5 Steps to Crafting a Marketing Budget That Actually Works
“You have to spend money to make money.”
Cliché? Maybe. Still, it’s the question every business owner asks: How much should I spend on marketing?
The truth is, there’s no universal formula, but smart frameworks exist. Over the years, I’ve advised startups, solopreneurs, and seasoned small business owners alike. The key to success always begins with building a budget that’s rooted in reality and aligned with the business’ vision. Let’s walk through the five essential steps to make your marketing budget a powerful growth tool, not just a spreadsheet entry.
1. Know Your Costs, Then Prioritize Marketing
Before you throw money at ads or influencers, understand your operational baseline. What does it take to keep your business running? Once you have that number, carve out a portion specifically for Branding, Promotion, and Advertising—three essentials in effective marketing.
Your brand is your first impression. It is visual and verbal: your logo, your website, your messaging, your copy, your packaging…it all shapes perception. You’re not just selling a product or service; you’re creating a story people want to be part of. That deserves a real investment, not leftovers from the budget pie.
2. Define Your Customer Like a Pro
Your budget won’t matter if your message doesn’t land. To spend wisely, get crystal clear on your ideal customer. (You can’t effectively market to everyone.)
Demographics: Age, location, income, etc.
Psychographics: What problems do they need solved?
Behavior: Where do they spend their time online or offline?
Whether you’re B2B or B2C, your marketing dollars should be aimed directly at the audiences most likely to convert. Everything else should be considered noise.
3. Set Goals and Spend for Outcomes
Budgeting without goals is like driving blindfolded. Start by asking yourself:
What results do I want to achieve in the next 6, 12, or 36 months?
Am I trying to maintain current revenue, grow, or scale quickly?
What would success look like in data, not just feelings?
The ROI of branding can be difficult to track, but critical to long-term growth. However, campaign-based marketing, ads, emails, SEO, etc. offer more tangible returns. Treat branding as a foundational investment, and pair it with measurable tactics.
2025 Benchmarks to Guide You:
According to the Spring 2025 CMO Survey, here’s what companies are currently spending on marketing (as a percentage of total revenue):
B2B Product: 6.4%
B2B Services: 9.0%
B2C Product: 15.5%
B2C Services: 6.0%
The U.S. Small Business Administration recommends 7–8% for businesses under $5M in revenue—but that’s just an average. Your business may require aiming toward either end of the spectrum…or of course, somewhere in between.
Budgeting by Business Stage: (this is another baseline to guide you)
3–6% – to retain revenue
7–11% – to grow
12%+ – to scale quickly
If you're launching or in a growth phase, don’t be afraid to commit and take a big swing. Have two budgets in mind: one to maintain where you are, and one to reach where you want to go.
4. Ditch the Guesswork: Track ROI and CAC
You can't improve what you don’t measure.
Start by tracking your leads and refining how people contact you. Then, move toward measuring Customer Acquisition Cost (CAC). This includes everything: branding, advertising, salaries, software, and sales support. Divide the total by the number of new customers gained in a specific period.
Example:
If you spent $10,000 last quarter and gained 100 customers, your CAC is $100.Evaluate this number annually, at the least, and strive to lower it without compromising quality. It’s not just about spending smarter; it’s about scaling wisely.
5. Budget with Flexibility, Pivot with Confidence
Marketing is part art, part science. What works today might flop tomorrow. And that’s OK, as long as you’re paying attention.
If your social media ads aren’t converting, stop the spend and try content marketing, PR, direct mail, or Google Ads instead. The best budgets are living documents. You’re not locked into anything. Adapt early and often.
One of my favorite pivots? Swapping out digital ads for branded print materials like rack cards or brochures, for high-touch industries. It's all about context. Make an impression! Right message. Right place. Right time.
Final Thought: Budget Like You Mean It
Marketing isn’t a cost…it’s an investment in visibility, credibility, and ultimately, profitability. If you treat it like a necessary evil, your results will reflect that. But if you commit, measure, and optimize, you’ll create a budget that fuels business growth, not just activity.
Still have questions? Need help turning these ideas into action? Reach out.
I help small businesses build bold, strategic marketing budgets that align with who they are and where they aim to go.