A key part of planning out your small business’s marketing for 2026? Creating a marketing budget. Marketing budgets are not just about spending money, but about strategically investing in your small business’s growth, and ensuring marketing remains a priority. So don’t skip this episode!
This week on the S.O.B. (Small Owned Business) Marketing podcast, Vivian and I are discussing marketing budgets, why they are important, and the different types of marketing budgets that are available for you as a small business.
Marketing HOT TAKE: Not creating a marketing budget does NOT save you money! It just prevents you from being consistent and investing in your business. Disagree? Let us know in the comments.
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Chapters:
00:00 Welcome to our Marketing Cult! Please Leave Us a Review
04:56 The Importance of a Marketing Budget
08:22 Consistency and Accountability in Marketing
13:55 Types of Marketing Budgets Explained
15:30 Percentage of Revenue Budgeting Method
20:32 Fixed Amount Budgeting Method
25:11 End of Month Allocation Method
29:09 TLDL; Marketing Budgets for Small Businesses
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*Intro* Chelsea: Hey everyone and welcome to the S.O.B. Marketing podcast. Where we celebrate to S.O.B. you are, and if you haven't figured it out yet - we mean Small Owned Business, we don't mean S.O.B...
Vivian: Listen, we know that as a small business owner you are working hard on the daily to keep your business fully operational while trying to promote it. And while some days it may feel like the business is owning you, if we're being honest with each other I bet you would admit that you wouldn't give up the insanity for anything.
Chelsea: Our commitment here at the S.O.B. Marketing podcast is to give you the real talk, what works when it comes to advertising, marketing, and promoting your business. And then what doesn't really work.
Vivian: And Chelsea and I promise to always keep the conversation real.
*Beginning of Episode*
Chelsea: Welcome back, you SOBs, you small-owned businesses. We would never call you guys names. Before we get started, really quick reminder, make sure you're following us, and don't forget that we have a TLDL section. TLDL, Vivian, that means too long, didn't listen. I know you were wondering. You know, after all these years, she still hasn't gotten it.
Vivian: I can't keep my acronyms straight. That's true.
Chelsea: So TLDL. There's a chapter at the end of this episode where I give you a brief summary about what we talked about today because you are a small business owner. You might be strapped for time and you can't listen to this entire episode now. Okay, I'll give you a brief summary. But when you get the chance, go back and listen to this entire conversation because you're going to want to because Vivian, today we are talking about the very popular marketing budget.
Vivian: Yes, and before you turn this off.
Chelsea: Yeah, seriously.
Vivian: We are doing this because we do understand that budgeting is probably one of the hardest things to do, especially for small business owners, because you could be at very different stages of your business year to year. Okay. Whether you're starting out, whether you're three to five years in, or whether you've been doing this for over a decade. It all kind of requires a little bit of a mindset shift around how you go about planning to spend those dollar bills y'all on your marketing. We want to have the conversation now in preparation for the new year, 2026 because even if you're not taking action today, we want it to be in the back of your mind so that you feel confident going into the new year about how you're going to approach your budgeting.
Chelsea: Absolutely, and that is why you need to be following because for this month of December, all of our episodes are going to be focused on ways that you can prepare for 2026.
Vivian: Not 20 20 cents.
Chelsea: So I think last week's episode was Year-end review. Next week we're going to do marketing plan. We're going to have a fun Christmas one. But the point is we're trying to prepare you guys for the new year so you feel confident going into 2026.
Vivian: Yeah. I do want to share that if you guys are anything like me and this year has felt a little bit of a wild card, like maybe you're like, what happened this year? We need to regroup and move into the new year a little more organized, prepared, and more than anything, just understanding that the better organized we are, the more opportunities we'll be able to jump on because we're steadfast and we got a game plan together.
Chelsea: So basically, we're here to help you guys, all together we're going to get our sh** together.
Vivian: I mean, those are big lofty goals. I'm how old now? I'm going to be 43 here soon at the end of the month and I have yet to get my sh** together and I'm kind of hoping I never do.
Chelsea: Okay, that's good to know. So I have more than 15 years to get my sh** together. Perfect.
Vivian: That's right. You guys, I just want to quickly mention if you're watching or if you don't know, you can always watch these episodes on YouTube and you'll see a very special guest in the background.
Chelsea: Or on Spotify.
Vivian: Or on Spotify. A very special guest in the background today. My little Zuesy-goosy. My puppy is in the room. He was feeling, I think, a little, he just needed a little TLC today. So he decided he was going to sit in on the episode.
Chelsea: He did. Okay, Vivian, let's get started with the TL...not the TLDL. With the marketing hot take. *Pew, pew, pew, pew, pew, pew, pew, pew, pew*
Vivian: I think you added a few pew pews in there.
Chelsea: I did. It's to make up for the fact that I wanted to start with the TLDL. So my marketing hot take for this week is not creating a marketing budget is not going to help you save money.
Vivian: Yeah. So I'm assuming you think that part of the reason that people may not sit down and actually think about budgeting for their marketing initiatives is because they think that means I'm already going to be in the negative because I'm planning on spending my dough.
Chelsea: Exactly. Let's say you set a marketing budget and then you're like, I'm going to spend less than my marketing budget because that means I'm saving money. That's not you saving money. That's not a good goal. That's just you limiting your business's growth.
Vivian: Okay.
Chelsea: She's thinking about it.
Vivian: Yeah. I will agree with you on that because I do think having a marketing budget is a smart idea and regardless or depending on where you're at, if your marketing budget for the year is $2 because you're just getting started or if your marketing budget is $50 because you're a little further ahead in the game, then you're right. If you allocate that money, that is a commitment of a reinvestment back into your business. I do agree with your marketing hot take today. Shocking. Two episodes in a row.
Chelsea: I know. This is great. I need to make sure that I come up with a crazy one next week so you shut me down. Okay, Vivian. Where do you want to start this conversation with marketing budgets?
Vivian: All right. So let's first talk about why you need, let's make the case for why you need a marketing budget because I will say, small business owners, I say this with all the love in the world because I am included. We like doing things by, what do they, what's that phrase? By the seat of our pants.
Chelsea: Yeah.
Vivian: Okay. We do like surprises, excitement, stress, all of these things. I think we're just maybe a little better equipped for, our personalities are, because we do own a small business. We get used to living in a lot of ambiguity and maybe it's not that big of a deal. We're like, I can figure my budget out as I go. But to your point earlier with the hot take, it does mean that you are less prepared to take up opportunities that may come your way that are perhaps unplanned throughout the year. Knowing your budget, setting a budget is going to help you with understanding where you're at throughout the year in your business. Also maybe what funds you have available.
Chelsea: Yeah. I think a marketing budget, from my perspective, it's the thing that keeps marketing at the forefront of your mind as a small business. As a small business owner, you've got 20 million things going on, right? Marketing isn't always something that you're thinking of, but when you have a specific set of money set aside for marketing, that kind of forces you to keep an eye on marketing initiatives that you can, you know, opportunities that you can take advantage of and it keeps it in your mind because it's easy to forget.
Vivian: Yeah. I love that you brought this in particular up because you guys, the month goes by fast. Okay. Any month, January through December goes by very fast. When you are knee deep in running a business, trying to maintain your staff if you have staff, trying to find events to go to.
Chelsea: I am very difficult to maintain.
Vivian: I mean, yes, my one staff member is extremely difficult to maintain. But the thing is, a real life example of this is in my other position, we do have a pot of money that we will utilize to promote certain healthcare professionals. So every month there is a sense of accountability whenever the accounting team or somebody checks in and says, hey, out of this pot of money, how much did you use the last four weeks? Because we're looking at the numbers. Similarly for you, this could be effective.
Chelsea: Can we also, Vivian, talk about the fact that having a marketing budget will make you be consistent? Consistency. It's the thing we talk about the most in marketing that is also the thing that I think everyone struggles with the most.
Vivian: For sure. In different areas. Then also because, like I said, if you don't have that sense of accountability with yourself month to month, before you know it you're going to be four months in and you're going to be like, wait, I did not do any marketing for my business or I haven't spent any money on ads or I haven't signed up for any events. You are correct. It's consistency. It helps you to maintain and to kind of stay on track with that, having that budget in place.
Chelsea: Yeah. It also is great with yes not overspending, because you know it's a budget you can't go over this. But it's also great with I think we already mentioned this briefly but underspending. It's a reinvestment into your small business. You're not saving money you're just not investing in your business.
Vivian: Right and the way to look at this and what we hope we can do if this is your first time listening, strong reason that you should consider subscribing, because what we want to do if we do our jobs right is to empower you to feel like you have a really good handle of determining when you have a positive ROI, return on investment. When you have made a good marketing decision and therefore the next time you go to reinvest into a marketing initiative, sure is this promotion going to cost me $1. Yes. Am I confident though that I have researched it, asked all the right questions, have the data and analytics set up so that I know how far that $1 took me? So we want to be sure that then you know, yes, I can confidently invest this $1 knowing that I'm probably going to get 1.5x, 2x more money from it.
Chelsea: Exactly. Another thing, if you follow us that I hope you learn from us and something that a marketing budget can help you with is experimentation. Marketing is about experimenting and finding the marketing initiatives that work for your small business. A marketing budget is going to help you with that.
Vivian: Yeah, y'all. We don't want you to be stuck in like the 1990s advertising.
Chelsea: Go ahead. What advertising is that?
Vivian: In the 1990s? That would involve probably sign flipping out in front of your store. I'm joking. Blimps, advertising on an air blimp, yeah.
Chelsea: I think that would still work today.
Vivian: I mean, it probably would. But to your point, it's the experimenting. It does encourage that, having a budget in place, because when you have a little more money to spend, like let's say you get to the end of the third quarter and you realize you haven't used a lot of your marketing budget and you're like, wow, what have I been wanting to try that I haven't tried yet? Do I think it would be a good idea?
Chelsea: No, absolutely. I love that.
*S.O.B. Community Ad*
Vivian: This episode of the S.O.B. Marketing podcast is brought to you by the S.O.B. Community. If you are a small business owner that is neglecting your marketing and you feel like you've wasted time and money on marketing help that didn't deliver. Or if you're just craving support from people who actually get what it's like to run and promote a small business, then our membership community is for you. Visit skool.com/sob to sign up today to get instant access and weekly support. That's S-K-O-O-L dot com slash sob.
*End of S.O.B. Community Ad*
Chelsea: Let's talk about the different types of marketing budgets because there are more than one type of budget out there.
Vivian: I know. This is probably going to be the conversation that maybe or the part of the conversation that shocks a little bit of people because what we want to propose to you is the fact that it doesn't matter where you are in your business. There is a type of budget that would fit your small business where you're at today. Okay? So there's no excuse for just saying like, hey, I'm just going to wing it and we'll see. We'll see how much money I spend next year. That doesn't hold you accountable. It doesn't allow you to kind of, prepare for growth of your business. And also it's probably, for the other reasons, consistency, experimentation, all that. It's probably not going to do your business all that well.
So Chelsea though, let's first tell me the names of the three types of budgets that we're gonna talk about.
Chelsea: Okay, so we got percentage of revenue method.
Vivian: Zeus said, no, he does not like that one. Percentage of revenue method in case my dog growled too loudly.
Chelsea: We have end of month allocation method and we have fixed amount method.
Vivian: Yes, they all seem very technical. We're going to explain them. They're not. Once we explain them, you're going to be like, yeah, that makes sense why you would take that approach. So let's start Chelsea where?
Chelsea: Let's start with the one that everyone knows, which is the percentage of revenue method. This is the most popular marketing budget method, the one that everyone knows about. It's best for businesses that have steady revenue. For businesses that know what they're, about what their projected revenue is going to be.
Vivian: So if you're listening to this and maybe this is your first year in business, I would say this is probably not the one you want to go with, unless you have some really strong predictions about how much money you're going to make and that those predictions are actually based on something. Okay. It's not just like, I know I'm going to want to make this much.
Chelsea: Oh I'm totally going to make this much.
Vivian: If let's say you had a business plan that you took to a bank and you got a loan and you secured a loan for $100, $80, something like that. Therefore you have a marketing plan laid out and you know how much money you and the bank are predicting that you're going to bring in. Then I would say it's okay to do that in the first year or two. Otherwise, mostly businesses that have been around, established maybe four, five to seven years, definitely 10 years. You guys-
Chelsea: I was going to say, I would say more 7 to 10 years.
Vivian: I mean, yeah, there is a reason to think that. Just because at least then you understand the market a little better, you understand your circumstances, you have more of that experience under your belt. So you can probably more closely predict what your year to year revenue is. So thinking about that.
Let's say for example, and there's a little caveat here that depending on what, Chelsea just drew an asterisk in the air. Depending on what industry you are in, this percentage, not goal, but threshold kind of changes. Okay. The median of the percent of revenue people put towards their marketing can change.
Chelsea: Let's explain it first.
Normally, this method says you should reinvest or set aside 5% to 7% of your total yearly revenue for marketing. So like Vivian, what you were just saying, it depends on the industry though, right?
Vivian: Right. In the tech industry, for example, if you guys are launching an ad or an app, and that app is your actual product, then you probably are going to be way higher than 5% to 7% of your total revenue for dumping into marketing your business, right? So some industries like tech are usually way higher in the amount of dollars that they set aside to market their product. Industries like healthcare, they have an average, some of them can spend anywhere from 6% to maybe like 9% of their revenue, yearly revenue.
Chelsea: looked it up. Restaurants are usually around 3% to 6%.
Vivian: So the way this would look is let's say right now sitting in December of 2025, you can look, you start to look at what your plans are for 2026 based off of the revenue that you made this year, which you still have a little bit of the year left, but based off of the revenue that you're going to make for the year of 2025, you predict that in 2026, you're gonna increase your revenue by 10%. So then you take that final number, let's just say it's $100, and you say, if I make $100 in revenue, then I am going to set aside five percent of it. So quick math, 5% of $100 would be $5. Okay. So then you plan to spend $5 over the next 12 months in 2026 to promote your business.
Chelsea: Okay, I'm so glad Vivian did the math because I'm not good at quick math.
Vivian: Have you seen that reel that's floating around? There's a reel where basically, and I think it's on TikTok too, where people are worried about their husbands picking up their phone, about what they may find in there, but really I'm worried about this and it shows a calculator and it shows like 18 minus six, like simple math.
Chelsea: No, I've seen the one where it's the men are eating and the women's going for the phone, but the men don't care about them going for the phone. They care about the food. So they're like grabbing the food.
Anyways, let's go to our next marketing budget method, which is going to be fixed amount method. Vivian, do you want to explain this one to everyone?
Vivian: Sure. So the fixed amount method is going to be great if you are a new business owner because there are so many variables that you're just kind of that first couple years you're like, I kind of don't know exactly how much revenue I'm going to be bringing in. But what you're doing is at the beginning of the year, so going into 2026, you would set a fixed amount that you are comfortable spending for that year. So, I would say I'm a new business owner. I just launched my jewelry business. I think that this year I can allocate $2 for the entire year to promote my business. Then from January 1st to December 31st, you're going to figure out a way to use those $2 ads, events, whatever it is.
Chelsea: I love that. I have a twist on this. Something you can do if you don't feel comfortable setting aside a specific amount of money for the entire year, do this monthly.
Say every month I'm going to set aside $400. Maybe you don't spend the whole $400 a month. Go ahead, let it accrue. Let it roll over, as long as you are being consistent and putting in the effort of marketing your business every month. That's what we're shooting for when it comes to a budget.
Vivian: Yeah. That would be a good way to like, like you said, you can let it accrue. So like if you're not using all of the $400 for that month.
Chelsea: Yeah, I'm not saying don't spend any money that month. I'm saying like if you don't spend all of the money that month, and this is specifically for like if you're a new, new business and you just don't have $1 to set aside at the beginning of the year.
Vivian: Yeah, well, and here's the thing though, is you're not technically setting aside the money at the beginning of the year. What you're doing is, okay, so let's say the example I used earlier, you have $5 or no, I used 2. Okay. You're like, hey, I'm going to use this fixed amount method. 2026, I'm going to spend $2 in marketing. Divide that by 12, that gives you $166 a month. So it's kind of, it's doing what you're saying.
Chelsea: Yes. I want to though, let people think of it that way. Sometimes it can be difficult to think of it as like a yearly thing. So if you need to say, I have $166 a month, do it that way then.
Vivian: Yeah, you can. I think the other part of it too is also monthly, because here's the thing as a professional marketing person for all these years, $166, you're not going to be able to do a whole lot with that. You can run some Facebook ads, you could do stuff like that. There's always something you can do. Okay. I'm not deterring y'all from investing as much as you want per month. But if maybe the $2 a year, you're like, let me divide that by four then. That means every quarter I'm spending X amount. Then that way you kind of know if you want to do something a little bigger, all right, that's where you're going to put your money for that first quarter, right? So there are a million different ways you can approach this. The big thing here though for the fixed amount method is, and the way it's different from the one we talked about before, the percentage of revenue is you really don't have a clear view of exactly how much revenue you're bringing in, mostly because you don't have previous data to utilize, right? You're kind of having to, it's not winging it, but you're giving yourself a number that you are comfortable with. Also, that would allow you to stay consistent and allow you to reinvest back into your business.
Chelsea: Yes. I love that you said consistent.
Vivian: Yes. All right. So what's the last one, Chelsea?
Chelsea: Okay, Vivian. So the last one is end of month allocation method. So this is best for small businesses with fluctuating income. So let's say you are a waxing salon. You're popping in the summer. People don't like getting waxed in the winter, unfortunately. You really should. I can tell you all about the reasons why as someone who's worked a long time in the beauty industry, but usually you get slower in the winter months. So this is going to be the best marketing budget for you.
Vivian: Yes. I love that you brought up the seasonal fluctuation of income or revenue that comes in. So what we're talking about here is we want you to use the previous month's revenue, take a percentage of that, and then set it aside for the upcoming month. So what does that look like, Chelsea? Give us an example of what that would look like.
Chelsea: Absolutely. So let's say in May you did $10 in revenue and you researched it and you decided that you're going to spend 5% of your revenue monthly on marketing. That's your marketing budget. 5% of $10 is $500. So in June, you have $500 to spend. Now let's go to November.
Vivian: Brrrr.
Chelsea: Yeah. Not a peak month. No one, everyone's wearing pants. So they're like, I don't need to wax my legs, you know? So let's say you only made $5 in revenue. 5% of $5 is $250. So now you only have $250 to spend in December.
Vivian: Yes. The idea here is, remember, this works really well for businesses that don't have consistent revenue month to month, but maybe there's a dip, there's a seasonal change. This helps to, for one, you're still investing the same percentage, and it's based on the revenue that has come through your door. So you're not spending money you don't have. Part of the reason this is good, I think as a business owner, and I'm just speaking from experience, when the cash is on hand and you have it right there, you feel a lot more confident to spend it, right? Instead of signing up for something that you are like, I'm going to get a big bill for that, and then I don't know if three months from now when I get the bill, if I'm going to be able to pay it because I don't know how the revenue is going to go from now until that bill is due. So this is a really great way to be judicious, I think financially. Also it helps, it helps because you are still being consistent month to month. It's just that level of consistency is going to change a little bit because the stuff you choose to do with $250 in December, is going to look very different than the marketing you do in June when you have $500.
Just as a reminder, because we know that these budgeting talks can get, sometimes they could get a little hairy or whatever. If you guys want to send us a voice note, if you have a question about any of this stuff, or just want to share something that's worked for you in your business, then please go over to sobmarketing.com and then hit contact us, scroll down, there's going to be a purple button that says record. Hit record, send us that voice note.
Chelsea: Yes, do it.
Vivian: Right now.
Chelsea: Right now. Vivian, are we ready for the TLDL?
Vivian: We are. Let's do it.
Chelsea: I think so. Okay, let's do it. So today we talked about marketing budgets. I know, I know. But I think it was a really good conversation. We talked about why small businesses do need marketing budgets, and we talked about the three different kinds that you can pick from. There is percentage of revenue method, which is the most popular, but not the one that you necessarily need to use, especially as a small business owner. You also have the fixed amount method and the end of month allocation method.
So remember, Vivian, do you know what we forgot to do?
Vivian: What?
Chelsea: We forgot to tell everyone to caffeinate me.
Vivian: To buy me a coffee.
Chelsea: Buy us a coffee. If you are enjoying this podcast, pretty, pretty please consider supporting us because we want to continue to make this podcast, but it can be a little difficult sometimes to be honest. So go ahead, consider buying us a coffee. It's a metaphor for a way to support the SOB Marketing Podcast. You can also follow, subscribe, like, leave a review. That's my favorite one. Or just share it with other small business owners, other SOBs that you think would benefit from hearing these conversations. And you know what? Go be the best SOB you can be.