Determining the right marketing budget for your business depends on factors like industry, growth stage, and revenue. While small businesses typically allocate 7-10% of gross revenue, startups and high-growth companies may invest 15-20% to accelerate brand awareness. Industry benchmarks also play a crucial role—retailers often spend 10-20%, while manufacturing firms allocate as little as 2-5%. Understanding customer acquisition costs (CAC) and lifetime value (LTV) helps fine-tune your budget for optimal ROI. This guide breaks down marketing budget strategies to help you allocate the right amount and grow your business effectively.

Details on Determining How Much You Should Spend on Marketing

The amount a business should allocate to marketing annually depends on its industry, stage of growth, and overall goals. However, there are general guidelines based on annual gross revenue and net profit:

Gross Revenue-Based Marketing Budgeting

When determining a marketing budget, businesses often use a percentage of gross revenue as a guideline. Small to medium-sized businesses (SMBs) typically allocate 7-10% of gross revenue if they are actively trying to grow, while more mature businesses focused on maintaining market share may spend 5-7%. Startups and high-growth companies, which need to invest heavily in customer acquisition and brand awareness, often dedicate 15-20% of gross revenue to marketing.

Net Profit-Based Marketing Budgeting

For companies preferring to base marketing budgets on net profits, a range of 15-30% of net profit is common, depending on growth ambitions and industry norms.

Industry Benchmarks for Establishing Budgets for Marketing

Some industries require higher marketing spends due to competition and customer acquisition costs:

Consumer Packaged Goods (CPG): 20-25% of gross revenue.

Retail: 10-20%.

Tech/SaaS: 15-20%.

Professional Services: 5-10%.

Manufacturing/Industrial: 2-5%.

Additional Considerations for Budgets for Marketing

Customer Acquisition Cost (CAC): Monitor how much it costs to acquire new customers and adjust spending to ensure profitability.

Lifetime Value (LTV): Businesses with high LTVs might justify a higher upfront marketing investment.

Growth vs. Maintenance: Companies in growth mode need higher budgets compared to those maintaining market share.

Ultimately, marketing budgets should align with your business goals, competitive landscape, and ROI expectations. Regularly evaluate the effectiveness of your spending to ensure it’s driving measurable results.

Determining the right marketing budget is just the first step—executing an effective strategy requires expertise and oversight. Hiring a Fractional CMO gives your business executive-level marketing leadership without the cost of a full-time hire. 

Unlike an in-house CMO, who can command a six-figure salary plus benefits and bonuses, a Fractional CMO provides strategic guidance, oversees campaigns, and optimizes budgets at a fraction of the cost. 

This is an ideal solution for small to mid-sized businesses, startups, and companies in transition that need high-level marketing expertise without long-term overhead. 

If you’re ready to maximize your marketing ROI and build a scalable strategy, let’s connect! Hire me as your Fractional CMO and take your marketing to the next level.