How much to spend on ads, for real
How much to spend on ads, for real
"How much should I be spending on advertising?"
I get asked that a lot, and the short answer is an awkward one: there's a textbook number. There's also a reason that number, on its own, won't help you decide anything on a Monday morning.
Let's go in order.
The textbook number, in dollars
The figure that comes up most — from the agency that advises small businesses in the US — is 7-8% of your gross revenue, for businesses under $5 million a year. Other industry sources refine that range by stage:
| Stage | % of revenue |
|---|---|
| Just starting out (little or no revenue yet) | 10-20% |
| Growing | 7-10% |
| Stable, already established | 4-7% |
| Pushing aggressive growth | 10-12% or more |
A number on its own doesn't mean much until you run it against your actual cash flow. Here's what that range looks like for three small-business sizes:
| Stage | Annual revenue | The range, per month |
|---|---|---|
| Just starting out | $50,000 | $420-$830 |
| Growing | $250,000 | $1,460-$2,080 |
| Stable | $1,000,000 | $3,330-$5,830 |
The fine print, because almost nobody prints it: these figures come from different benchmarking firms, not from Google or Meta, and none of them are audited. By industry, they vary quite a bit — from a recent study of more than 12,000 companies: technology and software 11-15%, retail 4-9%, ecommerce 6-12%, healthcare 6-14%, financial services 7-10%, professional services 5-8%. Use it as an order of magnitude, not as law.
The first filter that percentage leaves out: your margin
Say you land right in the middle of your range. That answers how much you're putting on the table. It doesn't answer whether you should.
We already covered this with ROAS: the point where you neither gain nor lose comes from dividing 1 by your margin. At a 25% margin, you need four times what you spent just to break even; at 70%, less than half of that already puts you ahead. The same 8% of revenue can fund a business that's growing or one that's quietly eating its own working capital, without the owner noticing until year-end. The full math, with real examples, is here.
Before you commit to the amount in the table above, work out your margin. Five minutes, not a consulting engagement.
The second filter: whether you'll even be able to see the result
There's a problem that comes before that one, and it's more common than it sounds: spending the "correct" percentage with no way to check what that spend actually did.
Of 8 Chilean B2B startups we scanned, none measured well — and not for lack of tools: half had plenty, the other half had almost none, and both ended up equally blind. The four patterns behind broken measurement are here. If you sell directly to consumers, the shorter checklist is this one, for whether your advertising is actually working.
Spending the right percentage without being able to see the result isn't caution. It's flying blind with the paperwork in order.
What people actually spend
Before that table starts to feel like an impossible bar, some context. A recent survey of more than 7,400 small US businesses found that 26% plan to spend $0 on marketing this year, and that 9 out of 10 spend less than $200 a month — well below the floor of the table for a business just starting out.
That's not a collective failure. It's that nobody translated the percentage into something you can decide with the cash you have today. A range in the abstract doesn't compete against this month's rent; a dollar amount does.
What to do this week
Three steps, in this order.
One. Pull your revenue from the last year, or your projection if you're just starting.
Two. Find your stage in the table and work out the range in dollars — not as a percentage, as the exact amount that would leave your account each month.
Three. Before you commit to it, run that amount against your margin. If the number you get from 1 ÷ margin is higher than what you're willing to sell in extra volume, the budget from the table isn't ready for you yet: margin first, spend second.
The textbook gives you the ceiling. Your margin and your measurement say whether it's worth reaching it.
Frequently asked questions
How much should a small business spend on advertising?
As a starting point, between 4% and 10% of revenue if you're already running, up to 20% if you're just starting out. It's a textbook ceiling, not a final answer — what decides whether that spend makes sense is your margin and whether you can measure the result.
What percentage of revenue should go to marketing?
It depends on your stage: 10-20% just starting out, 7-10% while growing, 4-7% once stable. It also shifts by industry — technology and healthcare sit at the higher end, retail and professional services at the lower end.
Does the budget change if I'm just starting a business?
Yes, upward: without an existing customer base, the recommended range rises to 10-20% of projected revenue, nearly double an established business.
Is it worth spending more if I'm not measuring my campaigns well?
No. It's the most expensive way to fly blind: you spend the right percentage and still don't know what worked. Before raising the budget, check whether your measurement even lets you see the result.
Is it bad to spend less than the recommended percentage?
Not necessarily. Nearly 9 out of 10 small businesses spend less than $200 a month on advertising. The percentage is a textbook reference, not an obligation — what actually matters is deciding it on purpose, not by inertia.
If you already know how much you're going to invest, the next step is knowing whether it's worth spending: check what counts as a good ROAS for your margin. And if you want to start with the very first thing — what you're measuring today and how your site compares to your sector — scan your site free. Nothing to install, no agency.