Performance marketing · September 28, 2026 · 6 min read
How much should you budget for marketing?
The references we use with partners to size a marketing budget by company profile, what an in-house team really costs next to an agency, and the line items that sit outside both.
The context
Almost every partnership we begin starts with the same question, asked in different words: how much should we be spending? It is rarely a question about marketing alone. It is a question about how fast the business intends to grow, how crowded its market is, and how much of the work it wants to own.
There is no universal number, and anyone who offers one without asking about your company first is selling something. What there is, is a set of references that make the conversation concrete. These are the ones we share with partners, drawn from nearly two decades of building marketing operations for startups, legacy businesses and everything in between.
Three profiles, three percentages
We size a budget as a share of annual revenue, and the share depends on where the company is in its life and how hard it has to fight for attention.
| Company profile | Years operating | Share of annual revenue | At $1MM revenue | At $3MM | At $5MM |
|---|---|---|---|---|---|
| Startup, direct-to-consumer, in growth mode | 0 to 3 | 10–15% or more | $100,000–150,000 | $300,000–450,000 | $500,000–750,000 |
| Established, in a competitive market | 3 to 10 | 7–10% | $70,000–100,000 | $210,000–300,000 | $350,000–500,000 |
| Legacy, conservative growth | 10+ | 3–5% | $30,000–50,000 | $90,000–150,000 | $150,000–250,000 |
The published benchmarks sit in the same range. The U.S. Small Business Administration recommends 7–8% of revenue for businesses with under $5MM in sales and net margins of 10–12%. Gartner's 2025 CMO Spend Survey, weighted toward companies with more than $1B in revenue, puts the average at 7.7%, with half of companies at 6% or less. The Deloitte and Duke CMO Survey, which includes more smaller companies, put it at 9.4% in 2025. Smaller and younger companies sit higher, which is why the first row does.
The logic is straightforward. A young brand is buying awareness it does not yet have, building channels from zero and learning what converts, so it spends a larger share of a smaller revenue. An established business in a contested category spends to hold and take share. A legacy business with a loyal base spends to maintain visibility and modernise, and can afford to move more slowly.
The profile matters more than the revenue. A ten-year-old business entering a new market, or facing a wave of well-funded competitors, belongs in the second row or even the first, whatever its age. We saw this with a multi-generational auto storage business in San Diego that was losing share to newer players: its budget had to behave like a challenger's before it could behave like a leader's again.
The in-house arithmetic
The second question follows quickly: should that budget pay for a team of our own, or for an agency? The honest answer starts with what a hire actually costs, which is always more than the salary.
Here is the sample comparison we walk partners through: a single junior in-house hire against an experienced agency team at a comparable scope of work. The first year carries one-time costs, so we show it next to the second. Rows marked as assumptions are ours, from what we see across partners; replace them with your own.
| Annual expense | In-house, year one | In-house, year two | Agency, each year |
|---|---|---|---|
| Base pay, or agency retainer | $50,000 | $50,000 | $75,000 |
| Payroll taxes: Social Security, Medicare, unemployment (about 8%) | $4,000 | $4,000 | none |
| Health insurance, employer share of single coverage | $7,900 | $7,900 | none |
| Retirement match (4%) | $2,000 | $2,000 | none |
| Recruitment (assumption: 20% of salary, once) | $10,000 | none | none |
| Management time (assumption: 10% in-house, 5% agency) | $5,000 | $5,000 | $3,750 |
| Vacation productivity loss (4%) | $2,000 | $2,000 | none |
| Ramp-up productivity loss (assumption: 20%, first year) | $10,000 | none | none |
| Specialist vendors the hire cannot cover (assumption: 50%) | $25,000 | $25,000 | none |
| Consulting the hire still needs (assumption: 50%) | $25,000 | $25,000 | none |
| Total | $140,900 | $120,900 | $78,750 |
In this sample the agency route costs $62,150 less in the first year and $42,150 less in the second, once recruitment and ramp-up are behind you. Benefits alone are a real cost: across private industry they make up about 30% of what employers spend on compensation. But the largest differences are the costs that rarely appear in a hiring plan: the time it takes to recruit and manage someone, the months before they are fully productive, and the specialists you still have to pay because one person cannot be a designer, a media buyer, a developer and an analyst at once.
That last point is the real argument. A single hire gives you one skill set. A team gives you many, and the bench does not leave when one person does.
The costs outside the team
Whichever way you staff it, some costs sit outside the people. These are the minimums we plan for, per year:
- Media: photography, video and animation, from $10,000
- Advertising: the spend itself with the ad networks, from $12,000
- Email platform: for example Mailchimp, up to 5,000 contacts, about $1,200
- Website hosting and domain: about $300
That is about $23,500 a year before events, printing, special website projects or integrations, each of which depends on the plan. Leaving these out of the budget is the most common reason a well-staffed team underdelivers: the people are in place, but there is nothing to put in front of the audience and no money to put it there.
The principle
A marketing budget is not an expense line to be minimised. It is an allocation decision: how much of this year's revenue should go into the growth of next year's. The percentages above make the size of that decision visible, the in-house comparison makes the staffing trade-off honest, and the outside costs keep the plan from starving its own channels.
The partners who get the most from their budget are the ones who decide the profile first, the staffing model second, and the channels third, in that order. The ones who struggle usually started with a channel, found an agency or a hire to run it, and backed into a number.
What to do next
Start by placing your company honestly in one of the three profiles, with your market in mind as much as your age. Multiply. Then price your staffing both ways, with every line in the table above, not only the salary. Finally, reserve the outside costs before you allocate anything to people.
If the numbers you arrive at look very different from what you are spending today, that gap is the conversation worth having. We are happy to have it with you.
Sources
- U.S. Small Business Administration guidance on marketing budgets for small businesses, 7–8% of revenue.
- Gartner 2025 CMO Spend Survey, May 2025.
- The CMO Survey by Deloitte and Duke University, 2025.
- KFF 2025 Employer Health Benefits Survey: average single premium $9,325, workers contribute $1,440.
- U.S. Bureau of Labor Statistics, Employer Costs for Employee Compensation, December 2025: benefits 29.9% of private industry compensation.
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