How Much Should a Small Business Spend on Marketing in 2027?
Founder & CTO ·
In this article
A reasonable starting point for 2027 is 7 to 8 percent of your gross revenue. That guideline is usually attributed to the U.S. Small Business Administration, and it's aimed at businesses doing under $5 million a year with net margins somewhere around 10 to 12 percent. On $500,000 in revenue that works out to $35,000 to $40,000 for the year. The percentage is the easy part, though. Where most small budgets go wrong is the order the money gets spent in.
Is 7 to 8 percent right for your business?
It's a starting point and you should adjust it. Go higher if you're new, entering a second city, or in a trade where the competition advertises heavily. Go lower if you're booked out for months and mostly need to keep the phone from going quiet. Thin margins also push the number down, because 8 percent of revenue is a very different bite out of a 6 percent margin than a 20 percent one.
What we'd steer you away from is setting the budget by what's left over. Businesses that market out of whatever cash is around in a given month spend the most when they're already busy and nothing when they're slow, which is backwards.
What does the budget look like at different revenue levels?
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Those monthly figures have to cover everything: ad spend, the people or agency doing the work, software, and the one-time builds. That last item is where the planning gets interesting.
Why split one-time costs from monthly costs?
Because they behave differently, and mixing them makes the monthly budget look smaller than it is. A website, a CRM setup, and proper lead tracking are bought once and used for years. Ads, content, and social posting are paid every month for as long as you want results from them.
If your site is slow, your forms go to an inbox nobody watches, and you can't tell which leads came from where, then every monthly dollar you spend is working at a discount. So in a year when the foundation needs work, plan to spend a bigger share upfront and a smaller share on monthly activity for the first few months. The year after, nearly all of it can go to activity.
What should you fund first?
Work backward from the sale. This is the order we'd put the money in, and it's the reverse of how most owners instinctively do it.
- Follow-up. Make sure every lead you already get is answered within minutes and chased until it's booked or dead. This is the cheapest revenue available to you, because you've already paid to get those leads. See our piece on lead response time.
- The website. It has to load fast, look like a business worth calling, and make the next step obvious. Traffic sent to a weak site is wasted.
- Being found without paying per click. Search and AI visibility take months to build, so start early in the year. Our guide to SEO costs has the ranges.
- Staying visible. Regular social posting keeps past customers and slow deciders from forgetting you.
- Paid advertising. Ads work, and they work far better once the four items above are in place. Ranges are in our Google Ads cost guide.
What does a worked example look like?
Take a service business doing $500,000 a year with an old site and no CRM. At 7 to 8 percent the budget is $35,000 to $40,000. Here's one way to lay out the year using our published prices for the foundation.
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That leaves about $1,080 to $1,500 a month for advertising, which is a modest ad budget and a workable one for a single metro area. In the second year the $17,500 build is behind you, the social term has ended, and you choose whether to keep social going as a managed service or shift that money into ads. Either way, far more of the budget is free for activity.
A business with less room can run the same logic with a smaller foundation. A custom website alone is $3,500, or $4,448 for the first year with the care plan. The packages are compared side by side on the pricing page.
When should you set the budget?
Now. November and December are the right time for most service businesses, for a practical reason: a build takes about a month once the content is in hand. If you decide in March, you're launching in the middle of your busy season with no time to give feedback. Decide before the holidays and the new site and follow-up are running by February.
It's also when you can see the whole of this year's spending in one place. If you haven't done that yet, our year-end tech stack and marketing budget audit walks through it. Most owners find subscriptions they forgot they were paying for, and that money goes straight into next year's plan.
Pick the percentage in five minutes. Spend the rest of the hour on the order.
Frequently asked questions
What percentage of revenue should a small business spend on marketing?
A common guideline is 7 to 8 percent of gross revenue, usually attributed to the U.S. Small Business Administration for businesses under $5 million in revenue with net margins of 10 to 12 percent. New businesses and those in competitive markets often spend more, and businesses with thin margins or a full schedule spend less.
How much is a marketing budget for a business making $500,000 a year?
At 7 to 8 percent of revenue, a $500,000 business would budget $35,000 to $40,000 a year, which is about $2,917 to $3,333 a month. That figure should cover ad spend, agency or staff costs, software, and any one-time builds such as a new website or CRM.
Should a website count as part of the marketing budget?
Yes, and it should be tracked as a one-time foundation cost, separate from monthly spending. A website and CRM are bought once and used for years, while ads and content are paid for every month. Keeping the two apart makes it clear how much is available for ongoing work.
What should a small business spend its marketing budget on first?
Lead follow-up first, then the website, then search and AI visibility, then social media, then paid ads. Following up on leads you already receive is the cheapest revenue available, and advertising performs better once the site and follow-up are working.
When should I plan my 2027 marketing budget?
In November or December of 2026. A website or CRM build takes about a month once content is ready, so deciding before the holidays means the new system is running by February, ahead of the spring busy season for most service businesses.
