This is one of the first questions I get asked. "What should I be spending on digital marketing?" The answer is usually "it depends", which is not helpful. Let me give you something more useful.
The right budget is based on three things, your revenue, your customer lifetime value, and what your competitors are spending. There's no one-size-fits-all number, but there are some practical guidelines.
The Percentage Rule
Most small businesses should spend between 5 to 10 percent of their annual revenue on digital marketing. A business doing 100,000 pounds a year should spend 5,000 to 10,000 pounds. A business doing 50,000 pounds should spend 2,500 to 5,000 pounds.
This is across the entire digital effort, not just ads. It includes staff time, agency fees, tools, software, and paid ads.
If you're below this range, you're probably under-investing. If you're above it, you need to be making sure your money is converting to customers.
But What If You're Just Starting Out?
If you're a new business with low revenue, you can't spend 10 percent of nothing. Start smaller. 200 to 500 pounds a month on digital is enough to test what works. As you grow, increase your budget.
Focus that budget on high-impact activities. Google Business Profile optimisation, Google Ads or Meta Ads during key seasons, basic local SEO work. Don't spread it thin across every channel.
Customer Lifetime Value Matters More Than Revenue
A dentist who gets a new patient worth 2,000 pounds over a five-year relationship can afford to spend 500 pounds to acquire that patient. A restaurant where the average customer spends 50 pounds once can't afford to spend 100 pounds acquiring them.
Think about what a new customer is actually worth to you. If they're worth a lot, you can spend more. If they're low-value transactions, your budget needs to be lean and focused on efficient channels.
What Does That Budget Break Down To?
Let's say you're a small business doing 80,000 pounds a year. You should aim for 4,000 to 8,000 pounds annually on digital. Here's a realistic split:
- 500 to 1,000 pounds on tools (email, CRM, analytics, website hosting)
- 1,000 to 2,000 pounds on Google Ads or Meta Ads (testing and volume)
- 1,500 to 3,000 pounds on agency support or staff time for strategy and optimisation
- 1,000 to 2,000 pounds on website maintenance and basic SEO work
The actual breakdown depends on your business. A restaurant might weight toward paid ads. A dentist might weight toward Google Business Profile and review management. A B2B service might weight toward content and SEO.
The Minimum Viable Budget
If you're absolutely starting from scratch with a tight budget, here's the minimum you need:
- 300 pounds one-time for a proper Google Business Profile audit and optimisation
- 50 to 100 pounds per month for basic tools (email, analytics, scheduling)
- 200 to 400 pounds per month on paid ads to test what converts
That's 2,700 to 5,200 pounds per year. It's bare bones, but if you execute it well, it works. Expect slower growth, though. You can't compete with businesses spending more.
When You Should Spend More
Increase your digital budget if you're in a competitive market. If there are five other dentists in Newbury and everyone's running ads, you need to match that spend or you'll lose to them. If you're the only solicitor in your area, you can spend less.
Increase your budget if your customer lifetime value is high. A customer paying you 10,000 pounds justifies spending 1,000 or 2,000 pounds to acquire them. A customer paying 100 pounds doesn't.
Increase your budget if you're in a growth phase. Sometimes you need to spend more upfront to build momentum. Once you have consistent customers and referrals, you can reduce paid acquisition spending.
Measure It
Whatever you spend, you need to know what you're getting for it. Call tracking, conversion tracking on your website, customer surveys. Know which channels are bringing customers and which are wasting money.
A business spending 5,000 pounds but getting no customers is worse off than a business spending 2,000 pounds and converting well. Spend less but measure everything.
Not sure what you should be spending?
A £199 audit will show you what your competitors are spending, what benchmark your industry is at, and recommend a specific budget for your business. Let's get this right.
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