Search for how much a small business should spend on marketing and you'll find the same answer everywhere: a percentage of revenue, often "7 to 8 percent, as recommended by the SBA". We checked where that number comes from, and where the other popular figures come from. None of them describes a small business. Here's what the sources actually say, and a better way to set a budget: work back from the customers you need and what a lead costs in your industry.
- The SBA doesn't recommend a percentage. Its current guidance says to cost out your plan and compare it with the revenue it brings in.
- Survey averages of 5 to 9% of revenue come mostly from large companies.
- Build the ad budget from customers needed, your close rate and the cost per lead in your industry.
- Add management, a website that converts, tools and the time to answer every enquiry.
- Judge it on cost per customer against the profit each customer brings, not on clicks.
Where the percentage rules come from
| Source | What it says | Who it describes |
|---|---|---|
| SBA, current guidance | No percentage: cost out the plan and compare it with the revenue it brings in | Any small business |
| SBA community blog, 2012 | 7 to 8% of revenue, assuming 10 to 12% margins; also 2 to 3% and 3 to 5% in the same post | Businesses under $5 million |
| Gartner CMO Spend Survey 2026 | 7.8% of company revenue | About 400 marketing leaders, mostly at $1 billion+ companies |
| The CMO Survey, Spring 2026 | Mean 9.0% of revenue, median 5% | 308 US marketing leaders, VP level or above |
| IPA Bellwether, Q3 2026 | UK budgets revised up, net balance +14.3% | Mostly the UK's top 1,000 companies |
Sources read November 2026. The 2012 post is no longer on sba.gov; the link is an archived copy.
The "SBA recommends 7 to 8 percent" figure traces back to a 2012 post on the old SBA.gov community blog, written by a community moderator. It said small businesses with revenue under $5 million should allocate 7 to 8 percent of revenue to marketing, assuming margins of 10 to 12 percent, and a few lines earlier gave 2 to 3 percent for ongoing marketing and 3 to 5 percent for start-up marketing. No source is cited. The SBA's current marketing guidance gives no percentage at all; its worked example, a new auto shop, sets a goal of a certain number of new customers each month.
The big surveys are real research, but about other businesses. Gartner's 2026 figure of 7.8% comes from companies mostly earning over $1 billion. The CMO Survey's mean of 9.0% sits above a median of 5%, which tells you a few big spenders pull the average up. Its figure for firms under $10 million in revenue, about 13%, rests on 20 answers. The IPA's Bellwether tracks whether large UK companies are raising or cutting budgets, not how much a small business should spend.
A better way: work back from customers
Customers you need
New customers per month to hit your target, after the ones who come back on their own.
Your close rate
Of every ten enquiries, how many become customers? Use your own records, not a guess.
Leads you need
Customers divided by close rate. Ten customers at one in four is forty leads.
Cost per lead
Your own past figure if you have one, otherwise a published benchmark for your industry.
Ad spend
Leads multiplied by cost per lead, per channel.
Everything else
Management, website, tools and the time to follow up.
For the cost per lead, LocaliQ publishes benchmarks from thousands of campaigns each year. Its 2026 search advertising benchmarks and 2026 Facebook benchmarks give these averages:
| Industry | Search ads, cost per lead | Facebook lead ads, cost per lead |
|---|---|---|
| All industries | $66.69 | $27.39 |
| Dentists | $72.97 | $61.56 |
| Home and home improvement | $90.92 | $42.95 |
| Attorneys and legal | $131.63 | Not in LocaliQ's Facebook leads data |
| Auto repair, service and parts | $29.96 | Not in LocaliQ's Facebook leads data |
Sources: LocaliQ 2026 search (Google and Microsoft Ads) and Facebook advertising benchmarks.
A made-up example shows the method. A home improvement firm wants ten new jobs a month and wins about one in four of the leads it quotes, so it needs around forty leads. At LocaliQ's search average of $90.92 a lead, that's about $3,640 a month in search ads; at the Facebook average of $42.95, about $1,720. Your real figures will differ, which is why the first month's job is to find out what a lead actually costs you. Leads are only half of it, though: a lead nobody calls back is money spent for nothing, and the gap between cost per lead and cost per customer is where most budgets leak.
The floor each platform sets
Google says there's no minimum spending commitment for Google Ads. Budgets are set per day, and Google can spend up to twice the average daily budget on a busy day, but never more than 30.4 times the daily budget in a month. To turn a monthly budget into a daily one, divide by 30.4: $3,040 a month is $100 a day.
Meta requires a minimum budget that varies by country and objective, and doesn't publish a single figure. The more useful floor is the learning phase: Meta says an ad set usually exits learning after about 50 results in the week after its last significant edit. At the $27.39 average Facebook lead cost, fifty leads is about $1,370 a week for one ad set. Smaller budgets can still work, but they often stay learning limited, so we'd run one well-funded ad set before three thin ones. Meta also lets spending run to 175% of the daily budget on a given day, within seven times the daily budget over a week.
What else belongs in the budget
- Management. If someone runs the ads for you. Our Meta ads and Google Ads management is $500-$2,000 a month, month-to-month, with entry plans from $500.
- A website that converts. Ads sent to a slow or unclear page waste money. Our builds are fixed price, $1,200-$15,000. See what a website costs.
- Tools. A CRM, email software and call tracking, so every lead is followed up and counted.
- Content and SEO. Slower to pay back than ads, but they keep working. See SEO vs PPC for which to start with.
- Time. Someone has to answer every enquiry within minutes. If nobody can, spend there before spending on ads.
Check it against profit, not revenue
The test that matters is what a new customer costs against the profit that customer brings in. If a customer is worth $400 in profit over a year and costs $250 to win, the budget can grow. If they cost $450, more spend makes the loss bigger, however good the click-through rate looks. Our guide to a good ROAS that still loses money covers the arithmetic. The SBA's advice lands in the same place: compare marketing costs with the revenue they generate and make sure the return is positive.
For channel-specific budgets, read what Facebook ads cost, which has a budget calculator, and what Google Ads management costs. For what agencies charge on top of ad spend, see how much a digital marketing agency costs.
Questions people ask
How much should a small business spend on marketing?
There's no single right percentage. Surveys of larger companies put marketing at around 5 to 9% of revenue: the 2026 CMO Survey found a median of 5% and a mean of 9%, and Gartner found 7.8% among companies mostly earning over $1 billion. A better figure for a small business comes from working back from the customers you need and what each lead costs.
Does the SBA recommend 7 to 8 percent of revenue?
Not today. The SBA's current guidance gives no percentage: it tells owners to cost out their marketing plan and compare it with the revenue it brings in. The 7 to 8 percent line comes from a 2012 community blog post on the old SBA website, which assumed profit margins of 10 to 12 percent.
How much should I spend on ads?
Multiply the leads you need by what a lead costs in your industry. LocaliQ's 2026 benchmarks put the average at $66.69 per lead from search ads and $27.39 from Facebook lead campaigns, with wide differences between industries.
Is there a minimum budget for Google Ads?
No. Google says there's no minimum spending commitment. It can spend up to twice your average daily budget on a busy day, but never more than 30.4 times the daily budget in a month.
What's the minimum budget for Facebook ads?
Meta requires a minimum budget, but it varies by country and objective and Meta doesn't publish one figure. The practical floor is higher: an ad set usually leaves its learning phase after about 50 results in a week.
Should a new business spend more on marketing?
Often, because it has no customers coming back yet. Tie the budget to a target, such as a number of new customers each month, which is how the SBA's own example plan for a new auto shop sets its goal.
What should a marketing budget include besides ads?
Management if someone runs the ads for you (ours is $500-$2,000 a month), a website that converts (ours are fixed price, $1,200-$15,000), tools such as a CRM or email software, content, and the time it takes someone to answer every enquiry.
How do I know if the budget is working?
Compare what each new customer costs with the profit that customer brings in, not with clicks or leads. The SBA's guidance makes the same point: compare marketing costs with the revenue they generate and make sure the return is positive.
Want a budget built from your own numbers rather than an average? Book a strategy call and we'll work out the leads you need and what they should cost.
