October arrives and every SME in the country starts having the same internal argument. "How much should we spend on marketing next year?" The finance person wants to cut it. The sales person wants to increase it. The MD splits the difference and nothing changes.
This conversation goes wrong for the same reason every year: marketing is still treated as a cost, not an investment. And costs get cut. Investments get measured, optimised, and scaled.
The difference between the two is accountability. If you can say "we spent £24,000 on marketing this year and it generated £180,000 in new client revenue," that's not a cost. That's a 7.5x return. Nobody cuts a 7.5x return. But if you can't say that, if marketing spend disappears into a fog of "brand awareness" and "market presence" with no connection to revenue, then yes, the finance person is right to sharpen the knife.
The typical SME marketing budget follows one of two patterns.
Pattern one: too much, too early. January arrives, energy is high, and the business commits to an ambitious marketing plan. New website, LinkedIn ads, email campaigns, content production, a trade show in March. By April, the budget is spent, the results are modest because nothing had time to compound, and marketing goes quiet for the rest of the year. The business concludes that "marketing doesn't work for us."
Pattern two: too little, all year. The business allocates £500 a month to marketing, which covers a basic email tool and occasional social media posts. Nothing meaningful happens because the budget doesn't support anything meaningful. The results confirm the expectation: marketing doesn't work. A self-fulfilling prophecy.
Both patterns share the same flaw. They treat marketing budget as a fixed cost to be minimised rather than a variable investment to be optimised.
Before deciding how much to spend, you have to know what a client is worth.
Take a managed services business with an average client value of £18,000 per year and an average retention of 3 years. Each new client is worth £54,000 in lifetime revenue. If the gross margin is 60%, each new client contributes £32,400 to the business over their lifetime.
Now ask: what would you pay to acquire one of those clients? If your marketing cost per acquisition is £3,000, your return is 10.8x. Spend £3,000 to make £32,400. That's an investment any rational business would scale up, not cut.
The businesses that get marketing budgets right work backwards from these numbers. How many new clients do we want this year? What does each cost to acquire? What's the total investment required? And what's the expected return?
This removes the emotion from the conversation. It's not about whether the MD "believes in marketing." It's about whether the numbers justify the spend.
For a B2B SME doing outbound marketing (email campaigns, telemarketing, content, prospect data), a reasonable benchmark for campaign costs is between £2,000 and £5,000 per month, depending on scope and volume.
That typically covers: prospect data acquisition and verification, email platform and sending infrastructure, content creation (emails, case studies, or articles), campaign management and reporting, and either telemarketing or some form of direct outreach.
Below £2,000 a month, you're spreading too thin to do anything properly. Above £5,000, you're in territory where a full-time marketing hire might be more cost-effective (though the comparison isn't straightforward, since an agency brings tools, data, and experience that a single hire typically doesn't).
The point isn't the specific number. It's that marketing has a minimum effective dose. Below that dose, you're spending money without getting results. At or above it, the spend starts generating measurable returns.
The right time to increase marketing spend is when you have data showing positive returns and capacity to handle more clients.
If your current marketing is generating meetings at £600 each and you're closing 25% of those meetings, your cost per client is £2,400. If each client is worth £30,000 over their lifetime, you should be spending more. The maths supports it. The constraint isn't budget. It's whether you can service the additional clients.
This is the conversation most SMEs never have, because they've never tracked the numbers closely enough to know their cost per meeting, cost per client, and client lifetime value. Without those numbers, every budget conversation is guesswork.
Equally, the data might tell you to redirect rather than reduce. If your email campaigns are generating meetings at £400 each but your LinkedIn ads are generating meetings at £1,800 each, the answer isn't "cut the marketing budget." It's "move the LinkedIn budget into email."
Not every channel works equally well for every business. The point of tracking ROI by channel is to identify what's working, do more of it, and stop doing what isn't. That's optimisation, and it only works when you have the data.
I've worked with clients who were spending £3,000 a month across four channels and getting all their results from one. Consolidating the budget into the performing channel doubled their output without increasing their spend by a penny.
If you're reading this during budget season, here's a practical framework.
Calculate your client lifetime value. Not revenue, but gross profit over the average client relationship.
Calculate your current cost per acquisition. Total marketing spend divided by new clients acquired. If you don't know this number, that's problem number one.
Set a target acquisition cost. A reasonable rule of thumb: your cost to acquire a client should be no more than 10% to 15% of their first-year revenue. Tighter industries might need 20%. Looser ones might manage 5%.
Work backwards from your growth target. Want 12 new clients next year? At £3,000 per acquisition, that's a £36,000 marketing budget. Divide by 12 and your monthly spend is £3,000.
Allocate by channel based on what's already working. If you have performance data from this year, use it. If you don't, start with a mix, measure everything, and reallocate quarterly based on results.
The budget conversation isn't really about money. It's about confidence. Confidence that the spend will produce measurable results. Confidence that those results will be tracked and reported honestly. Confidence that the investment will be optimised over time.
If you don't have that confidence, the problem isn't the budget. It's the lack of measurement. Fix the measurement first. The budget conversation gets a lot easier when everyone in the room can see the numbers.
Martin Dugan, AA2
