How Much Should a Company Spend on Marketing?

How Do You Determine a Marketing Budget?

Determine a marketing budget by working backward from the growth you want to the customers that takes, then to what you can afford to pay to win each one and what each channel has proven it costs. The budget is one part of the written plan on the Marketing Action Plan page, and usually the part leadership questions hardest.

1. Set the growth goal as the revenue or gross profit you want to add next year.
2. Turn it into customers by dividing that goal by what a typical new customer brings in during the year.
3. Decide the most you'll pay to win one, based on how much profit a customer brings over the relationship, how quickly it arrives, and how long your cash flow lets you wait to earn the cost back. The calculator on the Channel Selection page works that ceiling back to a cost per lead and per visit.
4. Price each channel at its proven cost per customer, taken from your CRM rather than the ad platforms. A channel with no proven cost gets a fixed test budget instead of a share of the plan.
5. Multiply the customers needed from each channel by that channel's cost per customer, then add the costs that don't move with volume, such as people, the website, tools and content.
6. Check capacity by asking whether sales, delivery and cash can handle that many new customers in the year.
7. Compare the total with a percentage of revenue, and if the two are far apart, find out why before you submit either.

What Percentage of Revenue Should Marketing Be?

No single percentage of revenue is right for every company, because the share that pays back depends on your margins, how long customers stay and how fast you're trying to grow. Published percentages are useful for checking a budget you've built, and a poor way to set one.

Benchmarks do exist, and the best-known is Gartner's annual CMO Spend Survey, which put marketing budgets at 7.8% of company revenue in 2026, up from 7.7% in 2025.¹ Most of the 401 marketing leaders it surveyed work at companies with more than $1 billion in revenue, though, so it describes large companies, while banks and software companies publish their own rules of thumb for small businesses, and industry figures such as construction's and law firms' come with limits of their own. Know the limits of any benchmark before you quote one in a budget meeting:

• They record what companies spent rather than what paid back, so an average can include plenty of budgets that didn't earn their keep.
• They blend different economics, since a software company with high gross margins and a distributor with thin ones can afford sharply different amounts to win the same revenue.
• They tie marketing to last year's revenue, so the budget shrinks in a bad year when growth matters most, and grows in a good one even when there's no room for more customers.
• They say nothing about capacity, which is often the real limit on how much marketing a company can use.

What Percentage of a Marketing Budget Should Be Digital?

The digital share should match how much of your best buyer's attention is digital, which varies by industry and buyer, so let each channel's proven cost per customer set its share rather than a fixed split. Put money where your buyer researches and decides, as the Channel Selection page explains in more detail.

A fixed digital share usually reflects what's easiest to measure, because digital channels report every click while associations, events and sales relationships are harder to track, even when they're where a buyer makes up their mind. The ad platforms also credit themselves generously, so a split based on their reports tilts toward digital even where digital didn't earn the share.

For the contractor, two channels are digital (Google search and LinkedIn) and two aren't (direct outreach to named firms and the local building owners' association). Its "How did you hear about us?" answers showed the association influencing deals the platforms had credited to themselves, which a split based on platform reports would have quietly defunded.

When Should a Company Spend More on Marketing?

Spend more when each added customer still costs less than you can afford to pay and your team can sell to and serve the extra customers well. Raise the budget in steps you can read, and judge each step by what the added customer costs, because the average hides the moment a channel starts running out of room.

More spend won't help in four common situations, and each one has a better use for the money:

• The channel isn't proven, because a few good months without clean measurement is still a guess, so fix the numbers on the Channel Selection page first.
• Leads aren't turning into customers, and more traffic to a slow follow-up or the wrong page buys more of the same loss, which is why the work in the Prospect-to-Lead Conversion step comes before a bigger budget.
• The added customer is near your ceiling, so hold that channel where it is and put the next dollar into a channel with room left.
• Sales, delivery or cash can't keep up, and spend past that point buys customers you can't serve well, which costs margin and reputation together.

How Much Should a Small Business Spend on Marketing?

A small business should use the same method with tighter limits, funding one channel properly where its buyer already looks and adding spend only as that channel proves what a customer costs.

For a smaller business the limits are usually cash and the owner's time, and a small company often can't wait a full year to earn back what it paid for a customer. Choose a ceiling you can fund up front, such as a few months of a customer's gross profit, and resist dividing a small budget across several channels, since none of them gets enough to show a result. Count your own hours as a cost too, since a channel that looks cheap can be expensive once you add the evenings it takes to run.

For a larger company the method is the same and the hard part is agreement, because each channel has an owner who believes in it and finance wants every line defended. A budget built from customers needed and proven cost per customer gives you that defense, with a fixed test budget for anything new and a quarterly review of what the added customer costs in each channel.