Notes for owners · Business growth
How much should an SME spend on marketing?
Work the budget backwards from the orders you need, not forwards from a percentage of revenue. Then split it three ways and review it every quarter.
The GullySales team · Updated 15 Sept 2026 · 6 min read
Work it backwards. Decide how many orders you need in the next quarter. Divide by your enquiry-to-order rate to get the enquiries required, then multiply by what an enquiry currently costs you, and you have a floor. Check that number against what a customer is worth to you over a year, and against what you can afford without stress. Percentage-of-revenue rules are a sanity check at the end, not the starting point. Most SMEs that feel they overspend are actually spending enough and wasting most of it after the enquiry arrives.
The calculation, with real numbers
Take the numbers from your own records, however rough.
Suppose you need twelve new orders next quarter. Your sales team converts about one enquiry in eight into an order, so you need roughly one hundred enquiries. Say your advertising produced enquiries at around ₹900 each last quarter, an illustrative figure from your own account. The media floor then works out to about ₹90,000 for the quarter, or ₹30,000 a month.
Now sense-check it. If your average order value is ₹60,000 and a customer typically orders twice a year, twelve new customers are worth roughly ₹14 lakh in the first year. Spending ₹90,000 of media to get that is sensible. If your average order is ₹6,000 and customers do not return, the same spend is not.
If you do not know your enquiry-to-order rate or your cost per enquiry, that is the first problem to fix. It is a measurement problem, not a budget one.
What the percentage rules are actually good for
| Situation | Typical market range as a share of revenue | Why |
|---|---|---|
| Established local service business, steady demand | 2 to 5 per cent | Word of mouth and repeat customers carry most of the load |
| B2B manufacturer with a long sales cycle | 3 to 6 per cent | Exhibitions, collateral and a small paid budget; sales cost sits separately |
| Consumer business in a competitive city market | 6 to 10 per cent | Paid media does the work of a shopfront |
| New product or a new city entry | 10 per cent or more, for a fixed period | You are buying awareness that does not exist yet |
| Business fixing its own basics | Almost nothing on media | Site, profile, reviews and reply time come first |
These are typical market ranges, not GullySales prices and not a promise. Use them the way you use a blood test reference range: to notice when your number is far outside it and ask why.
Split the money three ways
A marketing budget that is one line item cannot be managed. Split it.
People and expertise. Your own marketing salary, or a firm's fee. This buys judgement, planning and execution, and it is the part you should change least often.
Media spend. Google, Meta, LinkedIn, IndiaMART, JustDial, a hoarding, an exhibition stall. This is the part you move monthly based on what produced enquiries.
Production. Photography, video, a website page, a catalogue, a stall design, print. Lumpy rather than monthly, and it usually gets underestimated. A campaign with good targeting and a bad photograph fails on the photograph.
Ask any outside agency to quote in these same three parts, not as one number. Then it is obvious which part to cut when a quarter is tight, and it is almost never the media.
What does this look like for a real business?
For example, a two-branch furniture retailer in Mysuru wanting six more sofa-set sales a month. Its staff close about one walk-in in four, and roughly one enquiry in three becomes a walk-in, so it needs about seventy-two enquiries a month.
At an illustrative ₹350 per enquiry from local search and Meta advertising, that is about ₹25,000 a month of media. Add ₹10,000 a month of amortised production for proper photographs of the room sets, which lifted the enquiry rate more than any targeting change. Add a fixed monthly fee for whoever runs it. The total is a number the owner can hold against six sofa sets, and can argue with at the end of the month.
When you should not increase the budget
Four situations, and all four are common.
Enquiries are not answered within the hour. Doubling the media doubles the number of people who get no reply.
Nobody can say where last month's enquiries came from. Extra money then goes into a channel chosen by feel.
The website does not say what you sell, for whom, at what price band, with a way to get in touch on a phone. Traffic arriving there is paid for twice and converts once.
The sales team has no follow-up routine, so anyone who did not buy on the first call is gone. This is where most SME marketing money is actually lost, after the enquiry, not before it.
What to do next
Write down three numbers from your own records: how many enquiries you got last month, how many became orders, and what you spent. If any of the three is a guess, your first project is a one-page enquiry register, not a campaign. Once you have the three, the budget calculates itself and you can defend it in a management meeting. If you would like help getting those numbers established, book the free audit.