Blog / 10th June 2021

How to set a marketing budget for your small business

Setting a budget for marketing is SO important and often overlooked. Angie Downs of Halo Effect Marketing shares her views on how to go about it.

How much should I spend on marketing? It’s a question that I get asked a lot.  Unfortunately, there is not a single answer to this question.  While a general rule of thumb is 10% of gross turnover, the truth is the amount of budget will be influenced by a number of factors, and most importantly, it’s unique to your business.

Here are some top tips on setting your marketing budget for your small business.

Create a rough estimate

This process is helped if you have an idea for how much you want to spend on marketing.  So, what does 10% of your gross turnover look like?  Can you afford to allocate this to a marketing budget?  This isn’t a straightforward question as you’ll want to know what the return on investment might be.

How does your industry work?

The need for marketing is so diverse and is heavily dependent on the kind of industry you’re in.  Some questions you should ask yourself are:

How have you found customers in the past?

How did you gain your customers, was it word of mouth, advertising, social media contact?  If you don’t already have this documented it’s a worthwhile exercise to help you to understand what works for you.  Have you done any marketing activity already and what did you learn from it? 

Are you getting the right kind of customers?

It’s worth considering who your ideal customer is and what characteristics they possess.  This will differ across B2B and B2C but by writing down the kind of customers you want, and more importantly don’t want, you can start to think about whether you need to do things differently. 

Where does your ideal customer hang out?

It’s worth understanding how your ideal customer works, what media they consume and where they ‘hang out’ so you can work out how best to target them.  A good example of this is that LinkedIn is predominantly a B2B platform, and TikTok is for a younger demographic.  Understanding the demographics of different platforms will help you reach your ideal customer.

What does your sales funnel look like?

The standard sales funnel consists of Awareness, Interest, Desire and Action.  If you think of this in the context of your target customers:

Awareness      How do you make potential customers aware of your company?

Interest           How do you generate interest – what do you do specifically for those customers who show an interest?

Decision          Why should a customer choose you?  What makes you different?  Are you actively promoting your message to customers at this stage?  In some industries customers use search engines when they are ready to make a decision and often actively search for a product to meet their needs.

Action             How to do you close the sale?  How do you make it easy for a customer to choose you?

It’s worth considering what you do currently in each of these areas and whether this could be improved.  Do you understand your conversion rates at every stage?  This might help to guide you around where best to focus your marketing activity.  For example, if you get lots of enquiries, from customers showing an interest in your business, but your conversion to sale is low, you should focus on improving conversion rates rather than generating more enquiries.

Setting your marketing objectives

By now, you should have a good idea about where marketing could make a difference to your business.  This will improve your return on investment and have a direct effect on how much you should spend on marketing. If you don’t have the time to do this in-house, a good marketing consultant will be able to do it for you. 

You can then start setting objectives that you want your marketing activity to achieve.  For example: – Increase enquiries by 20% = 10 new enquiries per month.  If you have lots of objectives then you may need to prioritise your activity.

Armed with the research that you have already done you should have a good idea of what you could do to achieve your objectives.  A marketing consultant can help you with this if it’s not clear.

Measure and Learn

It’s critical that you measure all activity that you do in terms of marketing.  Understand your starting point, and then record all activity, spend and results going forward.  This will help you to understand what is working for you.  Check out our top tips on measuring your marketing activity

How much to spend on marketing a small business

You came up with a 10% of gross revenue figure at the beginning of the process.   How do you feel about that?  Can you afford it?  Would you be willing to spend it to achieve your objectives?  If not, why not work out the budget based on 8%, or 9%.  Whatever budget you decide upon, its essential that you use it wisely, and make decisions based on your objectives and desired results.  The most successful marketing plans have been tested, fine-tuned and they continue to deliver results.

In summary

To read more advice from Halo Effect Marketing visit or check out the GrowthBox Advice pages here.

Back to all blog posts

6msmall and medium sized businesses in the UK

51k+marketing service providers

Are you a marketing company interested in working with us?

Get in touch