How to Create a Marketing Budget for Your Small Business

Some might see marketing as solely a short-term business expense, but it’s actually a long-term investment. Unfortunately, many businesses reach a point where growth slows unless they have a solid marketing plan in place. In fact, according to BDC research, businesses in Canada that routinely invest in marketing often grow and adapt faster to changing market conditions.

This means you can’t rely primarily on referrals or organic demand to sustain your business, which is why you need to establish your marketing budget so you can plan accordingly. With a marketing budget for a small business, you’ll know how to attract new customers, retain existing clients, and stay visible in your target market.

At Bizfund, we understand the need for a marketing budget. We also know that an advertising budget need not be complicated as long as you know how to create one. In today’s guide, we’re exploring just that. We’ve shared how much to spend on marketing, how to create your marketing budget, and how to track if it’s working. We’ve even gone so far as to share how you can fund your marketing budget, helping you achieve your professional goals that much sooner.

How Much Should You Spend?

You need to consider creating a revenue-based budgeting plan, as it can help you maintain consistency and scale your marketing as you grow. This way, you can treat your marketing spend as a predictable rather than unpredictable cost.

How much to spend on marketing is for some a million-dollar question, but most Canadian small businesses spend roughly between 5% and 10% of their revenue on marketing, with B2B companies spending between 2% and 5%.

The exact amount you’ll spend depends on your growth goals, industry, and the current market competitiveness. But you can research what is common in your industry to see what competitors are spending and try to match their spending.

In most instances, businesses operating in highly competitive or consumer-facing industries spend more, while businesses with a strong referral network spend less.

You can also look at things through the lens of your growth intent. If your company is stable and you want to maintain revenue, you can spend closer to the 5% mark. However, if your goal is to expand, enter a new market, or launch new services, it’s more realistic for your budget to lean towards the 8% to 10% mark.

Breaking Down Your Marketing Budget

Your marketing budget for a small business will be most effective when you break it down into practical categories. These categories need to reflect how your business actually markets itself. For most companies, digital advertising accounts for the largest share of the budget.

This is especially true for businesses spending a lot on Google Ads, marketplace platforms, or social media ads. Most spend more of their budgets on this because it delivers faster visibility if careful monitoring is done.

Then comes content and SEO. This is usually a company’s second-largest share of a marketing budget. Usually, this includes everything from local search visibility and website optimization to blog content. Companies that choose SEO and blog content find that these efforts take longer to show results, but that they often deliver better long-term value.

Another key area you should expect some of your market spend to go towards is customer retention and email marketing. Although it’s self-explanatory, your design and branding expenses also fall into this category. These are the things that help you keep existing customers engaged, and they cost the least while producing higher lifetime value.

Creating Your Marketing Budget

So, now that you understand what goes into your marketing budget, let’s learn how to create a marketing budget for a small business:

1. Look at Your Past Results

The first thing you’re going to want to do is look at your past results. This will allow you to determine what is working and what isn’t.

The best way to do this is to look at where your business leads came from over the last year and note which channels consistently generated revenue. If you do this, you’ll have a practical starting point instead of just guessing where to begin.

2. Set Your Growth Goal

Every business has growth goals, but you need to set realistic ones that align with your current stage. For example, plan whether you want to maintain growth at its current pace, expand into a new market, or increase sales.

Once you know this goal, you can develop a marketing budget amount that reflects how ambitious you want to be with your company.

3. Decide on the Amount

If you’ve set a goal and have an idea of your marketing budget, that isn’t enough. You need to have a concrete estimate of how much of your revenue you’re comfortable spending on marketing.

At this point, most established businesses will begin with a percentage range, as we mentioned earlier. You’ll need to determine your range and adjust it based on your cash flow and how you expect your marketing to perform.

Doing things this way will help you keep your spending realistic and sustainable.

4. Allocate Your Budget

Once you know your budget, you can allocate the funds. Usually, it’s best to allocate funds based on performance and opportunity. What we mean is that you need to allocate more funds to channels where you’re already seeing results.

That’s why finding this out in the previous steps was important. However, you should also leave space in your budget to test new ideas because you want to make sure you’re doing everything you can to improve future growth.

5. Review the Budget

Your marketing budget isn’t something you set and forget. You need to ensure you’re reviewing your budget regularly and making changes as needed, since marketing performance evolves over time.

We usually tell businesses to check their numbers every quarter. This will help you remain flexible and make better decisions for your business as things evolve.

Tracking Marketing ROI

Your advertising budget will only work if you know what it’s producing, and to know this, you need to track your marketing ROI. Fortunately, tracking doesn’t have to be difficult. In most cases, you need only start with basic metrics such as cost per customer, cost per lead, and customer lifetime value.

These will give you a good benchmark indication of how your marketing is performing. If you don’t believe us, believe the BDC. They claim that marketing performance becomes far more manageable when a business focuses on a few meaningful indicators rather than dozens of metrics.

To find these metrics, you’ll need to look in different places. For digital advertising, your tracking is usually built into the platform. When it comes to offline marketing, you should use simple tracking methods, such as asking customers for valuable insights through surveys.

Over time, these ROI-tracking insights will help you reallocate parts of your marketing budget to channels that are performing better. This should help you stop spending on underperforming channels. In the long run, this is hugely beneficial for your company.

Marketing on a Tight Budget

We get it. Not every small business has a large marketing budget, but even if you don’t have as much as you had hoped, you shouldn’t put it off. Even if you only have access to limited funds as you experience a tighter cash flow, you can hone in on what matters to get more bang for your buck.

Usually, your priority should go to the channels that you know are working for you. So if email marketing is generating consistent business, spend more here, and if one advertising platform is consistently bringing in profitable customers, don’t diversify; stick to it.

You should also consider free or low-cost channels like referrals, organic social media, and partnerships. These can help supplement paid efforts when your budget is feeling tight. And your hard work may pay off, as some experts claim that consistency matters. In fact, consistently applied small budgets can often outperform sporadically applied larger budgets.

Funding Your Marketing Growth

When your marketing starts to pay off, it creates a ripple effect. Your demand increases, your cash flow begins to tighten, and your growth begins to put pressure on you before it can create stability. Not to mention, more leads likely mean you need more inventory, more staff, and higher operating costs.

It is in these situations where funding becomes an important part of your business’s marketing conversation. If you can confidently state that your current marketing is generating revenue, financing can help accelerate this momentum without disrupting daily operations. Although there are traditional funding avenues, you might find alternative financing to better serve your business’s needs.

One of the best alternative financing options to up your marketing budget is a merchant cash advance. These are available through companies like us at Bizfund. Merchant cash advances generally offer fast access to capital based on your business’s revenue and cash flow performance. 

This differs from traditional loan structures. With a merchant cash advance, your business’s repayment is tied to your sales. This aligns well with your marketing-driven growth because it offers flexibility.

It’s also worth noting that businesses that see predictable returns from advertising, promotional campaigns, and seasonal demand often use merchant cash advances to maintain consistency.

The Key Takeaways on a Marketing Budget for a Small Business

Creating a marketing budget for a small business is one of the most important steps you can take to support your business’s growth in the long term. If you can plan, track, and adjust your marketing spend routinely, you’ll find it becomes a predictable investment. And it doesn’t matter if your budget is big or small.

As long as you’re consistent with the spend and do so smartly when allocating funds, you’ll see rewards. However, sometimes you might need a little financial help when growth picks up, and your marketing starts working, and that’s where we can help.

At Bizfund, our team offers merchant cash advances up to $300,000 that you can acquire in as little as two business days. With this money, you can up your marketing budget and keep the momentum going. If you want to learn more, you can contact us here or apply here if you already know all you need to know.