How much should a small business spend on marketing?

The percentage band is real and worth knowing, but it answers a question about what other businesses do rather than what yours should. It is most useful as a sanity check in two directions: a business spending well under it is usually relying on referral flow that it cannot see the end of, and a business spending well over it without knowing its cost per customer is buying volume rather than growth.

The more useful way in is from the other end — what the work costs, rather than what the revenue can spare. A focused engagement covering one or two services sits in the low thousands a month at market rates. If the percentage of your revenue does not reach that, the honest conclusion is not to buy a cheaper version of the same thing; it is to buy less scope done properly, because a full-service engagement funded at a focused-engagement budget is how both sides end up disappointed.

The figure that actually decides whether the budget is right is one nobody publishes, because it is yours: what a customer is worth and how many enquiries it takes to get one. A business that knows those two numbers can evaluate any proposal in an afternoon. A business that does not is choosing between agencies on how the proposals read, which is a contest the best writer wins rather than the best operator.

There is also a spend that costs nothing and is almost always available first. Enquiries that already arrive and are answered late, or not at all, are inventory already paid for at whatever the last campaign cost. In most businesses that have never measured response time, the recoverable amount there is larger than the increment any budget increase would buy — and unlike a budget increase, it compounds against everything spent afterwards.