Creating a Marketing Budget for Small Business

For small business owners, every dollar counts. That is why a marketing budget is important. Without one, it’s easy to overspend on the wrong channels or underinvest in the ones that drive growth. A marketing budget for small businesses helps prioritize resources, reach your ideal customers and measure your return on investment (ROI).

What are normal marketing expenses?

Marketing planning typically includes considering a variety of channels and tactics to promote products or services, as well as to reach potential customers. Normal marketing expenses often cover digital advertising, such as pay-per-click (PPC) campaigns and social media ads, website development and maintenance, email marketing software, printed materials like flyers or brochures, event sponsorships, signage and market research. Costs may also include hiring marketing consultants or agencies, content creation (such as blog posts, videos and graphics), and customer relationship management (CRM) systems.

There are many options to build awareness of your business and its services or products. You’ll have to decide which will be most effective in reaching your goals. Careful planning can ensure marketing efforts are both strategic and effective.

How much should a small business spend on marketing?

The marketing budget outlines the money your business plans to spend on promotional activities over a given period — usually monthly, quarterly or annually. A well-structured budget ensures you’re not just spending money but investing strategically to grow your brand and revenue. Carefully monitoring spending is especially important when the economy isn’t performing well.

On average, small businesses spend about 8.11% on marketing.1 A recent Gartner survey revealed larger organizations reduced average marketing budgets to 7.7% of total revenue.2 However, if your goal is steady growth you might need to spend more.

For example, if your business generates $500,000 annually, a 7-8% marketing budget would range between $35,000 - $40,000. If you’re launching a new product or entering a competitive space, you might allocate more to maximize exposure.

Ultimately, the amount you allocate depends on your industry, growth goals and competition.

Build your small business marketing budget in seven simple steps.

The non-profit SCORE, which provides free mentoring to entrepreneurs and small businesses, offers a downloadable template to assist with creating a marketing budget.3 Before calculating potential marketing expenses, however, you’ll need to clearly define your business goals and objectives.

These steps will help to create a marketing budget tailored to your needs, with suggestions for percentages to allocate and metrics to track performance.

1. Define your business goals.

   What do you hope to accomplish through marketing? Goals might include:
   • Increasing brand awareness
   • Generating more leads
   • Boosting online sales
   • Expanding into new markets
   • Improving customer retention
   
   Your business goals will determine how you distribute your marketing budget. For instance, if lead generation is the top priority, you might invest more in paid ads and search engine optimization (SEO) rather than branding.

2. Understand your target audience.

   A budget is most effective when it supports marketing activities that reach the right people. Identify your ideal customer profile (ICP). Characteristics should include demographics such as age, gender, location and income. The ICP should also consider the target audience’s pain points and buying motives. The better you know your audience, the more cost-effective your marketing spend.
   
   Understanding your target audience also helps in developing branding. It helps to create a memorable identity that customers and prospects can easily recognize and differentiate your business from competitors. Strong branding also builds trust and emotional connection, making customers more likely to choose your products or services.

3. Choose the right marketing channels.

   You won’t need to invest in every channel. Instead, select the mediums where your audience spends the most time. You might choose a mixture of traditional or digital methods, depending on your business goals.
   • SEO offers long-term visibility via higher search rankings.
   • PPC ads provide quick traffic from fee-based services like Google Ads.
   • Social media increases brand awareness and engagement on Facebook, Instagram, LinkedIn or TikTok.
   • Content marketing establishes expertise and attracts organic (unpaid) leads.
   • Email marketing with newsletters or promotions builds relationships and drives conversions.
   • Local marketing could include sponsorships, events, flyers — even “Google Business Profile” optimization for community-based businesses.
   • CRM centralizes customer data, enabling marketers to segment audiences, automate communications and nurture leads more effectively for stronger engagement and higher conversion rates.
   
   Prioritize two to three main channels to evaluate and then expand as you see returns. Google Analytics 4, SEMrush and Ahrefs are instrumental in tracking SEO performance across multiple channels, website traffic and conversions.

4. Analyze past channel performance.

   If your business previously ran marketing campaigns, reviewing the data can be helpful in setting a new budget. Ask questions like:
   • Which channels generated the highest ROI?
   • Did you fund tactics that didn’t produce results?
   • Which campaigns led to new or repeat customers?
   
   Analyzing previous campaigns ensures your marketing budget is cost-effective and eliminates efforts that weren’t successful.

5. Divide your budget into categories.

   When you’ve decided which channels to use, allocate by category. A sample marketing budget allocation might include:
   • Digital advertising (30%)
   • Content marketing/SEO (20%)
   • Social media (15%)
   • Email marketing campaigns/tools (10%)
   • Website optimization/maintenance (10%)
   • Events, partnership, local marketing (10%)
   • Testing new channels (5%)
   
   A flexible model that allows adjustments as needed ensures you have a mix of tactics to achieve short-term results (ads) and long-term growth (SEO and content). It’s a good idea to also set aside a cushion for cost overruns.

6. Set key performance indicators (KPIs).

   Budgeting isn’t just about spending. You also need to track results to ensure you achieve business goals. Define measurable KPIs to determine whether you received an ROI.
   • Cost per lead (CPL)
   • Return on ad spend (ROAS)
   • Customer acquisition cost (CAC)
   • Conversion rate
   • Website traffic
   • Email open and click-through rates
   
   When you can tie each dollar you spend to a metric, you’ll be able to optimize marketing tactics and maximize ROI.

7. Revisit the marketing budget and adjust quarterly.

   Marketing trends shift quickly, and you might have to adjust your budget accordingly. Some considerations include:
   • Investing less in a channel that is underperforming.
   • Allocating more funds to a channel that is driving higher results.
   • Determining if business goals have changed (e.g., from awareness to retention).
   
   This approach not only ensures your business marketing budget is flexible but can also help to identify additional funds to reserve for testing new strategies.
   
   QuickBooks and FreshBooks are available to help manage small business marketing budgets, as well as other expenses.

Avoid common mistakes when setting a marketing budget.

Planning a marketing budget is essential. It's also important to be aware of common pitfalls that can undermine your efforts and impact your bottom line.

• Spreading too thin across channels or platforms
  It’s better to dominate in one or two marketing channels than to dabble in multiple ones with lesser results.
  
  
• Failing to measure ROI
  Without tracking performance, you won’t know what is working and where to invest.
  
  
• Neglecting organic strategies
  Paid ads deliver fast results, but SEO and content build sustainable growth.
  
  
• Ignoring competitors
  If competitors have more strategic approaches to marketing, it’ll be harder to stand out.

When you’re mindful of these common budgeting mistakes, you’ll save money and increase marketing effectiveness. Thoughtful planning and ongoing evaluation help drive better business results.

Optimize your marketing budget for small business.

Creating a marketing budget isn’t just about numbers — it’s about strategic decision making.  Defining business goals, knowing your audience, prioritizing channels and tracking ROI transforms marketing from a guessing game into a sustainable growth strategy. Synovus is an SBA Preferred Lender that is committed to helping small business owners achieve their goals. For assistance funding your marketing plan, contact a Synovus Business Banker, call 1-888-SYNOVUS (1-888-796-6887) or stop by one of our local branches.