How much should your company spend on marketing? The five-factor framework that actually works

TL;DR: 

• Most companies should invest 5-25% of revenue in marketing based on five factors: revenue stage × business model × growth goals × competition × foundation readiness 
• Formula: Baseline percentage × multipliers = your range 
• Next step: [Calculate your customer acquisition cost →]

Most companies should invest 5–25% of revenue in marketing. Your specific number depends on five factors: revenue stage, business model, growth goals, competition level, and foundation readiness. B2B companies often land near 7–12%, while high-growth startups need 15–25%. For context, recent cross-industry surveys put average marketing spend closer to ~7–9% of revenue overall; your specific situation may justify more or less. The right percentage for you lies at the intersection of what you can afford and what your growth goals demand.

Service companies at $3M revenue coasting with zero marketing budget, wondering why growth stalled. Startups with tiny budgets expecting massive returns. Fortune 500s spending millions on campaigns with no traceable ROI. The pattern repeats everywhere: companies either guess their marketing budget or follow generic advice that doesn’t fit their situation.

The question isn’t “how much do others spend?” The question is “how much given your specific situation?”

Generic advice says “spend 10% of revenue on marketing.” Companies destroy themselves following that rule. Others triple their growth by ignoring it entirely. The truth is, your optimal marketing budget depends on factors nobody talks about. Like whether your customers even know your category exists. Or whether you’re playing offense or defense in your market.

Here’s the framework that actually works, built from industry research, observable patterns, and proven economic principles.

Why “just spend 10%” advice fails

The 10% rule assumes every business is identical. Same growth stage, same economics, same competition. It’s like prescribing the same medication to every patient regardless of their condition.

Consider this pattern: professional services firms often operate in the low single digits of revenue (and higher during growth pushes) because they rely heavily on referrals and relationships. Force them to 10% without the right foundation, and that extra spend often becomes pure waste. They’re overspending in a market that doesn’t require it.

On the flip side, venture-funded SaaS companies routinely spend 40%+ of revenue on Sales & Marketing combined and call it conservative. When customer lifetime value exceeds acquisition cost by 3x or more, aggressive spending isn’t risky. It’s rational. The percentage looks insane until you see the unit economics.

The real problem with percentage-based advice? It ignores unit economics entirely. If your customer acquisition cost (CAC) exceeds what you can afford to pay, spending more just accelerates failure. You need to know if your economics work before setting any budget.

That’s why we developed a different framework. One that actually accounts for your business reality.

The five-factor framework

Factor 1: Your revenue stage

Your company’s size determines baseline investment needs. Not because bigger means better, but because market dynamics shift at different scales.

$0-1M revenue: 25% baseline You’re buying market entry. Everything costs more when you’re unknown. No brand recognition, no customer base, no organic word-of-mouth. You’re paying full price for every customer. This seems unsustainable because it is. It’s supposed to be. You’re investing in escape velocity.

$1-5M revenue: 20% baseline You’ve proven something works. Now you’re scaling it. The percentage drops because you’ve gained some efficiency, but you’re still in heavy investment mode. This is where most companies make a fatal error: they cut marketing spend too early, stalling at $3M forever.

$5-25M revenue: 12% baseline Congratulations, you have a real business. Some brand equity, some word-of-mouth, some operational efficiency. The challenge here? Complacency. Companies often coast at this stage while competitors eat their lunch.

$25-100M revenue: 8% baseline You’re playing a different game now. Market share battles, multi-channel complexity, brand defense. The percentage is lower but the dollars are serious. A 1% swing either way is millions.

$100M+ revenue: 5% baseline Efficiency at scale. You have brand power, market position, operational excellence. But here’s what nobody mentions: that 5% of $100M is still $5M. More than most companies’ entire revenue.

(These are baselines. The next four factors adjust from here.)

Factor 2: Your business model

Different business models have fundamentally different economics. A SaaS company and a manufacturing firm at the same revenue shouldn’t spend the same percentage. Here’s why.

SaaS companies: 1.5x multiplier Customer lifetime value often exceeds 3x annual contract value. You can afford higher acquisition costs because customers stick around. Plus, software scales without proportional cost increases. If the baseline says 12%, you should consider 18%.

E-commerce: 1.2x multiplier Lower margins but higher frequency. You’re fighting Amazon, competing on price, and dealing with return rates. You need above-baseline spending just to stay visible. Multiply baseline by 1.2x.

Service businesses: 1.0x multiplier Human-delivered services scale linearly. Every new customer requires more capacity. Marketing investment needs to account for fulfillment constraints. Stick with baseline percentages.

Manufacturing: 0.8x multiplier Longer sales cycles, relationship-driven sales, limited distribution. Your marketing dollar goes further because you’re not competing for daily attention. Multiply baseline by 0.8x.

Professional services: 0.9x multiplier Referrals drive significant new business typically. Marketing amplifies word-of-mouth rather than replacing it. Multiply baseline by 0.9x if you have strong referral systems.

Factor 3: Your growth goals

Want to double revenue this year? That costs more than maintaining position. Marketing investment should match ambition.

Aggressive growth (>50% annually): 1.3x multiplier You’re buying market share. This requires outspending competitors, testing new channels, and accepting lower efficiency temporarily. If you want exceptional growth, budget for exceptional investment.

Steady growth (20-50% annually): 1.0x multiplier The sweet spot for sustainable scaling. You’re growing faster than the market but not betting everything on hypergrowth. Baseline percentages support this pace.

Maintain position (<20% annually): 0.8x multiplier You’re optimizing, not expanding. Focus on efficiency over reach. But warning: cutting too deep invites disruption. Maintenance strategies can quickly become decline realities when markets shift.

Here’s what most advisors won’t tell you: choosing “maintain” in a growing market is actually choosing decline. If your market grows 15% and you grow 10%, you’re losing share. Budget accordingly.

Factor 4: Competition level

Marketing is an auction. More bidders means higher prices. Your competition level directly impacts what percentage you need to compete.

Rate your competitive intensity and apply the multiplier:

• Minimal competition: You created the category (0.8x multiplier) 
• Light competition: 2-3 serious players (0.9x multiplier) 
• Moderate competition: 5-10 competitors (1.0x multiplier) 
• Heavy competition: Dozens of alternatives (1.2x multiplier) 
• Brutal competition: Commoditized market (1.5x multiplier)

Consider the difference: a startup in a crowded field like cybersecurity needs 50% more budget than an AI company in an emerging niche. Same revenue, same growth goals, different competitive reality.

The brutal truth? In highly competitive markets, you either outspend or out-think competitors. Since most companies can’t out-think, they need to outspend. [Learn how to optimize spending for maximum impact →]

Factor 5: Foundation readiness

This factor kills more marketing budgets than all others combined. You can’t amplify what doesn’t exist.

Run this five-point foundation check:

1. Website converts visitors into leads (>2% conversion rate)
2. Sales team can handle 2x current lead volume
3. Clear, differentiated value proposition exists
4. Customer experience generates positive reviews
5. Basic analytics and tracking are functional

Score 5/5? Proceed with calculated budget (1.0x multiplier)
Score 3-4? Fix gaps first, then scale spending (0.8x multiplier as you improve)
Score 0-2? Pause scaling until fixed (0.5x multiplier cap – maintenance only)

Bottom line: companies pour budget into marketing while their website converts at 0.3%. That’s like filling a bucket with massive holes. Fix the holes first. [Get a website that actually converts →]

Your marketing budget calculator

Let’s make this concrete. Here’s how to calculate your specific budget:

Step 1: Find your baseline Your annual revenue: $_______ Your revenue stage baseline: ____%

Step 2: Apply multipliers Business model multiplier: ____ Growth goal multiplier: ____ Competition multiplier: ____ Foundation multiplier: ____

Step 3: Calculate your percentage Budget % = Baseline × Model × Growth × Competition × Foundation

Example calculations:

$10M B2B SaaS company, aggressive growth, heavy competition:

• Baseline (from $5-25M range): 12%
• Business model (SaaS): × 1.5 = 18%
• Growth (aggressive): × 1.3 = 23.4%
• Competition (heavy): × 1.2 = 28.08%
• Foundation (ready): × 1.0 = 28%
• Annual marketing budget: $2.8M

$10M professional services firm, steady growth, moderate competition:

• Baseline: 12%
• Business model (services): × 0.9 = 10.8%
• Growth (steady): × 1.0 = 10.8%
• Competition (moderate): × 1.0 = 10.8%
• Foundation (ready): × 1.0 = 10.8%
• Annual marketing budget: $1.08M

Same revenue, totally different realities, totally different budgets.

Sanity check: Marketing as % of gross profit should generally stay under ~70%. If your result is higher, revisit assumptions or fix conversion first.

Seems high? That’s because aggressive growth in competitive markets IS expensive. The question isn’t whether it’s high. The question is whether your unit economics support it. As we explore in our CAC calculator, sustainable growth requires CAC payback under 12 months for most businesses. 

Industry benchmarks reality check

Let’s ground this framework in market reality. Here’s what companies actually spend (when they’re growing successfully):

B2B technology:

• SaaS companies: 15-30% of revenue
• IT services: 7-12% of revenue
• Hardware: 5-10% of revenue

Professional services:

• Law firms: 3-7% of revenue
• Consulting: 5-10% of revenue
• Accounting: 4-8% of revenue

E-commerce:

• Direct-to-consumer: 15-30% of revenue
• Marketplace sellers: 10-20% of revenue
• B2B e-commerce: 7-15% of revenue

Notice the massive ranges? That’s because even within industries, the five factors create different realities. A bootstrapped SaaS company and a VC-funded one shouldn’t spend the same percentage, even in the same industry.

Three real-world patterns

Pattern 1: The underinvesting service company

Service companies around $3M revenue with zero marketing budget. “Word-of-mouth has always worked.” Growth stalled 18 months ago. Owner thinks marketing is “expensive.”

What the framework says:

• Revenue stage ($1-5M): 20% baseline
• Service business: 1.0x multiplier
• Stalled growth needs aggressive push: 1.3x multiplier
• Result: 26% of revenue
• Should spend: $780K annually

The typical path forward: Start at 10% ($300K) for six months. Focus on foundation: website, sales materials, case studies. Then scale to 15% ($450K) with proven channels. Reach 20% by year two. This feels massive to companies that have underinvested for years.

Pattern 2: The overspending startup

$1M revenue companies spending $400K+ on marketing (40%+). Venture-funded. CAC exceeding LTV. “We’ll fix unit economics at scale.”

What the framework says:

• Revenue stage ($0-1M): 25% baseline
• SaaS model: 1.5x = 37.5%
• Aggressive growth: 1.3x = 48.75%
• Their 40% could actually be conservative

The reality check: Percentage might be fine. Unit economics are broken. They need to fix pricing, improve retention, or find cheaper acquisition channels. This isn’t a budget problem. It’s a business model problem.

Pattern 3: The optimized mid-market company

$15M companies spending $1.5M on marketing (10%). Growing 35% annually. Marketing efficiency ratio (MER) above 4.0. Everything working smoothly.

What the framework says:

• Revenue stage ($5-25M): 12% baseline
• B2B services: 1.0x multiplier
• Steady growth: 1.0x multiplier
• Right on target at 10-12%

The opportunity: They could test increasing to 15% to accelerate growth. With proven efficiency metrics, additional spending would likely maintain performance. But if current growth satisfies goals, maintaining is fine. The MER framework we detail in another guide provides the scoreboard for these decisions. [Learn about marketing efficiency ratio →]

When NOT to increase marketing spend

Sometimes the answer to “how much should we spend?” is “not yet.” Here’s when to hold back:

Product-market fit isn’t clear If customers aren’t staying, renewing, or referring others, marketing amplifies a problem. Fix retention before acquisition. Companies that spend heavily before product-market fit typically burn through resources without sustainable growth.

Operational capacity is maxed Can you handle 2x the customers tomorrow? If not, marketing success becomes operational failure. Build capacity ahead of demand, not after.

No measurement systems exist If you can’t track what’s working, you can’t optimize. You’re gambling, not investing. Install basic analytics first. 

Cash flow can’t support it Marketing investment often takes 6-12 months to pay back. If you need profitability in 90 days, you can’t afford aggressive spending. Bootstrap with content and organic strategies instead.

The hardest truth? Sometimes the right marketing budget is zero. Fix the foundation first.

Your next steps

You now have a framework for calculating your marketing investment. Here’s how to implement it:

Week 1: Calculate your baseline Run through the five factors. Be honest about where you are, not where you want to be. Calculate your percentage range.

Week 2: Compare to current spending Are you under, over, or right on target? If there’s a gap, understand why. Often, the gap reveals strategic misalignment.

Week 3: Check unit economics Before committing to any budget, verify your customer acquisition cost and lifetime value support it. Marketing budget without unit economics is just expensive hope.

Week 4: Create your progression plan Don’t jump from 2% to 20% overnight. Map out quarterly increases. Test, measure, adjust. Scale what works.

Remember: this framework gives you a range, not a rigid number. Start at the low end, prove it works, then scale. The companies winning in your market didn’t start with perfect budgets. They started with smart frameworks and adjusted based on results.

Frequently asked questions

How long before we see ROI from increased marketing spend?

B2B companies typically see meaningful results in 6-12 months. E-commerce can see an impact in 30-60 days. Service businesses fall somewhere between. The key is patience. Most companies quit right before the compound effect kicks in.

Should marketing salaries be included in this percentage?

Yes. Include all marketing costs: salaries, tools, media spend, agencies, and contractors. The full cost of customer acquisition. Excluding salaries makes the percentage look smaller but doesn’t change reality.

What if we can’t afford the recommended percentage?

Start where you can, but adjust expectations accordingly. You can’t expect 50% growth on a maintenance budget. Either lower growth targets or find creative ways to fund marketing (improved operations, price increases, cutting elsewhere).

How often should we adjust our marketing budget?

Review quarterly, adjust annually. Marketing needs consistency to work. Constant budget changes create chaos. Set your percentage, commit for a year, then optimize based on results. The allocation within that budget is what you optimize monthly, as we cover in our allocation guide. [Learn optimal allocation strategies →]

Should startups really spend 25%+ on marketing?

If you’re venture-funded and chasing growth, yes. If you’re bootstrapped, be more conservative. The framework assumes you can afford temporary inefficiency for long-term gain. Adjust based on your funding reality.

What about companies under $1M revenue?

The percentages seem impossible because you’re still finding product-market fit. Focus on one channel, prove it works, then expand. Don’t try to do everything with nothing.

How do we know if we’re spending too much?

Check your marketing efficiency ratio (MER). If you’re spending $1 to make $3 or more, you’re likely healthy. Below that, optimize before increasing spend.

When should we hire an agency versus building in-house?

Under $20K monthly spend, agencies provide better leverage. Over $50K monthly, consider in-house for core channels. The sweet spot? Hybrid: in-house strategy with agency execution. [Explore our marketing services →]

What if our industry doesn’t match these benchmarks?

Industries vary, but the five factors still apply. Use benchmarks as directional guides, not rules. Your unit economics matter more than industry averages.

Should we include brand building in this budget?

Yes. Brand building drives long-term efficiency. Companies that only fund direct response eventually see declining returns. Balance performance marketing (70%) with brand building (30%) for sustainable growth.

Making the right marketing investment decision

Marketing budget isn’t really about percentages. It’s about aligning investment with ambition, reality with goals, spending with strategy.

The framework we’ve shared is based on established patterns in marketing investment. Some companies spend too little and wonder why growth stalled. Others spend too much on the wrong things. The successful ones? They find their number and stick with it long enough to compound.

Most companies have a marketing budget that’s either accidental (whatever’s left over) or aspirational (what they wish they could spend). Neither works. You need a budget that’s intentional. Based on your specific situation. Justified by your economics. Supported by your operations.

The five-factor framework gives you that foundation. But knowing your number is just the start. You still need to allocate it wisely across channels. You need to measure if it’s working and optimize continuously.

Marketing investment is one of the most important decisions you’ll make for your business. Too little, and you slowly become irrelevant. Too much without strategy, and you efficiently go broke. The right amount with the right approach? That’s how companies jump from $1M to $10M to $100M.

Ready to build your marketing investment plan?

Now that you know your target investment, what’s your plan to deploy it effectively? The framework gives you the “how much,” but success requires answering “how” and “where” and “when.”

If the complexity feels overwhelming, you’re not alone. Most companies know they need to invest in marketing but struggle with the execution details. That’s where experience matters.

Want help building a marketing investment plan that matches your specific situation? We’ll review your five factors, benchmark against successful companies in your space, and create a progressive investment roadmap that makes sense for your goals and constraints.

Schedule a consultation to turn your marketing budget framework into a growth engine that actually works.