The honest answer that accounts for where you actually are, not where a generic percentage formula assumes you should be.
The standard advice is to spend 5 to 10 percent of revenue on marketing. For a business doing $500,000 a year, that is $25,000 to $50,000 annually. For a business doing $100,000, it is $5,000 to $10,000.
That formula is not useless, but it leaves out the most important variable: what stage your business is at and what you are actually trying to achieve. Here is a more useful framework.
At this stage, the most important thing marketing can do for you is help you understand your customer, not scale acquisition. Spending heavily on campaigns before you have a clear picture of who buys, why they buy, and what they value is a fast way to waste money.
At this stage, your marketing budget should be small and focused on learning. Spend on things that generate conversations with potential customers: direct outreach, small-scale content, a functional website. Keep it under $1,000 per month until you have clear evidence of what message resonates and which channels reach your actual buyers.
This is where most small businesses sit when they first start thinking seriously about marketing investment. You have customers. You have some reviews. You know roughly who your buyer is. What you do not yet have is a system for getting more of them consistently.
This is the stage where campaign investment starts to make real sense, because you have enough market feedback to build a campaign that targets the right person with the right message.
At this stage, a reasonable marketing investment is somewhere between 8 and 12 percent of revenue, but more importantly, it should be structured as campaigns with clear objectives rather than ongoing retainers or scattered tactics.
A single well-executed campaign at this stage, costing $7,500 to $15,000, can generate enough new business to pay for itself multiple times over. That is a better use of limited budget than a $1,500 per month retainer that produces activity with no measurable return.
At this stage, marketing stops being an expense line and needs to start functioning as a growth engine. The question shifts from how much should I spend to what is my cost of customer acquisition and what is the lifetime value of a customer.
When you know those two numbers, marketing budget decisions become simple. If your average customer is worth $10,000 over their lifetime and your campaign cost of acquisition is $1,500, you scale that campaign until the market is saturated or the economics change.
businesses across North America at this stage typically invest 10 to 15 percent of revenue in marketing, with an increasing proportion going to paid acquisition as campaigns prove their unit economics.
Regardless of what stage you are at, the most important marketing number for a small business is not the percentage of revenue you spend. It is the ratio of customer lifetime value to customer acquisition cost.
If your LTV:CAC ratio is above 3:1, your marketing is working and you should spend more. If it is below 3:1, spending more will not fix the problem. You need to either improve the campaign or improve the offer.
Most small businesses do not track this ratio because they have not defined their LTV and they do not know their CAC. Fixing that data problem is worth more than any specific budget decision.
If you are a small business under $500K in revenue and you have not yet run a campaign with a clear objective and measurable outcome, the right amount to spend on marketing is whatever it takes to run one good campaign and measure the result. Not a retainer. Not scattered tactics. One campaign, one objective, one chance to learn what works.
Start there. The budget question gets much easier once you have data.