"How much should I be spending on marketing?" is one of the most common questions a business owner asks, and one of the worst-served by the answers online. Search it and you'll get a confident-sounding number that's often built on data from companies nothing like yours. The honest answer takes about two minutes longer to explain and will actually save you money.
The rule of thumb, and its one big caveat
The most cited benchmark comes from the U.S. Small Business Administration: businesses under $5 million in annual revenue should spend roughly 7 to 8 percent of gross revenue on marketing. Newer businesses trying to grow faster often push that to 10 to 12 percent or higher, because building awareness from zero simply costs more than maintaining it.
But here's the caveat that matters more than the number: that 7 to 8 percent assumes healthy profit margins, in the 10 to 12 percent range. A business running on thin 5 percent margins genuinely cannot spend the same share as one running on 30 percent, and pretending otherwise is how budgets quietly sink a business. The percentage is a starting point, not a law.
The benchmark trap that wastes real money
Here's where a lot of owners go wrong. You search for an average, you find the widely-quoted figure of around 7.7 percent from Gartner's survey, and you benchmark yourself against it. The problem: that survey is dominated by large enterprises, Fortune 500 companies with established brand equity and completely different economics.
If you run a $2 million home services business and measure yourself against that number, you're comparing yourself to companies that already have the brand awareness you're still trying to build. Smaller businesses generally need to spend a higher percentage, not a lower one, precisely because they're building from a smaller base. One analysis found businesses under $10 million in revenue allocate an average closer to 15 percent. The "average" you found online may be the wrong target entirely.
The number that reveals the real problem
Here's the statistic that reframes this whole conversation: roughly two-thirds of small business owners spend less than $1,000 on marketing per year. For most real businesses, the actual problem isn't overspending or picking the wrong percentage. It's chronic underspending, treating marketing as an afterthought that shrinks the moment revenue dips, right when visibility matters most.
That's the honest tension. The businesses asking "am I spending too much?" are rarely the ones with a problem. The ones with a problem usually aren't asking at all.
A better way to think about it
Instead of starting from a percentage, work backward from a goal. How many new customers do you want this year? Given how many leads it typically takes you to close one, how many leads does that require? And what does it currently cost you to generate a lead? That math produces a budget grounded in your actual business, not an average built from businesses unlike yours.
Then, and this matters more than the total, how you split the budget usually determines the outcome more than the size of it. A small budget aimed well outperforms a large one spread thin across channels that don't fit your business. For most local service businesses with strong word-of-mouth, over-investing in local SEO, content, and email nurture tends to beat pouring everything into paid ads, though the right mix depends entirely on where your customers actually are.
The bottom line
A reasonable starting range for most small businesses is 7 to 10 percent of revenue, nudged higher if you're newer or growing aggressively, adjusted honestly for your real margins. But the percentage is the least important part of this. Spending intentionally on the right channels for your specific business beats hitting any benchmark, and spending too little, the far more common mistake, is its own slow, quiet cost.