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How much should a small business budget for marketing?

Written by Ryan Terrey
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If you ask yourself this question, is your answer- how long is a piece of string? It can be a controversial question depending on who you ask and who asks the question. The marketing budget in a big corporation can be huge and still ineffective. Or the marketing budget of a sole trader might be minuscule, but how they spend it is so focused that they grow their business in leaps and bounds.

So how much should a small business budget for marketing? How much should YOU spend on your marketing? We have some thoughts about this conundrum we’d like to share with you and help you get the best bang for your marketing bucks.

What is a marketing budget?

A marketing budget specifically shows what money has been allocated to the functions of marketing only. The money being spent must align with the marketing objectives, or marketing projects being planned.

This can include paid advertising, market research, or paying marketing staff or contractors. Buying equipment for the marketing team does not really count for the marketing budget. If you want to spend your marketing budget on things like that, it is up to you, but it leaves you with less money to spend on the activities that will drive revenue and business growth.

A marketing budget specifically shows what money has been allocated to the functions of marketing only.

Why Is It Crucial To Have A Marketing Budget?

Having a specific budget for marketing will keep you and your team on the straight and narrow, and ensure that the right budget and resources are being directed to the activities that actually matter when it comes to growing your business.

It is also vitally important for tracking costs and expenses. It helps you determine the return on investment (ROI) on your campaign. Did you spend $10,000 on marketing a course, and it made you $150,000 in enrolments? This is a 1400% return on your initial investment.

Another good reason to have a budget is knowing what you’re allowed to spend. If your budget is $10,000 and a TV spot during a football match is $20,000, then obviously you can’t afford it and should try something else.

Also, if you had an unlimited budget, you could end up throwing your money into a black hole and getting no results. A paid subscription to an ad site you’ve forgotten about? Twelve months later you discover you’ve paid $5,000 and got nothing in return for it.

Rule of thumb when deciding how much to budget for marketing

You do need to spend money to make money. The more you spend in a smart way the more you should be reaping. But, that golden question remains - how much should I spend?

This is the advice we give our 6, 7, and 8-figure Members in our Elevate and Accelerate programs when it comes to setting a marketing budget:

  • 5-7% of your revenue will maintain your current level of business.
  • 7-10% of your revenue will grow your business.
  • 10-20% of your revenue will accelerate your business’s growth aggressively.


We talk here in percentages because it is appropriate and consistent with business size. If you hear a marketing expert give you a straight-up dollar figure to spend on marketing, be wary about someone just trying to make money off you.

Those percentages are a good guide, but they are just a general idea. You need to consider the following:

  • What is the level of competition you’re up against?
  • What are your current marketing methods?
  • What are your strategic goals?
  • How old is your business?
  • What difficulties are there in your market?

It is always important to never over-extend yourself financially when you’re marketing, but a good rule of thumb is - spending anything less than 7% of your total revenue will only make you fall backward.

Need help answering these questions? Want to see exactly how you could be getting the highest ROI in your marketing efforts? Talk to one of our Entrepreneur Development Managers at The Entourage who can help you get refocused and bring strategic thinking to your marketing plan.

Establish what you are currently spending on your marketing campaign

Have a good hard look at yourself and your business. Some good questions to ask yourself include:

  • What are you doing right now to market yourself?
    • How much does it cost, and do you feel it’s working for you?
  • Are you a member of networking groups?
    • How much do these groups cost?
    • How much TIME does it cost you?
  • How long does it take you to write a blog?
    • How much is that TIME worth?
  • Do you spend money on Social Media Ads?
  • Do you pay for Google Ads?
    • Do you pay someone else to do it?
  • Do you have a team member ‘doing some online stuff’?
    • How much TIME do they spend doing this?
    • What is their hourly wage?
    • Is it netting you any results?

TIME is the keyword here because often people don’t consider the time it takes to complete a task. If it took you 3 hours to construct a series of Facebook ads, do you only consider how much money you spent on the ad campaign? Are you forgetting the 3 hours of your time? How much are you worth an hour?

You should also look at as much history of your marketing spend as you can. Are there any patterns? Did you see a rise in sales when you had a rise in marketing spend? How have your profits shifted over time based on your marketing spend?

Calculating your ROI from marketing

Once you’ve completed the above task you can use this data to see how much return on your investment you achieved. You can also calculate your Cost Per Acquisition (CPA).

Looking back on the example above, where you ran a course for people to enroll in and sign up. You had a $10,000 marketing budget, and at the end of the campaign and the course, you came out with $150,000.

To make this example easy, we’re going to assume the course was already made and run previously, and it’s an online course, thanks to COVID-19. You’re an institution with a good reputation for providing excellent education, so tickets for the online event were set at $1,500 each. You sold 100 tickets. That’s pretty good.

We already know you have a 1400% ROI. And if you spent $10,000 to get 100 enrolments, then your CPA was $100 per enrolment.

If you're having trouble calculating your CPA and overall ROI for your current marketing efforts, feel free to give our team at The Entourage a call for a free consultation session.

What to do now

Has what we've talked about inspired you to try your hand at creating a budget suited for your needs? Do you need a bit of help? Click on through to see how we can offer you Marketing Training, or start now by mapping out your Marketing strategy with our FREE Marketing Template made exclusively for small businesses like yours.

If you want to learn more about taking your business to the next level with a well-oiled marketing engine, then get in touch with our team at The Entourage. We have business coaching and training programs for 6, 7, and 8-figure business owners, and experience transforming more than 40,000 other business owners across Australia and the world. Book in a call and one of our Entrepreneur Development Managers will be able to help you with your best next steps.

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