The U.S. Small Business Administration’s guideline is to spend 7–8% of gross revenue on marketing if your business brings in less than $5M a year. For a $500K business, that’s about $2,900–$3,300 a month.
You’ve built something real, and you want to spend on it wisely. So a fair warning before the math: a consultancy telling you how much to spend on marketing has an obvious stake in the answer. None of the percentages on this page are ours. The opinions are, and we’ve labeled them as opinions.
Is 7–8% of revenue the right number for your business?
It’s a starting point. A blunt one. Don’t get us wrong, the SBA number is useful. The SBA gives a single range for every business under $5M, which lumps a two-truck plumbing company in Greenwood together with a 30-person software firm in Fishers. But those two shouldn’t budget the same way.
In our book, stage matters more than size. Published budget guides converge on roughly these bands:
- 10–20%Getting started. You’re finding customers beyond friends and the first few referrals.
- 7–10%Growing. Something works, and you’re adding crews or chairs to keep up with it.
- 4–7%Steady. Established, with most of the work coming from repeat customers and word of mouth.
The top band looks alarming at first. Twenty percent of revenue? It makes more sense once you remember what a new business doesn’t have yet: reviews and a list of past customers to call in a slow month. You’re paying to build things an older business already owns.
What does that look like in dollars?
Find the row for your revenue, then the column for your stage.
| Annual revenue | SBA 7–8% a year | SBA 7–8% a month | Getting started (10–20%) a month | Steady (4–7%) a month |
|---|---|---|---|---|
| $300K | $21,000–$24,000 | $1,750–$2,000 | $2,500–$5,000 | $1,000–$1,750 |
| $500K | $35,000–$40,000 | $2,917–$3,333 | $4,167–$8,333 | $1,667–$2,917 |
| $1M | $70,000–$80,000 | $5,833–$6,667 | $8,333–$16,667 | $3,333–$5,833 |
If you land between two columns, use the lower number for your first 3 months. Raise it once you can see which spending brings in calls. Honestly, that rule matters more than whether you pick 6% or 8%.
Where should the first marketing dollars go?
Here at CPC, we aren’t afraid of a hot take, so here it is plainly: most small businesses should spend their first dollars on things they’ll still own a year from now. Everything else in this section follows from that.
For a local business, that usually means your Google Business Profile and your reviews. BrightLocal’s local search research found that businesses in Google’s top 3 map results get 126% more traffic than the ones ranked 4 through 10. It also found that profiles with 40 or more reviews and a 4.5-star average show up in those top 3 about 3.7 times as often as profiles with fewer than 10. Neither one costs much beyond time and a system for asking. That’s the kind of spending we love to see.
Next... answer the phone. A lead you paid for and didn’t pick up is the most expensive marketing there is. If you’re on a roof or behind a line all day, an automatic text-back for missed calls is worth more than a bigger ad budget. Our page for local businesses lays out the order we’d work in.
What shouldn’t you buy yet?
Social media management, if your Google profile has 8 reviews and photos from 2019. And Google Ads, if you can’t yet tell which calls came from an ad. Both are fine purchases later. Early on, they’re where budgets leak.
Is it cheaper to rent leads or own your pipeline?
If you’re in the trades, you’ve met the rental option. Pay-per-lead platforms like Angi and HomeAdvisor sell you a lead at a time. The alternative is owning the pieces that bring work in on their own: your profile, your site, an ad account in your name, and a list of past customers.
| Renting (Angi-style platforms) | Owning (your profile, site, and ad account) | |
|---|---|---|
| Cost per lead | Higher; you pay for every lead, won or lost | Lower once your profile and site are working |
| Who else gets the lead | Often other contractors too; shared leads are a common complaint | Nobody. The customer found you. |
| Billing | Charges that keep coming after cancellation are a common complaint | Ad spend goes to Google from your account, at a budget you set |
| When you stop paying | The leads stop the same day | Your reviews, ranking, and customer list stay |
Don’t get us wrong, renting isn’t always the wrong call. A new contractor with an empty calendar and no reviews can use platform leads to get through a first season while the owned pieces get built. The trouble shows up later, when the platform is still most of the pipeline. By then you’ve paid for hundreds of leads and own none of the things that produced them.
Where do our published prices sit against the math?
Our retainers are $1,200, $2,400, or $4,800 a month. Here’s each one as a share of annual revenue, using the same three revenue sizes.
| Monthly retainer | Per year | At $300K | At $500K | At $1M |
|---|---|---|---|---|
| $1,200 | $14,400 | 4.8% | 2.9% | 1.4% |
| $2,400 | $28,800 | 9.6% | 5.8% | 2.9% |
| $4,800 | $57,600 | 19.2% | 11.5% | 5.8% |
Ad spend is separate. If we run Google Ads for you, that money goes to Google from an account in your name, at a budget you set, and it counts toward the same percentage. At $300K, the $1,200 tier leaves roughly $550 to $800 a month for ads inside the SBA’s 7–8%. The $4,800 tier at $300K sits outside that range entirely. It only fits the getting-started band, and even then we’d usually suggest starting smaller.
The terms are the same at every tier. Three months minimum, then month to month. We take 8 clients at a time, and nonprofits get a reduced rate. If what you need is a plan you’ll run yourself, there’s a $3,000 one-time strategy engagement, and if you move to a retainer afterward, half of it ($1,500) is credited toward the retainer. We’d encourage you to read the full terms on the pricing page before you talk to anyone.
And if $1,200 a month would be more than your whole marketing budget, honestly, don’t hire us yet. Spend that money on your Google profile and on answering every call. It’s what we’d do first anyway.
One thing to do this week
Add up everything you spent on marketing last month: ads, fees, software, print. Divide it by your monthly revenue. Now you know where you sit against the bands above, and you have a real number to plan from instead of a guess.
Want your own number?
The Budget Calculator takes your revenue and stage and runs this math. Free, and no email required.
Questions owners ask about marketing budgets
Is 7–8% of revenue too much for a small business to spend on marketing?
It’s the SBA’s guideline for businesses under $5M, so it isn’t unusual. If margins are thin, start in the 4–7% band that published budget guides give established businesses, then raise it once you can see which spending brings in work.
Does a marketing budget include ad spend?
Yes. Count everything in one number: ad spend, agency or consultant fees, software, and print. A $1,200 retainer plus $800 a month in Google Ads is a $2,000-a-month marketing budget, and that’s the figure to hold against the percentage.
Should a new business spend more on marketing than an established one?
Usually, as a share of revenue. Published budget guides put early-stage businesses at roughly 10–20% of revenue and mature ones at 4–7%. A new business is paying to build the reviews and the customer list an older one already has.
How much should a $500K business spend on marketing per month?
About $2,900 to $3,300 a month at the SBA’s 7–8% guideline, or $35,000 to $40,000 a year. A newer $500K business can reasonably spend more. A steady one that runs mostly on repeat customers might sit closer to $1,700 to $2,900.
Are pay-per-lead sites like Angi worth the money?
Sometimes, early, when you need jobs this month and have no reviews yet. Over time they tend to cost more per lead than channels you own. And when you stop paying, the leads stop.