A percentage is not a marketing strategy
Ask how much a business should spend on marketing and you will usually hear a percentage of turnover. It sounds decisive. It is also too blunt to be useful on its own.
Two businesses with the same revenue can need very different levels of investment. One may be protecting a well-established position. The other may be entering a new market, rebuilding its proposition or creating a marketing function for the first time. Applying the same percentage to both ignores the job the money has to do.
A sensible budget begins with the commercial decision: what must change in the business, by when, and what role should marketing play in making that happen?
Start with the commercial job
Marketing investment should follow the growth plan. If the priority is to retain valuable customers, the budget may lean towards customer insight, CRM and service communication. If the business needs to create demand in a new segment, it may need research, positioning, sales enablement and sustained distribution before the first campaign can perform.
Write the job down in plain English. For example: build a qualified pipeline for a new service; support two new locations; reduce dependence on one customer segment; or make a complex offer easier for buyers to understand.
If the leadership team cannot agree that sentence, it is too early to divide money between channels.
Separate three different costs
SME budgets often become confusing because three kinds of investment are treated as one number.
- Leadership and capability. The people who set the direction, understand the customer, manage partners, make decisions and keep delivery connected.
- Assets and infrastructure. The website, CRM, brand system, content, data, sales materials and other things the business needs to operate well.
- Distribution and activation. Paid media, events, partnerships, outbound, PR and the work that puts a strong proposition in front of the right people.
Underinvest in capability and the business can spend efficiently on the wrong priorities. Underinvest in assets and paid activity sends people towards a weak experience. Underinvest in distribution and good work remains largely invisible.
Work backwards from the sales economics
The next step is not to guess a percentage. It is to understand how growth happens.
What is a new customer worth in gross contribution, not just revenue? How long is the sales cycle? What proportion of genuine opportunities normally convert? How much capacity does the business have to fulfil new demand? Which part of the journey is currently limiting growth?
Those answers create a practical boundary. A long, relationship-led B2B sale needs a different investment pattern from a high-frequency consumer offer. A business with spare operational capacity can make a different decision from one that is already stretched.
The budget should reflect the economics and the constraint, not a benchmark borrowed from a company with a different model.
Choose the investment mode
Most SME marketing budgets are trying to do one of four jobs.
- Maintain. Protect demand, customer relationships and a credible market presence.
- Improve. Fix a known weakness such as positioning, lead quality, conversion or customer retention.
- Grow. Create additional demand in an existing market with a proven offer.
- Change. Support a new market, acquisition, launch, repositioning or other material business transition.
The last two normally require more than a marginal increase in media spend. They often need new decisions, capability and assets before scale is sensible.
Budget for a complete system
A common failure is to fund the visible activity and leave the connecting work unfunded. The business buys media but not useful creative. It commissions content but has no distribution plan. It hires an agency but no one inside the business can set priorities or judge the work.
This is one of the points where senior marketing leadership changes the economics. One person owns the complete plan, makes trade-offs across internal and external costs, and stops every supplier being managed as a separate project.
For some businesses that responsibility belongs with a strong internal lead. For others, a fractional CMO provides the senior ownership without adding a full-time executive role.
Review the decision, not only the spend
A budget is a hypothesis. Management should know what the investment is expected to change, what evidence will appear first and what would cause the plan to be adjusted.
Review leading indicators such as qualified demand, customer response and sales use alongside lagging outcomes such as revenue, margin and retention. Look for the point where the system is breaking down. More traffic is not progress if the proposition is weak. More leads are not progress if sales cannot convert them.
The useful monthly question is not simply whether the budget was spent. It is what the business learned and where the next euro can make the biggest commercial difference.
Five questions for the leadership team
- What business outcome is marketing expected to influence?
- What capability, assets and distribution does that outcome require?
- What do the sales economics allow us to invest responsibly?
- Who owns the choices across the complete budget?
- What evidence will tell us to continue, change or stop?
That conversation produces a more credible budget than applying a universal percentage. If you need help turning the commercial plan into those choices, start with the business, not a list of marketing tasks.