How to Set a Marketing Budget

A marketing budget is a plan for how much you will spend on marketing over a given period and where that money will go. In one sentence: it turns the vague ambition of "we should do more marketing" into a concrete, fundable plan you can actually run and measure. Get it right and your marketing spend becomes an investment with a return you can see. Get it wrong — by guessing, underfunding, or scattering money across everything at once — and it becomes a cost you resent without quite knowing why.

For small businesses especially, setting a marketing budget feels harder than it should. Spend too little and you stay invisible; spend too much and you risk the cash you need to keep the lights on. The good news is that budgeting is a process, not a guess, and a sensible one will serve you far better than copying a competitor or picking a round number. This guide walks through how much to spend, where to put it, and how to know it is working.

What a marketing budget is

A marketing budget is the financial expression of your marketing plan. Where a marketing plan sets out what you want to achieve and the activities to get there, the budget answers the money question: how much each activity costs, and how the total is split across them.

The two should be built together. A plan with no budget is a wish list; a budget with no plan is just spending. The budget forces useful discipline — it makes you choose, because no business can fund every idea, and choosing is where strategy actually happens.

How much should you spend?

This is the question everyone asks first, and the honest answer is: it depends on your sector, your stage and your goals. A long-established local business defending its position will spend very differently from a young company chasing rapid growth. There are three common ways to land on a number.

Percentage of revenue. You set marketing spend as a fixed share of turnover. It is simple and scales with the business, but it has a flaw: it ties spending to past performance rather than future ambition, and can starve a business of marketing exactly when sales dip and it needs them most.

Objective-based (or goal-based). You start from what you want to achieve — a number of new customers, a revenue target, a market you want to enter — and work backwards to cost the activities needed to get there. This is harder but usually smarter, because it links spending to outcomes rather than to an arbitrary ratio.

Affordability. You spend what is left after other costs. It is the most cautious approach and common in tight times, but it risks under-investing and treating marketing as a luxury rather than a driver of growth.

In practice, the best approach often blends these: build the budget from your objectives, then sense-check it against a percentage of revenue and against what you can genuinely afford. Benchmarks help here. The marketing consultancy CM Beyer has published a useful breakdown of how much UK SMEs spend on marketing by sector and stage, which is a sensible reference point for sanity-checking your own figure rather than guessing in a vacuum.

Where to put the money

Once you have a total, the next decision is allocation — splitting the budget across channels and activities. A useful framework is the "70/20/10" idea, adapted to your situation:

• The bulk goes to the channels you already know work for you — the reliable performers that bring in customers predictably.
• A smaller slice goes to promising channels you want to scale up but have not fully proven.
• A small slice goes to genuine experiments — new channels or tactics you are testing for the first time.

The exact split is yours to set, but the principle holds: protect what works, invest in what is growing, and always reserve a little for testing so you keep learning. Resist the temptation to spread the money thinly across every channel at once — a small budget split ten ways rarely makes an impact anywhere.

Typical line items for a small business budget include:

If a meaningful share of your budget is going into paid search, it pays to understand the basics of Google Ads before you commit, so the money is spent deliberately rather than burned learning on the job.

Build in contingency and flexibility

Two mistakes recur in small business budgets. The first is allocating every last pound, leaving nothing for the opportunity or problem that always appears mid-year. Holding back a modest contingency — say 5 to 10 percent — gives you the freedom to react. The second is treating the budget as fixed for twelve months. Markets, costs and what works all change. Review the budget regularly, ideally quarterly, and be willing to move money from what is underperforming to what is delivering.

Measure, or you are just spending

A marketing budget is only as good as the measurement behind it. Without tracking results, you cannot tell which activities earn their keep, and you will keep funding the ones that shout loudest rather than the ones that work. The discipline that makes a budget worthwhile is the same one behind measuring marketing ROI: for each activity, compare what it returned — leads, sales, new customers — against what it cost.

Practical steps:

• Decide, in advance, what success looks like for each activity.
• Track the cost and the result of each channel separately.
• Compare channels on return, not on gut feeling.
• Reallocate budget towards what performs and away from what does not.
• Review the whole budget at least quarterly.

Deciding the metric before you see the data is vital. If you choose afterwards which number to celebrate, you will always find a flattering one. Set the goal first, then let the results — not your hopes — guide where next quarter's money goes.

A simple way to start

If you are setting a marketing budget for the first time, keep it manageable:

1. Write down your main goals for the year.
2. List the activities most likely to achieve them.
3. Cost those activities to get a working total.
4. Sense-check that total against a percentage of revenue and against what you can afford.
5. Allocate across reliable channels, growth channels and a little testing.
6. Hold back a contingency, and put measurement in place from day one.

You will not get it perfect, and you do not need to. A budget you build, track and adjust will beat a clever-looking one you set and forget.

The bottom line

A marketing budget is a plan for how much you will spend on marketing and where it will go, turning ambition into a fundable, measurable plan. Decide the total by starting from your goals and sense-checking against revenue benchmarks and affordability, rather than plucking a number from the air. Allocate the money deliberately — most to what works, some to what is growing, a little to testing — and always keep a contingency. Above all, measure: track what each pound returns and move money towards what performs. A marketing budget set this way stops being a cost you grudge and becomes an investment you can defend.