Most marketing budget conversations get answered with a percentage. "Spend 5% to 10% of revenue on marketing." It's the most quoted number in the industry, and it's roughly true on average across enough businesses to be a defensible default.
But it's a starting point, not an answer. The actual right number for your business depends on three things that the rule of thumb doesn't account for: what stage you're in, what you're actually trying to move, and what your team can execute on.
This piece walks through how to think about it.
Why "% of revenue" alone is misleading
Two service businesses, both doing $5M in revenue, both spending 7% of revenue on marketing: $350,000 per year. On paper, they're doing the same thing.
In practice, they could be doing wildly different things and getting wildly different results.
Business A is putting most of that into an in-house marketing manager and some paid ads. Business B is putting most of it into a fractional CMO and a content/video production engine. Business C is paying a single agency a retainer that covers strategy, execution, and reporting.
Same percentage, completely different operations. Same percentage, completely different leverage.
The 5–10% number is a sanity check on whether you're investing seriously in marketing. It's not a plan.
Three things that change the actual number
1. What stage you're at
A business in the first year of building a real marketing function, first website, first systems, first hires, typically spends more, not less, as a percentage. There's foundational investment that doesn't scale linearly. You build the website once. You set up the CRM once. You produce the brand video library once.
For service businesses we work with at the $2M to $25M range, the practical reality:
- $2M-$5M, foundation phase: 8% to 15% of revenue, weighted toward one-time investments (site, brand, systems) plus modest ongoing spend.
- $5M-$15M, growth phase: 6% to 10%, with most of it shifting from "build" to "run": ongoing ads, content, and channel management.
- $15M+, optimization phase: 5% to 8%, with marketing operating as a mature engine you're tuning rather than constructing.
If your number is way below the floor for your stage, you're under-investing. If it's way above the ceiling and you've been there for years, the issue is probably efficiency, not budget.
2. What you're trying to move
Different goals require different investment shapes.
If you're trying to generate immediate leads, the budget is weighted toward paid acquisition: ads, landing pages, sales enablement, fast follow-up. The marketing-to-revenue cycle is short. You can measure month-to-month.
If you're trying to build long-term brand and authority, the budget is weighted toward content, video, PR, partnerships. The cycle is 12-24 months before the investment compounds visibly. Trying to measure it in monthly increments will lead to canceling it before it works.
If you're trying to build a marketing system that produces predictable leads month after month, the budget needs to cover both: paid acquisition for short-term flow plus systems and content for long-term compounding. This is what most growing service businesses actually need, and it's also where most of them under-invest in the long-term half.
3. What your team can execute on
Budget without execution is wasted budget. A $200K/year ad budget with no one watching the dashboards produces worse results than a $50K ad budget with someone actively optimizing it. We've seen both.
Before adding spend, the question to answer is: does the team handling this have the capacity, expertise, and attention to actually use it well?
If the answer is no, the right move is one of three things: hire to add the capacity, partner with someone who has it, or shrink the budget until it matches what your team can execute on. Spending money you can't execute on isn't ambitious; it's just expensive.
A budget framework for $2M-$25M service businesses
For a service business in the $5M to $15M range, with a real marketing system in place, this is the rough shape we see work:
- Strategy and management (15-20%): The fractional CMO, agency partner, or in-house head of marketing. Whoever owns the strategy and the system.
- Paid acquisition (25-35%): Ads, landing pages, conversion optimization, lead nurture. The flow that turns budget into leads.
- Content and creative (25-35%): Video production, photography, copywriting, design. The assets that fuel everything else.
- Tools and infrastructure (5-10%): CRM, marketing automation, analytics, scheduling. The plumbing.
- Brand and partnerships (10-15%): PR, sponsorships, events, partnerships, the brand-level stuff that's hard to attribute but compounds.
The percentages aren't precise. They're a sanity check. If your spend is 80% in one bucket and almost nothing in the others, that's a signal worth examining.
Spending money you can't execute on isn't ambitious. It's just expensive.
What "minimum viable" looks like
If you're early in the process and not sure how much to commit, here's a useful floor:
For a $2M to $5M service business, the minimum that produces real, measurable marketing, not just "we're doing some stuff" but actual lead generation that scales with investment, is around $8,000 to $15,000 per month. That covers a basic strategy partner, modest paid spend, content production, and the tools to tie it together.
Below that, you're not really running marketing. You're doing isolated tactics, and the results will reflect that.
Above that, the rate of return depends mostly on how well the spend is being managed, not how much of it there is.
One more thing
The biggest budget mistake we see isn't spending too little or too much. It's spending without a strategy that tells you what the spend is supposed to produce.
When the strategy is clear, budget questions get easier. You know what you're trying to move. You know what each line item is in service of. You know what to cut when something's not working, and what to protect when it is.
When the strategy isn't clear, no budget number is the right number, because you're not actually investing in anything, you're just spending.
If you'd like a real read on what your business should be investing, in what shape, given your actual stage and goals, that's a conversation we have in a Marketing Assessment. Bring your numbers; we'll bring the framework.
