The honest answer: there is no magic percentage
You will see many rules of thumb online. Even the US Small Business Administration says there is no hard and fast answer, while pointing out that many businesses use a percentage of revenue as a guide. Figures quoted in its article range from about 1% of revenue on advertising to close to 8% of revenue on marketing overall, depending on the source and industry.
A more useful approach for a small local business is to work out what a new customer is worth, decide what you can afford to pay to win one, and start with the free fixes before spending anything.
Step 1: Know what a customer is worth
Estimate how much a typical customer spends with you over a year. A café regular might spend $8 twice a week, which is over $800 a year. A cleaning client might book six times at $160, or $960. A one time furniture buyer might spend $1,200 once.
That number tells you how much it is sensible to spend to win a customer. If a regular is worth $800 a year, paying $40 to win one is easy. If a customer buys once for $60, it is not.
Step 2: Spend nothing first
Before paying for ads, fix the leaks that cost only time. A complete Google profile, replies to every review, a clear website button and a habit of asking for reviews often bring more customers than a first ad budget would. Our one afternoon audit walks through them.
Step 3: A simple starting split
Once the basics work, a sensible split for many local businesses looks like this. Treat it as a starting point, not a rule.
| Area | What it pays for |
|---|---|
| Keeping customers | Email or text reminders, loyalty cards, small thank you gestures |
| Being found | Google profile upkeep, a fast website, local listings |
| Content | Photos, short videos and templates so you can post consistently |
| Paid ads | Small, focused tests once the steps above are in place |
Step 4: Measure one number per channel
Ask every new customer how they found you, and write it down. It sounds old fashioned, but it beats guessing. After two months you will know which channels bring customers and which only bring likes.
Review your budget every quarter. Move money from what is not producing customers to what is.