How Much Should You Spend on Marketing? A Guide for Businesses

Key Takeaways

• Marketing is an investment in long-term business growth, not a quick fix.
• Most US businesses spend between 5% and 10% of gross revenue on marketing.
• There are two standard budgeting methods: revenue-based and goal-based.
• Factors such as your growth stage, competition, and internal resources should inform your marketing budget.
• Avoid underfunding, overreacting to short-term results, and ignoring ROI tracking.
• Regularly reviewing marketing spend and performance helps you adapt and maximize results.

Setting the right marketing budget is a balancing act. You want to strike a balance between opportunity and risk.

Most mid-sized businesses in the United States face the same question: Are we spending too much? Too little? Somewhere in the middle?

That isn’t by chance.

With online competition turning every local showdown into a wide-open market, knowing where your next customer comes from (and how much it costs to acquire them) is more important than ever. The smartest spenders strike a balance between the shiny new tools of digital and the steady pull of traditional advertising.

Let’s saddle up and dig into what the data, experts, and experience tell us about smart marketing spend for businesses that want growth without wasting a single dollar.

Why Marketing Spend Matters for Long-Term Growth

Every business wants to grow, and marketing is one of the few real levers you can pull to make it happen. It not only brings in new leads and customers but also builds brand value and cushions you during downturns or shifts in the market.

According to Gartner’s 2025 CMO Spend Survey, U.S. companies are allocating an average of 7.7% of their total revenue to marketing, remaining unchanged from 2024. However, even without larger budgets, marketing leaders are finding ways to maximize their resources, leveraging data, analytics, and AI tools to boost efficiency and automate routine tasks. 

At the end of the day, marketing spend isn’t about shouting the loudest. It’s about building a steady engine that consistently generates new business, rather than chasing one-off wins.

Understanding Industry Benchmarks

While many companies spend just 1-3% of their gross revenue on marketing and often struggle to maintain growth as a result, the U.S. Small Business Administration (SBA) recommends a higher investment in order to grow. According to the SBA, businesses with less than $5 million in annual revenue should allocate 7-8% of gross revenue toward marketing to build brand awareness and acquire customers.

To put that into context:

• 3-5% of gross revenue is generally needed just to maintain market share.
• 5-10% (or more) is typical for businesses with ambitious growth goals.

Here’s what that looks like in practice:

• Home builders often charge between 6% and 8%, especially in competitive metro markets where digital ads, social proof, and video walkthroughs drive buyer interest.
• Med spa owners typically invest 7%–10% due to the need for regular lead generation, search engine ranking, and reputation management.

While B2C businesses typically spend 5–10%, B2B companies range slightly lower, at about 3–7% of gross revenue.

These benchmarks provide a useful starting point, but the optimal number for your business depends on your specific goals, competition, and stage of growth.

What Does This Mean For You?

Let’s take an example: if a local service business has just achieved $2 million in annual gross revenue and wants to scale to $3 million in 3 years, it should allocate at least 7.5% of its gross revenue to its marketing budget to achieve continued growth. That’s a $150,000 yearly marketing budget, or about $12,500 per month. This could cover a multi-channel strategy, including…

• A Website Modernization
• Search Engine Optimization
• Digital Advertising (multi-channel Google and Meta ads)
• Content Marketing
• Social Media Marketing
• Email Marketing Campaigns

If your market is highly competitive or you have ambitious growth plans, you’ll need higher. Newer businesses or those launching a new branch often need to push up to the higher end of the range to build awareness fast.

Revenue-Based vs. Goal-Based Marketing Budgets

Every marketing budget outline comes down to two choices: do you set it by the numbers you bring in, or by the goals you want to hit? Let’s talk about both approaches. 

1. Revenue-Based Budgeting

This method means allocating a set percentage of your gross revenue to marketing, usually following the 5–10% rule. It’s direct and easy to explain to your team or board. 

The downside? It doesn’t adjust for rapidly changing goals, market openings, or significant business shifts.

2. Goal-Based Budgeting

Goal-based budgeting starts with your marketing objectives. For example, you can generate 500 qualified leads per quarter, increase organic web traffic by 30%, or launch a new service line. You then reverse-engineer what it will take to achieve those targets, factoring in ad spend, creative work, technology, and labor costs.

Which Marketing Strategy Is Better?

Both approaches have their merits. Revenue-based budgeting ensures predictable spending and is beneficial for stable businesses. Goal-based budgeting is flexible and growth-oriented, making it effective when you have clear targets and can measure outcomes. 

Many United States businesses blend the two: use a revenue baseline, then layer on funds for specific campaigns or bold growth pushes.

Top Factors that Influence the Right Marketing Spend

No two businesses face the same path. Here’s what you should weigh when setting your budget and building an effective marketing strategy:

1. Growth Stage

Are you in expansion mode or holding steady? Startups and companies entering new markets must spend more to gain attention. Established brands in stable markets can afford to focus less on growth and more on retention and maintaining steady brand upkeep.

2. How Crowded Is Your Turf?

If you’re a homebuilder in Naples or a med spa owner in St. Louis, the market is packed. Greater competition means higher ad costs and more effort to stand out. Plan accordingly.

3. Internal Resources

Do you have a full in-house marketing team, or are you leaning on outside help for marketing activities? In-house teams incur much higher costs and come with the added employee management, but outsourcing to a marketing agency or contractor comes with its own management costs and requires some coordination.

4. Seasonality and Market Shifts

If your busiest months are predictable (for example, spa season peaks in the spring and fall), shift more budget to those periods. However, review quarterly to ensure you’re not missing out on changing customer trends.

5. Tech Stack and Tools

Modern marketing relies on platforms, including CRM tools, automation, analytics, paid media management, and creative software. Be honest about what you have, what you need, and what will actually help you drive results.

Common Marketing Budget Mistakes and How to Dodge Them

Even with the best intentions, businesses often fall into the same traps when setting their marketing budgets. Here are some of the most common mistakes (and more innovative ways to avoid them). 

1. Not Setting Clear Goals

Without specific, measurable targets, even a well-funded budget can vanish without leaving much to show for it. Start with business objectives and translate them into marketing goals, not the other way around.

2. Underspending Out of Fear

It’s tempting to cut spending during uncertain times. Unfortunately, the businesses that gut their budgets are rarely the ones that survive upheavals intact. 

Many companies instinctively slash marketing when times get tough, but as Harvard Business Review argues, that’s like “bleeding” during a crisis: it weakens your ability to fight back and recover.

3. Chasing Trends Across Marketing Channels Blindly

Just because everyone else is starting a TikTok channel or investing heavily in short-term paid ads doesn’t mean it’s the best move for you. Stick to strategies and marketing channels that align with your audience, goals, and available resources.

4. Failing to Track Marketing Costs and Adjust

If you’re not reviewing monthly performance (cost per lead, conversion rates, website traffic), you’re flying blind. Regular adjustment helps you move spending from what isn’t working to what is.

Tracking ROI and Adjusting Your Marketing Spend

The best marketing plans are not set-it-and-forget-it; they are accompanied by a living, iterative document that helps drive better marketing performance and efficiency over time. Here’s how to keep your spending smart and responsive:

1. Track the Numbers That Matter

Focus on key performance indicators (KPIs) that align with your business goals. These may include:

• Cost per lead
• Customer acquisition cost (CAC)
• Lifetime value (LTV)
• Website traffic and conversions
• Revenue generated directly from marketing campaigns and online ads

2. Use Modern Tools

Google Analytics, HubSpot, and even basic CRM software can help you identify where your spending is effective and where you’re wasting money. Set up dashboards for regular review and invite team input—they often spot shifting patterns before you do.

3. Review and Reallocate Marketing Budget Quarterly

Market conditions are constantly shifting, and your business goals can evolve, too. That’s why it’s essential to check in on your performance regularly.

Aim to do this at least every quarter. If you notice that specific strategies aren’t delivering results, don’t hesitate to reallocate that budget toward more impactful tactics, whether that’s digital advertising or more traditional methods.

Remember, as new opportunities arise, be open to experimenting with fresh approaches. Staying flexible enables you to maximize the effectiveness of your marketing efforts.

Wrapping It Up: Embrace Your Marketing Success

Setting the right marketing budget is part common sense, part data, and part wild west-style risk management. Spend too little and you may get left behind. Spend without a plan and you’ll likely be telling stories of wasted efforts.

Generally speaking, you’ll want to: 

1. Focus on clear goals
2. Use industry benchmarks
3. Review your approach every quarter

Give your marketing budget room to work, keep it flexible for what’s ahead, and measure what matters. That’s how businesses across the United States turn investment into growth, even in a crowded and ever-shifting digital frontier.

Let’s Make Your Marketing Dollars Count

At Lasso Up, we assess your current spend, compare it to industry standards, and help you determine if you’re underutilizing your resources or wasting money blindly.

Contact us today, and let’s wrangle your marketing initiatives into something worth bragging about.

FAQs: How Much Should You Spend on Marketing?

1. How much should a small business spend on marketing in the United States?

The U.S. Small Business Administration (SBA) suggests that businesses with under $5 million in annual revenue allocate 7-8% of gross revenue to marketing in order to grow. In general, 3-5% helps maintain market share, while 5-10% (or more) supports stronger, more competitive growth

2. Is it better to set a marketing budget based on revenue or goals?

Both revenue-based and goal-based budgets have advantages. Revenue-based is predictable and simple; goal-based is flexible and better for ambitious growth targets. Many businesses combine these methods.

3. What should be included in a marketing budget?

A comprehensive marketing budget encompasses digital ads, website maintenance, SEO, content creation, branding, technology (such as CRM and analytics), and occasionally, events or sponsorships.

4. How often should I review my marketing budget and business goals?

Review marketing budget allocation and results at least quarterly to ensure alignment with market changes and business objectives.

5. What are common mistakes businesses make with digital marketing budgets?

Mistakes include underspending, failing to track performance, chasing trends without a clear objective, and not adjusting marketing budgets in response to results. Add another sentence with the phrase “marketing investment.”

6. How can I measure the ROI of my marketing spend?

Track metrics like cost per lead, customer acquisition cost, revenue generated, and conversion rates. Utilize tools like Google Analytics or HubSpot to track the connection between spend and outcomes.