How much should a small business spend on marketing?

Every article on this subject gives you a percentage of revenue and moves on. That number is close to useless if you are a two person business trying to work out whether £600 a month on Google Ads is sensible or reckless. The honest answer starts with what a customer is worth to you.

The percentage rules, and why they mislead small businesses

You will see figures quoted between 5% and 10% of revenue. There is some basis for that. Gartner's annual CMO Spend Survey has put average marketing budgets somewhere between roughly 6% and 11% of company revenue across recent years.

The catch is who those companies are. That data comes from large organisations with marketing departments, brand budgets and a finance team. Their 8% includes salaries for people whose entire job is marketing. Yours does not.

The percentage also breaks at the low end. A business turning over £150,000 with a 5% budget has £625 a month. That is not enough for a serious paid campaign, so spreading it thinly across ads, social and content guarantees that none of them work. You would be better spending the same money on one channel properly for six months.

Work backwards from what a customer is worth

This is the calculation almost nobody does, and it takes ten minutes.

Take your average sale value, then your gross margin on it. A recruiter placing candidates at an average fee of £4,000 has a very different maths problem to a personal trainer selling £180 a month of sessions.

Then work out your conversion rates. If one in three enquiries becomes a quote, and one in three quotes becomes a customer, you need nine enquiries per customer. If a customer is worth £4,000 in fees at 70% margin, that customer contributes £2,800. Divide by nine and you can afford roughly £311 per enquiry before you are losing money.

That number is your ceiling per lead. Now compare it to reality. If Google Ads is bringing you enquiries at £45 each, you should be spending more, not less. If it is costing £400, the channel is wrong or the landing page is broken.

Do this for repeat customers too. If the average client stays two years, you are not buying one sale, you are buying the lifetime value, and you can afford considerably more to acquire them.

What things actually cost in the UK

Rough ranges from the market I work in, so you can sense check a quote:

• A decent small business website: £1,500 to £6,000 as a one off, depending on page count and complexity
• Freelance SEO or content support: £400 to £1,500 a month
• A small agency retainer: £1,000 to £3,000 a month, often with junior staff doing the work
• Google Ads management: typically 10% to 20% of ad spend, on top of the ad spend itself
• Email marketing platform: usually under £50 a month at small list sizes

Two things to watch. First, the ad spend and the management fee are separate, and some quotes blur them. Second, a retainer that is mostly reporting is common, so ask what the actual deliverables are each month before signing.

The thing that eats budgets fastest is paying for management of a channel that is not yet working. Fix the conversion problem before you increase the traffic budget.

Where a limited budget should go first

If you have £500 a month and no marketing at all, the order matters more than the amount.

Start with the free and near free things that produce enquiries directly. A complete, active Google Business Profile. Reviews from existing customers. A homepage that says clearly what you do and where you do it. These cost time rather than money and they raise the return on everything you spend later.

Next comes fixing conversion. If your website turns 1% of visitors into enquiries and you can get that to 2.5%, you have more than doubled your enquiries without spending a penny on traffic. Paying for visitors to a site that does not convert is the most common way small businesses waste money.

Most small businesses do not need a bigger budget so much as a clearer picture of where the current one is going.

Only then buy traffic. Ads, content, outreach, whichever fits your market. By that point you have somewhere for the traffic to land and a way of knowing whether it worked.

The cost most owners forget is their own time

Every budget conversation I have leaves out the biggest line item. If you spend six hours a month writing posts, chasing reviews and fiddling with the website, that is not free. It is six hours you did not spend on billable work or on selling.

Put a number on it. If an hour of your time is worth £50 to the business, doing your own marketing for six hours a month costs £300, on top of whatever you spend on tools and ads. A £400 freelance invoice looks different once you have done that sum.

The reverse applies too. Some jobs are genuinely better done by you, because they need your knowledge and take minutes rather than hours: replying to reviews, answering enquiries quickly, recording a two minute video about a job you have just finished. Keep those. Pay for the work that eats whole afternoons and does not need you specifically.

Track two numbers and you can stop guessing

Cost per lead and cost per customer. Nothing else really matters at this size.

Cost per lead is total marketing spend for the month divided by the number of genuine enquiries. Cost per customer is the same figure divided by the customers you won. Keep both in a spreadsheet with a row per month.

You need to know where enquiries come from, which means asking every caller how they found you and writing it down. It is unglamorous and it is more reliable than most analytics setups at low volumes.

After three months you will know which channel is earning its place. At that point the budget question answers itself: spend more where the cost per customer is comfortably below what a customer is worth, and cut what is not working.

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