Marketing budgets fail in two predictable ways: they are either plucked from thin air ("let's spend what we spent last year, plus a bit") or they are set so cautiously that marketing can never prove itself. Neither approach tells you whether you are spending the right amount, and neither gives your finance team any confidence that the money is working. A proper marketing budget is not just a number — it is a reasoned argument that connects spending to revenue.
This guide walks through how to build that argument: the percentage-of-revenue benchmarks UK businesses actually use, how to split the budget across channels, how to handle seasonality, and how to present it so finance says yes. If you would like help turning a budget into a plan, our digital marketing team does this with clients regularly — contact us to talk it through.
Start with revenue, not with channels
The most defensible way to set a marketing budget is as a percentage of revenue — either past revenue or targeted revenue. This ties spending to the size of the business and to growth ambitions, which is exactly the language finance teams speak. The widely used benchmarks, drawn from long-running industry surveys, look roughly like this:
- 1–3% of revenue: maintenance mode. Enough to keep the lights on — a basic website, some local presence — but not enough to grow. Common in businesses that rely on referrals and repeat work.
- 5–8% of revenue: the typical range for established SMBs that want steady growth. Enough for one or two serious channels plus the basics.
- 8–12% of revenue: aggressive growth. Appropriate for businesses entering new markets, launching products, or playing catch-up against stronger competitors.
- 12%+ of revenue: usually startups buying growth, or businesses in hyper-competitive sectors where visibility is existential.
These are starting points, not rules. A solicitor with high-value cases and strong referrals might grow perfectly well at 4%. An e-commerce brand fighting national competitors might need 12% just to be visible. Use your revenue target for the coming year rather than last year's actuals — budgeting against the business you want to be keeps marketing aligned with ambition.
Work backwards from your growth target
Percentages give you a sanity range. Working backwards from the target gives you a number you can defend line by line. The maths is simple:
- Set the revenue target: say, £1.2 million, up from £1 million.
- Subtract revenue you can count on without marketing: repeat business, contracted work, reliable referrals. Say £700,000.
- The gap — £500,000 — is what marketing has to generate.
- Divide by your average customer value to get the number of new customers needed. At £2,500 average, that is 200 customers.
- Multiply by your cost per acquisition (or a realistic estimate). At £250 per customer, the budget is £50,000 — 4.2% of target revenue.
If the resulting number is far outside the benchmark range, something in your assumptions needs attention — usually the cost per acquisition estimate or the average customer value. This exercise forces honest thinking, which is precisely why finance teams respect it.
How to split the budget across channels
Once you have the total, resist the urge to divide it equally. Allocate by role in the customer journey and by evidence of return:
- Capture existing demand first (30–40%): search advertising and SEO. These target people already looking to buy — the highest-ROI spend for most businesses. Our guide to PPC budget planning covers the paid side in detail.
- Build future demand (20–30%): content, social media, email marketing. Slower to pay back, but this is what reduces your cost per acquisition over time.
- Create awareness where needed (10–20%): paid social, display, PR, events. Justified when you are new, launching, or in a market where nobody knows you exist.
- Keep the machine running (10–15%): website maintenance, tools, analytics, CRM. Unglamorous and non-negotiable.
- Hold back a test fund (5–10%): money explicitly for trying new channels. Without it, you will still be running the same playbook in three years while the market moves on.
Review the split quarterly. Channels earn their share by performing — shift money toward what is working and be honest about what is not.
Plan for seasonality
Many UK businesses have strong seasonal patterns — retail peaks before Christmas, trades businesses surge in spring, B2B dips in August and December. A flat monthly budget ignores this and wastes money twice: overspending in quiet months when nobody is buying, and underspending in peak months when demand is highest.
Look at two or three years of your own sales data and shape the budget to match, weighting spend slightly ahead of the peak (people research before they buy). Keep a reserve for opportunistic moments — a competitor stumbling, a sudden press opportunity — because rigid annual budgets cannot respond to luck, good or bad.
Seasonality also affects what you spend on. January might be the month for brand and content investment when auctions are cheap; November might be all hands on paid search. The budget is not just a number per month — it is a plan for the year.
Presenting it so finance says yes
A budget gets approved when it reads as an investment case, not a wish list. Structure your proposal around four things: the revenue target and the gap marketing must fill; the assumptions behind your cost-per-acquisition figures, with last year's actuals where you have them; what you will stop or reduce to fund what is new; and how you will report — which metrics, how often, and what triggers a reallocation.
Commit to a review rhythm in the proposal itself: monthly performance check-ins, a proper quarterly review with reallocation rights. Finance teams do not expect certainty; they expect accountability. A budget that says "here is what we will spend, what we expect it to produce, and when we will tell you if it is not working" is a budget that gets signed.
One final honest note: the first year of proper budgeting is the hardest, because your assumptions are guesses. By year two you have actual cost-per-acquisition data by channel, and the whole exercise gets easier and more accurate. Start now, measure honestly, and let the data do the arguing for you next year. If you want a hand building the plan behind the numbers, take a look at our digital marketing services or contact us.
FAQs
What percentage of revenue should a small business spend on marketing?
Most UK SMBs aiming for steady growth spend 5–8% of revenue on marketing. Businesses in maintenance mode spend less (1–3%); those pushing hard for growth spend more (8–12%). Work backwards from your growth target as well — the percentage is a sanity check, not the whole answer.
Should my marketing budget be based on last year's revenue or this year's target?
This year's target. Budgeting against last year's revenue funds last year's business. Budgeting against the target aligns marketing spend with where you are trying to go — which is the entire point of the exercise.
How much should I keep back for testing new channels?
Around 5–10% of the total budget. It is small enough not to threaten core performance and large enough to run a meaningful test. Without a protected test fund, experimentation always loses to the urgent demands of existing channels.
How often should I review my marketing budget?
Review performance monthly and reallocate quarterly. An annual budget set in January should not be carved in stone — markets move, channels change, and money should follow results. Build the reallocation right into the original proposal.
What if I cannot afford the budget the maths says I need?
Then adjust the target, not just the budget. If the numbers say £50,000 buys the growth you want and you have £25,000, either accept slower growth or find a cheaper cost per acquisition — usually through better conversion rates or more efficient channels. Pretending £25,000 will do £50,000 of work helps nobody.
