“How much should I spend on marketing?” is one of the most common questions business owners ask, and one of the most frustrating to answer. The honest reply is “it depends”, which is true but not very useful when you’re trying to set a budget in January.
You’ll often hear rules of thumb, usually a percentage of turnover. They can be a starting point for a conversation, but they ignore the things that actually matter: how much a customer is worth to you, how competitive your market is and whether you’re trying to grow or hold steady.
Here’s a more practical way to decide how much to spend on marketing, and get to a number you can defend.
Work out what a customer is worth
Before you can decide what to spend winning customers, you need to know what they bring in. Not the first invoice, but the gross profit over the time they typically stay with you.
A café customer might spend a few pounds a visit but come back weekly for years. A kitchen fitter’s customer might spend thousands once, then refer two friends. An accountant’s client might pay a monthly fee for a decade.
Take your average gross profit per customer and multiply it by how many times they typically buy. That’s a rough lifetime value. It doesn’t need to be precise. You’re looking for the right order of magnitude.
Decide what you can afford to pay for one, then work backwards
Once you know what a customer is worth, you can decide the most you’d pay to win one. This is your target cost per customer. For most businesses it’s a fraction of lifetime value, leaving room for overheads and profit.
Then look at your conversion rate. If one in five enquiries becomes a customer and you’re willing to pay £200 per customer, you can afford roughly £40 per enquiry. That single number makes most channel decisions much easier. A Google Ads campaign producing enquiries at £25 each is worth scaling. A directory listing costing £600 a year that produced three enquiries isn’t.
Now combine that with what you want to achieve. If you need 50 new customers this year and your target cost per customer is £200, your acquisition budget is around £10,000. That’s before you add anything for keeping existing customers, brand work or the tools that hold it all together.
This approach gives you a budget linked to an outcome, which is much easier to justify to a business partner or bank manager than “we picked 5% because someone said so”.
Don’t forget the costs that aren’t adverts
What you spend on marketing is more than ad spend. Plan for:
- Your website: hosting, maintenance and the occasional improvement. It’s where most of your other marketing sends people.
- Content: photography, video, written copy. Good ads with poor creative waste money.
- Tools: email platform, CRM, scheduling and analytics subscriptions. These creep up quietly.
- People: an agency, a freelancer, a part-time marketer or your own hours. Your time has a cost even if it doesn’t appear on a statement.
- A testing pot: a small amount set aside to try something new each quarter.
Adjust how much you spend on marketing for your situation
A few factors should push your budget up or down.
Reasons to spend more
- You’re new and nobody knows you exist yet
- You’re entering a new area or launching a new service
- Your competitors are active and your enquiries are dropping
- You have spare capacity that’s costing you money while it sits idle
Reasons to spend less (for now)
- You’re already turning work away
- Your website or sales process is leaking enquiries, so more traffic would just leak faster
- You can’t yet track where customers come from
That middle point deserves attention. If your follow-up is slow or your website doesn’t convert, fix that first. It’s usually cheaper than buying more traffic, and it makes everything you spend on marketing afterwards work harder.
The right budget isn’t a percentage. It’s the amount you can spend per customer, multiplied by the number of customers you need, plus what it costs to keep the machine running.
Spend in stages, not all at once
You don’t have to commit the whole year’s budget in January. Start with a proportion, measure your cost per enquiry for two or three months, then move money towards what’s working.
Keep a simple monthly record: spend by channel, enquiries by channel, customers won. After a quarter you’ll know more about your marketing than most businesses ever do, and your budget conversations will be based on your own numbers rather than someone else’s averages.
Where to go from here
If you’d like help working out your customer value, setting targets and splitting a budget across channels, that’s a core part of our marketing strategy service. And if you’d rather hand the whole thing over, an outsourced marketing department gives you a planned budget and a team to run it for a fixed monthly cost.
