Somebody asks what they should spend on marketing and gets told five to ten percent of revenue. It is a reasonable benchmark and a poor plan, because it says nothing about what the money is for.
Work backwards instead
Three numbers and some honesty.
- How many new clients do you need this year to hit the goal, accounting for the ones you will lose.
- What does one currently cost to acquire, using real numbers including the deals that did not close.
- Multiply. That is your floor.
If that number is uncomfortable, one of three things is true. The goal is too aggressive for the current machine, the acquisition cost needs work before more volume makes sense, or the business is under-investing and has been coasting on referrals.
All three are useful things to discover in a planning meeting rather than in October.
Stage changes the answer more than size does
Nobody knows you exist
Higher spend, and most of it on being seen at all. This stage is expensive and slow and the numbers look bad for a while. Businesses that quit here usually quit about two months before it would have started working.
Steady referrals, want more control
Middle of the range. The work is capturing demand that already exists, which is cheaper than creating it. Search, the website, reviews, follow-up. This is where most established service businesses sit and where the returns are most predictable.
Growing fast, capacity is the constraint
Spend shifts toward efficiency and retention rather than volume. Also toward recruiting, which is a marketing problem most companies do not treat as one.
Flat and comfortable
The dangerous one. Spend often drifts down, referrals slowly thin out, and by the time it is obvious the business needs eighteen months of investment to recover a position it used to hold for free.
The most expensive marketing budget is the one that got quietly cut three years ago.
How to split it
A rough starting frame, not a rule.
- Foundation, once, then maintained. Website, brand, photography, the basic proof. Underfund this and everything downstream costs more.
- Capture, ongoing, the largest ongoing share. Search, paid where it pays, reviews, service pages, follow-up. Reaching people already looking.
- Creation, ongoing, the patient share. Content, video, social, awareness. Slow, hard to attribute, and it is what makes capture cheaper over time.
- Retention and referral, small and neglected. Almost always the highest return per dollar and almost always the last thing funded.
If your budget is entirely capture, growth will stall the moment you stop paying. If it is entirely creation, you will build awareness and fail to convert it.
What counts as marketing spend
Be consistent, because comparisons are meaningless otherwise. Count agency fees, ad spend, software, production costs, and the loaded cost of internal marketing salaries. Sponsorships and trade shows count. The truck wrap counts.
Businesses that exclude salaries from the number consistently believe they spend far less than they do.
When to spend more
- Acquisition cost is comfortably below what a client is worth and you have capacity to deliver.
- You are winning most of the deals you get into and simply need more at bats.
- A channel is working and constrained only by budget.
When to stop and fix instead
- Leads arrive and nobody follows up quickly.
- You are winning on price rather than on preference.
- You cannot say which channel produced your last ten clients.
Spending more into any of those three makes the problem larger and better documented. Fix the leak, then open the tap.