How Much Should a Local Business Spend on Marketing?

By Chase Powell · · Marketing Strategy

"How much should I be spending on marketing?"

I've been asked that question more than any other in 20 years of working with local businesses. Usually it comes right after an owner tells me what they're spending now, and then admits they're not sure any of it is working.

The honest answer is that there's no magic number. But there is a way to land on a number you can defend, measure and adjust. That's what this post is about.

The percent-of-revenue rule, and why it's only a starting point

The most common advice you'll hear is to spend a set percentage of revenue on marketing. You'll see figures anywhere from a few percent up to ten or more, depending on who's talking.

The best-known benchmark comes from Gartner's annual CMO Spend Survey. In its 2026 survey, released in May, Gartner reported that marketing budgets averaged 7.8% of company revenue, up slightly from 7.7% in 2025. That's a real number from a real survey of about 400 marketing leaders in North America, the UK and Europe.

But read the fine print: Gartner says the vast majority of those respondents work at companies with more than $1 billion in annual revenue. That's not a roofing company in Wolfforth or a family dental office on 82nd Street.

So use percent-of-revenue as a sanity check, not a rule. It tells you whether you're wildly under or over. It doesn't tell you what your business actually needs.

Start with what a customer is worth

A better place to start is with your own numbers. Three of them, specifically.

1. What a new customer is worth to you

Not the first ticket. The gross profit you'll make from that customer over the time they stay with you. A plumbing customer might be worth a service call this year, a water heater in three years and a referral to their neighbor. A dental patient might stay with you for a decade.

If you don't know this number exactly, estimate it. A rough number you write down beats a perfect number you never calculate.

2. What you can afford to pay to get one

Once you know what a customer is worth, decide how much of that you're willing to spend to win them. That's your target cost to acquire a customer.

Say a new customer is worth $1,500 in gross profit to you over a few years, and you're comfortable spending a fifth of that to get them. Your target is $300 per new customer. Those are made-up numbers to show the math. Plug in your own.

3. How many new customers you need

Look at your capacity and your goals. How many new customers can your crew, your chairs or your calendar actually handle each month? How many do you need to hit your revenue goal?

Multiply the number of new customers you need by your target cost per customer. That's a budget built from your business, not someone else's average.

Budget for the bucket, not just the water

Here's where most local businesses go wrong. They put every dollar into getting leads, and nothing into what happens after the lead shows up.

If calls go to voicemail, forms sit unanswered overnight and nobody follows up on estimates, more ad spend just pours more water into a leaky bucket. I covered this in Speed to Lead: Why Lubbock Businesses Lose Jobs in the First Hour. Fixing follow-up often does more for your results than doubling your ads.

So when you set a budget, split it into two parts:

  • Getting found: ads, your Google Business Profile, your website, reviews, sponsorships, signs, direct mail.
  • Converting what you get: a CRM, missed-call text-back, follow-up sequences, someone whose job it is to answer leads fast.

The second bucket is usually cheaper, and it makes every dollar in the first bucket work harder.

Where the money usually goes for a local business

Every business is different, but here's the order I generally recommend local owners work through:

  1. The basics that cost little or nothing. A complete, accurate Google Business Profile. A steady habit of asking for and answering reviews. A website that loads fast on a phone and makes it obvious how to call you.
  2. Follow-up and tracking. A CRM, call tracking and an instant response to new leads. If you can't tell where your calls come from, you can't tell what's working.
  3. Paid search. Google ads aimed at people already searching for what you do, in the area you serve.
  4. Awareness. Social ads, sponsorships, radio, direct mail, truck wraps. These can work well, especially in a market like Lubbock where word of mouth and name recognition carry a lot of weight. They're just harder to measure, so they come after you can measure the rest.

Plan for your seasons

West Texas businesses don't have flat years. HVAC lives and dies by the first 100-degree week and the first hard freeze. Roofers see demand jump after a hailstorm. Tax preparers, landscapers, pool companies and retailers near campus all have their own calendars.

Your budget should follow your season. Spend more when demand is high and people are actively searching. Pull back, but don't go dark, when it's slow. Use the slow months to fix your follow-up, collect reviews and get your tracking right so you're ready when the phones light up again.

Signs your budget is off

You're probably spending too little if:

  • Your calendar has gaps you could fill, and competitors with worse reviews are showing up above you.
  • You rely almost entirely on referrals and have no way to turn up the volume when you need to.

You're probably spending too much, or in the wrong places, if:

  • You can't say which channels produced your last ten customers.
  • Leads come in, but your close rate is low or slipping.
  • You're paying for services nobody on your team can explain.

I wrote about how to get those answers in What a Marketing Audit Should Actually Tell You.

What to do this week

  1. Add up what you spent on marketing over the last 12 months. Ads, agencies, software, sponsorships, printing, all of it. Most owners are surprised by the total.
  2. Estimate what a new customer is worth in gross profit over the time they stay with you.
  3. Ask where your last 20 customers came from. Look in your CRM if you have one, or ask your front desk and crew.
  4. Divide your spend by your new customers to get a rough cost per customer. Compare it to what a customer is worth.
  5. Check your follow-up. Call your own number after hours and fill out your own form. If leads are slipping through, fix that before you spend another dollar on ads.

A marketing budget isn't a number you pick once a year and forget. It's a decision you check every month against what's actually coming in the door. Get the math right, plug the leaks, and the "how much" question gets a lot easier to answer.

Want help building a budget around your own numbers? Our MarketTap Blueprint looks at your market, competitors, ads, tracking and follow-up and turns it into a prioritized 90-day plan. Or book a strategy call and we'll walk through where your marketing dollars are going.

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