How to Spend Your Marketing Budget Without Wasting Money

What Is a Typical Marketing Budget for a Small Business?

All small businesses spend a percentage of of annual revenue on marketing. But what exactly is the right percentage to invest? Well, it varies.

• Established businesses with strong brand awareness often invest 6–8% on marketing
• Growing or competitive businesses typically invest 8–12%
• New businesses may invest 12–20% to gain visibility faster

How to Decide Where Your Marketing Dollars Go

Before choosing channels, answer this one question:

Do you need leads now, or are you building long-term demand?

Your answer determines how your budget should be split.

• Short-term demand → paid advertising
• Long-term demand → SEO and content
• Trust and conversion → reviews, local presence, and authority

Most small businesses need all three, but not equally.

A Practical Marketing Budget Breakdown by Channel

1. Search Engine Optimization (SEO): Long-Term Lead Generation

Search engine optimization (SEO) is the process of optimizing your website so that search engines will recognize it as authoritative and relevant to users. SEO consists of on-page and off-page SEO, which includes optimizing elements such as page titles, headers, and meta descriptions, writing guest blogs, and link earning.

Following good SEO practices not only helps the search experience but also helps improve the user experience and performance of your site. The goal is to keep users engaged and on your site longer to help search engines and visitors see your site as authoritative, useful, and user-friendly.

Why it matters

• Reduces cost per lead over time
• Builds credibility and trust
• Supports local search visibility (Maps + organic listings)

Best for

• Service businesses with repeat demand
• Companies planning beyond the next 90 days

2. Paid Advertising: Immediate Lead Volume

Pay-per-click (PPC) ads are an excellent way for you to drive valuable leads for your business. PPC is an online advertising model in which advertisers pay each time a user clicks on one of their online ads. According to Unbounce, users who arrive at a retailer's site from paid ads are 50% more likely to convert than organic traffic.

Why it matters

• Generates leads quickly
• Allows precise targeting
• Scales with demand

Watch out: Paid ads without tracking often look successful but quietly lose money.

3. Content Marketing: Trust That Converts

An important step to ranking on Google is to create relevant, useful content. Content doesn’t only include written articles. Content marketing encompasses many tactics including video, podcasts, infographics, downloadable guides, and email.

Why it matters

• Improves conversion rates
• Educates customers before they call
• Builds authority in competitive markets

Content includes:

• Service pages
• Blog posts
• FAQs
• Location pages
• Educational resources

How to Know If Your Marketing Budget Is Working

If you don’t measure outcomes, you’re guessing.

The most important metrics are simple:

• Cost per lead
• Lead-to-customer conversion rate
• Revenue per job
• Cost per booked customer

How you allocate your budget can be determined by measuring the return on investment (ROI) for each tactic in order to prioritize your investments.

Simple ROI Example

Return on investment (ROI) is a measure of how effective your investments are at generating income. This measurement can help you determine how successful your marketing campaigns are. To calculate ROI, first subtract the cost from the revenue and then divide this number by the cost of the investment.

However, determining one overall marketing ROI benchmark is challenging because all marketing tactics are different. What's considered a "good ROI" can vary based on the type of marketing strategy, your distribution channels, and your industry.

Here is a formula created by Hubspot to measure marketing ROI:

[((number of leads x lead-to-customer rate x average sales price) - cost) ÷ cost] x 100.

• Number of leads: How many people converted to a lead?
• Lead-to-customer rate: What percentage of leads became a customer?
• Average sales price: The average price of your product or service.
• Cost: How much you spent on creating and promoting the campaign, including ad spend, hourly wages, and producing the content.

The more competitive your market and the faster you want to grow, the more you should expect to invest.

Market Smart

There is no single “perfect” marketing budget, but there is a smart way to spend one.

• Start with a realistic percentage of revenue.
• Choose channels based on your growth timeline.
• Track results tied to revenue, not noise.

That’s how small businesses stop wasting money and start building momentum.