acquisition cost;
qualified leads or sales opportunities;
conversion rate;
marketing contribution to pipeline or revenue;
customer value over time;
retention or repeat-purchase behaviour; and
revenue or contribution margin generated from acquired customers.
Not every marketing investment should be judged exclusively through short-term campaign ROI. SEO, brand development, website infrastructure, CRM implementation and market research can create value over longer periods and may support several stages of the customer journey.
The objective is therefore not simply to calculate a single ROI number. It is to understand whether marketing investment is contributing economically meaningful business outcomes over an appropriate time horizon.
Vanity metrics such as impressions, followers, likes or traffic can provide diagnostic information, but they should not become the primary justification for spending unless they can be connected to a meaningful business objective.
When to Increase, Reduce or Reallocate Marketing Spend
Increasing, reducing and reallocating marketing spend are three different decisions.
Increase spending when customer acquisition economics are attractive, the business has sufficient capacity to serve additional demand, and there is credible evidence that the successful activity can scale.
However, do not assume performance will remain constant as spending increases. A channel that performs efficiently at one spending level may produce a higher acquisition cost, lower-quality leads or audience saturation at a larger scale. The economics of the next dollar invested matter as much as historical average performance.
Reduce spending when the economics remain weak after reasonable optimization, when market conditions have changed, or when the company’s strategic priorities no longer justify the investment.
Reallocate spending when the overall marketing budget remains reasonable but evidence suggests that some channels, activities or capabilities deserve a greater share of it.
A weak-performing channel does not necessarily mean the entire marketing budget is too large. The problem may be allocation rather than total investment.
Common Marketing Budget Mistakes
Common problems include:
treating a benchmark percentage as a strategy rather than a reference point;
equating the entire marketing budget with advertising spend;
expanding into multiple channels before basic measurement is established;
cutting an initiative before enough data has accumulated or before the normal sales cycle has had time to play out;
continuing to increase spending based only on historical average performance without considering diminishing returns;
underinvesting in websites, CRM, analytics or other infrastructure required to convert demand effectively; and
increasing demand-generation activity without confirming that the business has the capacity to serve the resulting customers.
These mistakes often occur because the budget is treated as an isolated marketing decision rather than as part of the broader business model.
A Better Question Than “What Percentage Should We Spend?”
Revenue percentages can provide a useful starting point, but they should not determine the answer.
A more useful question is:
What level of marketing investment can the business justify based on the growth it wants to achieve, the economics of acquiring the customers that growth requires, and its ability to convert and serve that additional demand?
That question changes marketing budgeting from a percentage exercise into a strategic allocation decision.
The goal is not necessarily to spend more or less than the benchmark. It is to invest at a level the business can support, measure and economically justify — and then adjust that investment as better evidence becomes available.
Need help developing a marketing budget and strategy around your business goals, market and growth priorities?Learn how Acumen approaches Marketing Strategy for growing businesses.