Masoud Azizi
Co-Founder and CMO of Indigo Mars.
The most commonly cited baseline, from the U.S. Small Business Administration, is 7 to 8% of gross revenue for businesses under $5 million a year, with broader small-business ranges running anywhere from 5% to 12% depending on the source. That number is a genuinely useful starting point — and also genuinely incomplete on its own, because a business's stage matters more than any flat percentage. A brand-new business nobody's heard of and an established name defending its position have very different real answers, even at identical revenue.
The Baseline Numbers
Multiple current surveys converge on a similar range: Gartner's CMO Spend Survey puts the average marketing budget at roughly 7.7% of company revenue, while the Deloitte/Duke CMO Survey puts it closer to 9.4%. The SBA's simpler, small-business-specific guidance of 7 to 8% for companies under $5 million remains the most commonly cited starting benchmark. Businesses in growth mode, or in highly competitive categories, often push meaningfully higher — 10 to 12% or more.
Why the Percentage Alone Is the Wrong Question
A brand-new business with no name recognition needs to spend more, not less, than an established competitor at the same revenue — often 10 to 20% of revenue in the early stage, because nearly every dollar has to go toward building visibility from zero. An established, well-known business can often spend less as a percentage, since word-of-mouth and existing reputation are doing real work that a new business doesn't have yet. Applying one flat percentage to every business regardless of how well-known it already is misses the actual driver: how much of your customer base already knows you exist.
A Concrete Example
Consider a $1.2 million dental practice budgeting 12% for marketing — a reasonable figure for a competitive local healthcare category. That's $144,000 a year, or $12,000 a month: enough for a genuine SEO retainer running alongside a real Google Ads budget, not one or the other. Seeing the actual dollar figure behind a percentage, rather than just the percentage itself, is usually what makes a budget conversation feel real instead of abstract.
The Los Angeles Factor
Los Angeles pushes realistic marketing budgets toward the higher end of these national ranges, for the same reason ad costs run higher here than the national average: more competition for the same customers in a large, dense market. A business in a less competitive city might comfortably sit at the lower end of the SBA's range; a Los Angeles business in a genuinely competitive category — legal, medical, home services — often needs to plan closer to 10 to 12% just to be seen at all against the volume of competitors bidding for the same attention. Before budgeting for outside help, it's worth asking whether you're at that stage yet: DIY Marketing vs. Hiring an Agency: How to Know Which Stage You're At.
A Better Way to Think About It Than a Flat Percentage
Rather than starting from a percentage, work backward from an actual customer goal: how many new customers do you need this month, what's your realistic conversion rate from lead to customer, and what does that imply about how many leads you need to generate. That calculation, multiplied by a realistic cost per lead for your category, produces a budget grounded in your actual goal rather than an industry average that may or may not apply to your specific situation. Once you have a budget in mind, here's what to actually ask before choosing who to spend it with: Questions to Ask Before Hiring a Marketing Agency in Los Angeles. The real number underneath this whole calculation is what a customer is actually worth — see How to Calculate Customer Lifetime Value.
Where to Go From Here
If paid advertising is where most of that budget is headed, see the specific breakdown by platform in How Much Should a Business Spend on Ads in LA?, or get the complete picture in Paid Advertising for Los Angeles Businesses: Google, Meta, and TikTok.
Not sure what the right number actually is for your specific business? Get in touch — we'll work it out from your real numbers, not a generic percentage.
