If you’re a CEO, MD or owner of a growing SME, this question probably comes up at least once a year. Usually at budgeting time, often in the middle of a difficult conversation.
This article exists to help you anchor that decision properly. To provide realistic guidelines for what marketing budget is sensible for your business size and stage, and to help you compare like with like.
Who this is written for
I’m writing this for UK-based businesses with annual turnover between £5m and £15m.
At this stage, most companies:
- Have a proven product or service
- Still rely heavily on sales effort, relationships, or founder energy
- Feel they should be getting more from marketing
- Have tried a mix of junior marketing hires, agencies or freelancers with mixed results
Crucially, this is the stage where marketing needs to shift from supporting activity to driving growth, costs accumulate, and investment decisions become a lot harder.
Three ways to think about what you should spend on marketing
There are three sensible lenses you can use to answer this question. Each is useful, but none are perfect on their own.
1. Marketing spend as a percentage of sales
The most common rule of thumb is to look at marketing spend as a percentage of revenue. On this basis the most useful benchmarks typically come from a mix of Office for National Statistics (ONS) data, British Business Bank research, and long-running marketing surveys from Deloitte, PwC and Gartner that track SME cost structures and growth investment.
For UK SMEs, typical benchmarks sit between 3-7% of sales, depending on business size:
- £5m turnover: ~ 5-7% (£250k to £350k)
- £10m turnover: ~ 4-6% (£400k to £600k)
- £15m turnover: ~ 3-5% (£450k to £750k)
These are all-in numbers: to include people, agencies, tools, content, advertising. Everything.
When looking more closely at what those percentages actually represent, it’s interesting to see those ranges are normative benchmarks - i.e. what UK SMEs of that size typically need to invest if they want marketing to impact sales. They are based on observed cost structures of companies that do grow consistently.
So they answer the question:
“What level of investment is normally required to compete and grow at this size?”
Not:
“What are most businesses currently spending?”
So, benchmarks are helpful as a sense-check, but they aren’t ‘what everyone spends’ numbers. They’re ‘what businesses that want marketing to drive growth end up needing to spend’ numbers.
Benchmarks can also feel hard to stick to because marketing costs rarely grow in a straight line. They tend to creep up through a series of small, individually rational decisions, which is how cost structures quietly become inefficient over time.
2. Working backwards from customer acquisition
A more commercial way to think about marketing spend is to start with growth requirements.
Ask yourself:
- How many new customers or orders do we need this year?
- What is the gross profit from a typical new customer?
- What proportion of that profit are we willing to reinvest to acquire them?
For example:
- You need 50 new customers
- Each delivers £20k gross profit
- You’re willing to invest 25% of that to acquire them
That gives you:
- £5k allowable cost per acquisition (CPA)
- £250k total marketing investment (50 x £5k)
This approach forces discipline and links spend to outcomes. The advantage is that businesses using this method tend to have a lot more comfort and confidence in their marketing investment.
If your CPA creeps up, you reduce spend, if the CPA is below your target, you know there’s room to spend more without compromising profitability. It gives you a system to manage rather than a budget to control, and for some there’s reassurance in the logic.
Its weaknesses?
Firstly, it needs reliable measurement, tracking and reporting in place, with a level of robustness and maturity that most SME marketing functions don’t have.
Secondly, when marketing teams calculate and report on their CPA they don’t tend to include their salary costs, so the numbers can be misleading.
But finally and most crucially, the budget setting calculation still doesn’t tell you whether your marketing function is capable of delivering the results at that level.
3. What does an effective marketing function actually cost?
This is the comparison most businesses don’t make. It is the most useful of the three, but also the one that causes the most confusion.
Rather than asking “what can we afford?”, ask:
“What does it cost to run a marketing function that is genuinely fit to drive growth at our size and stage?”
In other words, what are the components of a function that works, and how much does each component typically cost to get right.
As a minimum, a £5–15m business needs:
1. Marketing Leadership
Strategic direction, commercial judgement, prioritisation, ownership of results.
- Often part-time or fractional at this stage
- £30k–£50k equivalent cost
2. Day-to-day management
Planning, coordination, supplier & budget management, measurement, momentum.
- Typically a full-time Marketing Manager (or stretched part-time at the lower end)
- £40k–£65k per year fully loaded (salary, NI, benefits)
3. Tools and subscriptions
CRM, website hosting and maintenance, email, automation, analytics, data and reporting tools.
- Often underestimated, rarely optional.
- £10k–£20k per year
4. Content production
Web, copy, design, photography, video.
- £25k–£50k per year (modest but realistic for professional outputs)
5. Campaign delivery & channel spend
Advertising, paid search/social, events, partnerships - the actual cost of competing in-market.
- £50k–£150k+ per year (depending on ambition)
A realistic minimum
Even at the lower end, this adds up quickly:
- People (leadership + management): £70k–£115k
- Tools & content: £35k–£70k
- Delivery: £50k–£150k
Minimum effective investment: £155k–£335k per year
What you have here is a realistic estimate of the cost to have a marketing operation that functions as it should, and contributes with a level of predictability. You'll notice that a large proportion of the investment is allocated to people and tools - that's because many cases, under-performance isn't due to lack of discretionary spend, but the absence of a properly structured marketing function capable of turning that spend into results.
What most businesses this size actually spend
In practice, many UK SMEs spend well below these ranges, often without realising it.
Typical spend is 1-3% of revenue, with a bias towards the lower end.
So the reality looks more like this:
- £5m turnover: £50k to £150k marketing spend
- £10m turnover: £100k to £300k marketing spend
- £15m turnover: £150k to £450k marketing spend
And when you look closely at how this spend is distributed, the majority use more than half of their marketing investment on one salary.
In fact, there are more than a quarter of a million businesses in the UK (that’s 20% of all businesses who employ people) who have one single marketing employee. One person - responsible for everything - and expected to deliver.
The result is usually an underpowered function: busy, reactive, limited strategic oversight, lightweight delivery, and commercially marginal. Low cost, low contribution.
The opportunity cost of under-investment
If the first uncomfortable truth is most UK SMEs under-invest in marketing, the second is that most UK SMEs simply don’t grow.
In the UK (based on Office for National Statistics business demography data and analysis frequently cited by the British Business Bank):
- Only ~40% grow sales year on year
- Only ~30% grow by 10%
- Only ~10% grow by 20% or more
Think about that for a minute. Most businesses aim to grow by 20% year-on-year, but all things being equal, to achieve that you need to out-perform 9 out of 10 competitors.
And if your marketing function isn’t set up to compete with the top 10% of your market, the implicit opportunity cost is significant.
On a £5m business, a missed 20% growth opportunity is £1m.
On a £15m business, the opportunity cost grows to £3m.
Suddenly, marketing spend isn’t the biggest number in the room.
This also highlights how benchmarking yourself against “what others in our sector are spending” is rarely the safe option it appears to be. It’s usually the fastest route to the middle of the market - and as we’ve seen, the middle either flatlines or goes backwards. The businesses that grow consistently don’t optimise for average; they invest to outperform.
Final thought
The question isn’t whether your marketing budget is high or low, expensive or efficient. It’s whether it’s appropriate for the role you expect marketing to play. When marketing is funded at a level designed for admin or “support”, it will deliver exactly that. When it’s funded as a growth function - with leadership, management, capability and room to compete - it becomes a commercial asset rather than a cost line.
Most frustration with marketing ROI comes from investing just enough to stay busy but not enough to stay effective. Once you anchor your decision to what it actually costs to compete and grow at your size and stage, the right number tends to become a lot clearer.
A common follow-up question at this point is:
“Once a budget is set, why do marketing costs spiral as companies grow?”
I explore that pattern and what it means in practice here: Small Bets vs Big Bets: Why marketing costs spiral in growing SMEs.
If you find these articles and way of thinking useful, you can read more about my background and the type of work I do here.
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