Marketing budget strategy based on growth goals and customer acquisition economics rather than a fixed percentage of revenue.

Marketing Strategy

Your Marketing Budget Shouldn't Be a Percentage of Revenue

Nick Bouras

September 8, 202613 min read

"What percentage of revenue should we spend on marketing?"

I get asked some version of this question all the time.

And I understand why.

Business owners want a number. Five percent. Seven percent. Ten percent. Something they can plug into a spreadsheet, approve in a meeting and move on.

There are plenty of benchmarks that will give you exactly that.

Gartner's 2026 CMO Spend Survey found that marketing budgets average 7.8% of company revenue, up slightly from 7.7% in 2025.

The U.S. Small Business Administration has also pointed businesses toward percentage of revenue as a useful budgeting guide while making an important distinction: there is no hard and fast percentage that's right for every business.

I agree.

If your business doesn't have reliable historical data, somewhere around 7% to 8% of revenue can be a perfectly reasonable place to start the conversation.

But that's the key word.

Start.

Because a percentage can tell you what other companies spend.

It can't tell you what your growth costs.

Those are two very different things.

There is no single percentage of revenue that every business should spend on marketing. A benchmark such as 7% to 8% can be a reasonable starting point when reliable historical data is limited, but the right budget should ultimately be based on the company's growth target, customer acquisition cost, customer lifetime value, margins, competitive position and ability to scale profitably.

The Benchmark Isn't the Strategy

Let's say your business generates $5 million a year.

At 7%, your marketing budget would be $350,000.

Is that enough?

I have no idea.

And anyone pretending they know from those two numbers alone is guessing.

What does your competitive landscape look like?

How much market share do you currently have?

How aggressively are your competitors investing?

Are you trying to maintain $5 million in revenue?

Or are you trying to grow 25%?

Maybe 50%?

Because those are completely different business objectives even though the company starts with the exact same revenue.

Your revenue tells me how big you are. It doesn't tell me how ambitious you are.

And ambition has a price tag.

I recently broke this down in under a minute. Here's the short version.

"We Tried Google Ads. It Didn't Work."

I hear this constantly.

"We tried Google Ads."

"We tried Facebook."

"It didn't work."

Then I start asking questions.

How much did you spend?

How long did you run it?

What were you advertising?

How many clicks did you generate?

How many conversions?

What did a qualified lead cost?

What did a new customer cost?

What happened after the lead came in?

And pretty quickly, "Google Ads didn't work" turns into something very different.

The business never spent enough to actually find out.

That's the part of the marketing budget conversation I think gets ignored.

Gartner says marketing budgets averaged 7.8% of company revenue in 2026.

But here's an even more interesting statistic.

56% of the CMOs Gartner surveyed said their marketing organization still didn't have the budget required to deliver its strategy.

Think about that.

Meanwhile, I regularly talk to businesses investing nowhere close to 7% or 8%.

Some aren't even scratching the surface.

A $3 million business spending $30,000 a year on advertising is investing just 1% of revenue.

Yet that same business might tell me:

"We tried Google. It didn't work."

Or:

"Facebook doesn't work for us."

Maybe.

But before we blame the platform, I want to know whether we actually tested it.

Because spending a tiny amount of money, generating a small amount of data and stopping doesn't necessarily prove a channel doesn't work.

Sometimes you didn't prove the platform failed. You proved the test was too small to tell you anything.

A failed campaign and an underfunded test are not the same thing. Stop treating them like they are.

Too many businesses confuse the two.

Your Marketing Can Work and Still Be Too Small to Matter

Let's stay with that $3 million business.

They're spending $30,000 annually on advertising.

That's 1% of revenue.

Now let's assume the advertising is producing a 3X ROAS.

That's $90,000 in attributable revenue.

At 4X, it's $120,000.

At 5X, it's $150,000.

A 5X return sounds fantastic.

And it is.

The marketing worked.

But here's the question:

Did it matter?

This is a $3 million company.

Even at an impressive 5X ROAS, that $30,000 advertising investment generated $150,000 in attributable revenue.

Now imagine the owner tells me: "We want to grow 25% next year."

That's another $750,000 in revenue.

Suddenly the problem becomes obvious.

The marketing isn't necessarily broken.

The budget never had a chance of hitting the goal.

That's a completely different diagnosis.

A 5X ROAS doesn't mean you have the right budget.

It means the money you spent worked. That's it.

Those aren't the same thing.

I'd rather have a campaign producing a profitable, scalable 3X return at meaningful volume than a tiny campaign producing 5X that can't materially change the trajectory of the company.

Imagine two campaigns.

Campaign A spends $30,000 and generates $150,000 at 5X.

Campaign B eventually reaches $300,000 in spend while maintaining a profitable 3X and generates $900,000.

Which ROAS looks better on the marketing report?

Campaign A.

Which one actually has a chance to change the business?

Campaign B.

Obviously, that doesn't mean every business should immediately increase spending tenfold.

Returns don't scale perfectly. Margins matter. Sales capacity matters. Operational capacity matters. Customer retention matters. At some point, every channel encounters diminishing returns.

But that's exactly why we need data.

ROAS tells you how efficiently the dollars worked. It doesn't tell you whether you invested enough dollars to achieve the growth you wanted.

Your dashboard can look incredible while the business barely feels it.

A great ROAS can still be a vanity metric if the spend is too small to matter.

And if the business can't feel the growth, eventually somebody is going to ask what we're actually celebrating.

Your Growth Goal Changes the Math

Now let's take a $5 million business.

At 7% of revenue, the marketing budget would be $350,000.

Let's assume, purely for illustration, that its advertising produces somewhere between a 3X and 4X return on ad spend.

That's approximately $1.05 million to $1.4 million in attributable revenue.

Now leadership says: "We want to grow 50%."

That's another $2.5 million in revenue.

Marketing budget strategy tied to growth goals and business objectives.

Does that automatically mean we increase the budget until the spreadsheet says we'll generate another $2.5 million?

Absolutely not.

That's not how marketing works.

But now we're asking the right question.

Can the current investment realistically support the growth target?

If not, what would?

What happens to acquisition cost as we scale?

Where do diminishing returns begin?

Can sales handle the additional opportunities?

Can operations handle the additional customers?

Do the margins still work?

Now we're finally having the conversation that matters.

The question isn't whether 7% is reasonable. The question is whether 7% is capable of producing the result you're asking for.

Your Market Matters More Than the Average

Industry averages still matter.

A law firm operates under different economics than a restaurant.

A roofing company faces a different competitive environment than a manufacturer.

A company entering a new city faces a completely different challenge from a business that's already one of the dominant players in its market.

So yes, look at your industry.

Look at the benchmarks.

But don't stop there.

An industry average is broad by definition. Your market isn't.

You need to understand your competitive landscape.

You need to understand your current market share.

You need to know how aggressive your competitors are.

And you need to know what you're actually trying to accomplish.

If you already dominate your market and primarily want to defend that position, your investment requirements may look completely different from a challenger with 3% market share trying to become one of the top three players.

Benchmarks tell you what everybody else is doing. They don't tell you what your business needs to win.

Ask the Better Question

Eventually there's another number I care about considerably more than what percentage of revenue you're spending.

What does it cost you to generate a new customer?

That's the number I want.

Because once we know that, the entire conversation changes.

Suppose it costs approximately $1,000 in marketing investment to acquire a new customer.

Now suppose that customer generates $5,000 in revenue and the margins make that acquisition profitable.

We have something we can actually work with.

Want another 100 customers? We can begin modeling what that requires.

Want another 500? We can model that too.

Then we ask the questions that actually matter.

Can we reach enough of the right people?

Can the sales team handle the additional opportunities?

Can operations fulfill the additional business?

What is the customer's lifetime value?

Does the cost to acquire a customer remain attractive as spending increases?

Where do diminishing returns begin?

Now we're building a growth plan.

Once you know what a customer is worth and what it costs to acquire one, you stop budgeting by opinion.

Now you have economics.

A useful marketing budget starts with five questions: What are we trying to grow? What does it currently cost to acquire a customer? What is that customer worth? Can sales and operations handle more demand? And what happens to acquisition cost as investment increases? A benchmark can help establish the first test. Those economics determine whether the investment should scale.

Most Businesses Don't Know What a Customer Costs

Here's the problem.

Most businesses I talk to don't actually know what it costs them to acquire a new customer.

They know what they spend on Google.

They know what they spend on Meta.

They know what they pay their agency.

They might know how many leads came in last month.

But ask: "What does it cost you to acquire a new customer?"

And suddenly things get fuzzy.

That's exactly why I think a revenue percentage can still be useful at the beginning.

If you don't have reliable historical data, you have to start somewhere.

But that initial investment is doing more than buying leads.

At the beginning, part of your marketing budget is tuition. You're paying to learn what actually works.

We need to understand what it costs to generate a qualified opportunity.

We need to know how often those opportunities become customers.

We need to understand what it costs to acquire a customer.

We need to understand lifetime value.

We need to understand which channels contribute to revenue.

And we need enough activity to determine what can actually scale.

This is where businesses sometimes sabotage themselves.

They put $1,000 into Google.

Then $1,000 into Meta.

Maybe they try something else next month.

Nothing immediately transforms the business.

So they shut everything down.

Google doesn't work.

Meta doesn't work.

Marketing doesn't work.

Maybe they're right.

But maybe they never actually tested any of those things.

Sometimes businesses aren't testing marketing. They're testing whether an underfunded campaign can get lucky.

Then they're disappointed when it doesn't.

If you're barely investing enough to move the needle, don't act surprised when the needle doesn't move.

More Budget Doesn't Fix Bad Marketing

There's another side to this argument.

I'm not telling every business to spend more money.

More money poured into bad marketing just helps you waste money faster.

If your creative is exhausted, increasing the budget can accelerate diminishing returns.

If your landing page doesn't convert, buying twice as much traffic just gives twice as many people the opportunity to leave.

If you're great at acquiring new customers but terrible at bringing them back, your next growth opportunity might already be sitting inside your customer database.

If marketing generates qualified opportunities but sales doesn't convert them, buying more leads doesn't solve the real problem.

And if you're already spending $300,000 annually without understanding what that money produces, I'm not automatically going to recommend $500,000.

First, we need to understand what the $300,000 is doing.

Research from McKinsey found that rigorous management of existing marketing spend can free up as much as 20% of the marketing budget for higher-value opportunities.

Sometimes the answer isn't:

Spend more.

It's:

Stop wasting what you're already spending.

You Earn the Right to Scale

Now suppose we've done that work.

We have enough data.

The campaign is generating customers.

We understand what those customers cost to acquire.

We understand what they're worth.

We've established proof of concept.

Now you want to grow.

This is where increasing the budget starts making sense.

And if I'm sitting across the table from your CFO asking for another $100,000 or $500,000, I don't want my argument to be: "We think this will work."

I want the receipts.

Here's what we've invested.

Here's what happened.

Here's how many customers we acquired.

Here's what each customer cost.

Here's what those customers are worth.

Here's how performance changed as investment increased.

And here's what the historical data suggests is possible if we continue scaling.

You don't earn a bigger marketing budget with a growth projection. You earn it with proof.

Your revenue target tells us where you want to go. The data tells us whether we have a financially sound way to get there.

That's when marketing stops being a line item people argue about and becomes a growth lever the business understands.

Sometimes the Budget Isn't the Problem

Let's go back to our $5 million company.

They're already spending 7%.

That's $350,000 a year.

Revenue has been flat for three years.

Should they spend more? Maybe.

Should they spend less? Maybe.

Should they spend the exact same amount completely differently? Maybe.

If someone tells you to spend more or less without understanding the system, they're guessing.

Maybe their ads worked incredibly well two years ago and the creative is exhausted.

Maybe they've reached diminishing returns in one channel while completely ignoring another.

Maybe they're great at acquiring new customers but have neglected repeat customers.

Maybe their offer isn't competitive anymore.

Maybe marketing generates plenty of opportunities and sales isn't converting them.

Maybe the market changed and their strategy didn't.

A percentage can't diagnose your business.

Neither can a benchmark.

You have to understand the entire marketing system.

The Goal Is to Outgrow the Benchmark

Use the percentage if you need somewhere to start. Just don't confuse the starting line with the strategy.

If you've historically underinvested and don't have enough reliable data to understand your acquisition economics, somewhere around 7% to 8% gives you a reasonable benchmark to begin the conversation.

But eventually the percentage should become less important.

You should know what it costs to acquire a customer.

You should know what that customer is worth.

You should understand your competitive landscape.

You should understand your position in the market.

You should know where your marketing produces returns and where those returns begin to deteriorate.

You should understand retention and repeat business, not just acquisition.

And most importantly, you should know what revenue target you're actually trying to achieve.

Because once you know those things, you don't need an industry average to tell you what you're allowed to invest.

You have something considerably more valuable.

You have the economics of your own business.

So the next time somebody asks: "What percentage of revenue should we spend on marketing?"

My answer is simple.

Start with the benchmark.
Then get enough data to stop needing it.

Frequently Asked Questions About Marketing Budgets

There is no percentage that's right for every business. Gartner's 2026 CMO Spend Survey found marketing budgets averaging 7.8% of company revenue. However, Gartner's research largely represents much bigger organizations, so a small or midsize company shouldn't automatically assume 7.8% is its magic number. A percentage is useful for establishing a baseline. Your eventual budget should reflect your growth goals, competitive position, customer acquisition cost, lifetime value, margins and ability to profitably scale.

There isn't one universal number. The SBA has noted that many businesses use a percentage of revenue as a budgeting guide, while emphasizing that there's no hard and fast answer. If your business has little reliable marketing data, a benchmark can give you somewhere to start. Once you have enough data, your budget should increasingly be built around what it actually costs your business to acquire profitable customers.

It can be a reasonable starting point, but that doesn't mean every company should spend exactly 7% or 8%. A company trying to maintain its current position may require a completely different level of investment from a company trying to grow 50%, enter three new markets or aggressively take market share. Your growth objective matters as much as your current revenue.

There isn't one universally good ROAS because profitability depends on margins, fulfillment costs, customer lifetime value and other economics. Businesses commonly evaluate scenarios such as 3X, 4X or 5X ROAS, meaning every $1 in advertising spend produces $3, $4 or $5 in attributable conversion value or revenue. But don't confuse a high ROAS with sufficient scale. A profitable 3X at meaningful volume can be considerably more valuable than a tiny 5X campaign that barely affects company revenue.

A 3X ROAS can be very good if the economics behind it are profitable. A company with strong margins, repeat purchases and high customer lifetime value may be able to scale profitably at 3X. Another company with thin margins may lose money at the same return. The better question isn't simply whether 3X is good. It's whether 3X is profitable and scalable for your business.

ROAS measures revenue or conversion value relative to advertising spend. ROI looks at the profitability of an investment after accounting for the relevant costs. If a company spends $100,000 on advertising and generates $300,000 in attributable revenue, that's a 3X ROAS. But that doesn't automatically mean the company made $200,000 in profit. The economics still need to account for the cost of delivering whatever was sold.

If you don't have reliable historical data, start with a reasonable benchmark and use the initial investment to establish performance data. Once you have that data, work backward from the business objective. How much additional revenue do you want? How many new customers does that require? What does it cost to acquire each customer? What is each customer worth? Are those customers profitable? Can the business handle additional volume? At that point, your marketing budget becomes an economic model instead of an arbitrary percentage.

Increase your marketing budget when you've established evidence that additional investment can produce profitable growth. Understand what you've spent, how many customers that investment produced, what those customers cost to acquire, what they're worth and what happens to performance as spending increases. Don't scale because you want growth. Scale because you've found something worth scaling.

Absolutely. A business can have effective advertising and still invest too little for marketing to materially affect overall revenue. A $3 million company spending $30,000 annually on advertising could produce an excellent 5X ROAS and generate $150,000 in attributable revenue. The campaign worked. But if leadership expects $750,000 in additional revenue, the investment may simply be too small relative to the objective. Your marketing can be working and still be underfunded.

There are many possible reasons. The offer may have been weak. Targeting could have been wrong. Creative may not have connected. The landing page might not have converted. Sales follow-up could have failed. The economics might simply not work. But there's another possibility businesses often overlook: you didn't spend enough or run the campaign long enough to generate enough information to reach a meaningful conclusion. Before declaring that Google Ads, Meta or another channel doesn't work, determine whether you actually conducted a legitimate test. A failed campaign and an inconclusive test aren't the same thing.