How much should my small business spend on marketing?



Norma put down the phone in shock.  She'd just been talking to the sales rep at one of the city's radio stations, and had been presented with the price that a short radio campaign would cost her.

"No small business can afford this!" she said. "That's our entire marketing budget for the year!"

Norma was worried - she knew that her new business - Norma's Noodle Shop - needed to be promoted, she had thought radio would be the best place to advertise, but now, she felt out of her depth.  What should she do?  Should she invest more money?  Just what kind of a budget should a small business have for marketing anyway?

Marketing is an important component of most businesses.  It is the fishing that a business does, hoping that customers will bite, and be reeled in to buy the product or service.

Small business is at a disadvantage, in that they usually don't have the funds to undertake a massive marketing campaign at the beginning of their business which would set it going with a big bang.  In fact, most of us are lucky to have a couple of bob to rub together to create a spark.

"How much should I spend?" is a question that is asked over and over again.  The answer, quite simply, is however much you can afford. But, any money that you spend must be spent wisely, otherwise you might as well be handing it out to random strangers on the street.

So, there are a set of four steps that everyone should look at before they even spend a cent:

1. Who is you Target Audience?

Make sure you have identified your target audience.  When you say "It's everyone," do you mean everyone in a specific area?  Everyone with a specific dream?  Everyone with a specific reason for looking for a product?

Even if your product may appeal to everyone, there will be pockets of customers that it will attract more.  It's the old 80/20 rule - 80 percent of your sales will come from 20 percent of those you market to.  Try to identify the 20 percent.

2. Where do they hang out?

Where do your target audience go?  What do they do?  What do they read?  Where do they shop?  What do they do during their leisure time?  Where do they go for information?

Answering these questions will help you to pinpoint where your best marketing will be done. Start to think about where and when they are likely to be most responsive to your marketing.  Norma's Noodle Shop might be best advertised on a big billboard outside the local oval - so hungry footy fans think to go there after the game.  

There is little point in advertising extreme sports gear around nursing homes, or your new and improved meat pie at a PETA convention.  True, you might get a hit or two this way (maybe not the kind of hit that you want!!), but its hardly an effective advertising spend.

The number of new media sources today is huge.  Information overload is all too common.  People tend to stick to their little clutch of media outlets.   Apart from obvious things like newspapers, radio, tv, think about blogs, social media, websites, e-zines, mailouts, billboards, trade journals and the like.  Which ones of these do your target audience interact with. 

3. What is the best message for them?

Make sure your message is memorable.  Take some time to think about how your target audience will react to your message - will it make them laugh? Think? Get angry? Will it just get lost with all the other messages that are flying around?  Sometimes, it really is a good investment to get a marketing firm on board to come up with ideas for your company - think about the Oreo's advertisement that played during the blackout at the Superbowl.

How much should my small business spend on marketing?


















Smart marketing at its best - devised by a team of marketing experts.

4. Measure your advertising effectiveness.

If you don't measure, how will you know your message is going to the right people, and that the right message is getting across?  How do you measure? ASK! Ask the people who call you where they heard about your company.  Ask if they've seen or heard your ad. 

Only by measuring and refining will your marketing spend be well spent.  Otherwise, you are searching in the dark for your Oreo...

So, how much should I spend?

As much as you can.  In marketing, more dollars equals more exposure equals more sales.  However, make sure your marketing is targeted to the right people, in the right media and that it is understood by your target audience.  And if you have no dollars to spend, you're still OK - you can blog, comment on other's blogs, write articles to post online, or do what Messages On Hold did and wave big polystyrene hands with your logo on at sporting events.


Bree Vreedenburgh

Success Coach at BV International

I am a Business Success Coach, concentrated in the franchising and small business areas. I assist business owners to create businesses that are successful, growing and fulfilling.

Comments (1)
Neil Steggall

Neil Steggall, Partner at Wardour Capital Partners

A thought provoking article and a good question. I think you know the answer to your question is a little like "how long is a piece of string"? Some businesses are built around a marketing budget from day one and consistently spend 10% to 15% of revenues on advertising & promotion. Take Red Bull as an example. A UK client of ours has successfully built and sold several sizable businesses based around heavy advertising & promotional spending of 10% +. These businesses range from a fast food chain, a pizza chain and a restaurant chain. A highly successful American entrepreneur I met last year has a successful formula whereby he looks to be able to sell any product direct to the public at five times its cost on an advertising budget equal to 20% of revenues. I find it interesting that most SME's will borrow or raise equity to buy equipment or fund payroll but few think of doing so to fund marketing. Major brands are more likely in the 2.0% range as they are really protecting market share and an annual round of promotions - think toothpaste!