Most businesses guess when it comes to marketing spend.

Then they panic when the results don’t show up.

Meanwhile, the companies that scale predictably, year after year, don’t leave it to chance.

They apply a simple principle used by nearly every high-growth brand you admire:

The 5% Rule.

It’s not a silver bullet.

It’s just the baseline every business needs to stop wasting money, start building momentum, and finally get serious about ROI.

Let’s break it down.

What Is the 5% Rule?

The 5% Rule is exactly what it sounds like:

Allocate 5% of your top-line annual revenue to sales and marketing.

That’s it.

• $1M in revenue? Your marketing budget should be $50,000.
• $10M? It’s $500,000.
• $50M? Now we’re talking $2.5 million, and that’s where the real traction begins.

It’s not arbitrary. It’s just enough to build momentum without overcommitting, especially when your spending is aligned to strategy, not vanity.

For fast-scaling brands or companies launching new services, that number can flex higher, sometimes up to 10%.

But the point is: you need a starting point rooted in reality, not random comfort.

Why Most Businesses Get This Wrong

Here’s the brutal truth:

Most companies set their marketing budget the same way they pick a lunch spot, on gut instinct and group consensus.

Then they wonder why nothing sticks.

They spend big in one quarter, then ghost marketing the next.

They cut spend when they need more visibility.

They get lured into high-cost vendor traps with zero tracking in place.

The result?

A reactive, chaotic, and ultimately ineffective marketing engine.

Overspending with no ROI hurts.

But underspending while expecting exponential growth?

That’s how you stall out.

What to Include in Your 5% Budget

Here’s what smart companies actually include inside their marketing budget:

1. Paid advertising (Google, Meta, YouTube, etc.)
2. Website development + SEO
3. Content creation: blogs, videos, podcasts, graphics
4. CRM and automation tools
5. Email + text campaigns
6. Marketing leadership (think: Fractional CSMO)
7. Strategic vendor/agency partnerships

Pro tip: Attach an ROI expectation to each line item.

Marketing should never feel like a black hole.

Every dollar should have a job.

What Happens When You Actually Apply It

• You stop guessing and start scaling.
• You create real accountability (internally and with vendors).
• You track results consistently (CPL, CAC, LTV, etc.).
• You unlock momentum—because marketing is no longer an afterthought.

Most importantly: your marketing stops being a collection of random acts.‍

It becomes a system tied directly to business outcomes.

Why the 5% Rule Needs a Fractional CSMO

Let’s be honest, budgeting is only half the equation.

The other half is who’s driving the strategy behind the spend.

A Fractional Chief Sales & Marketing Officer (CSMO) doesn’t just “run campaigns.” They:

• Build strategy-first marketing plans tied to ROI
• Eliminate siloed tactics and random spend
• Set KPIs, manage vendors, and optimize performance
• Translate budget into action, and action into results

This is how high-growth companies run marketing, from $5M to $100M and beyond.

Marketing Is an Investment, Not a Guess

You’d never run payroll without a budget.

You’d never buy equipment without knowing the ROI.

So why are you winging it with your marketing?

It’s time to treat marketing with the seriousness it deserves.

Apply the 5% Rule.

Tie it to real strategy.

And make every dollar accountable.

Want help building a marketing budget that actually works, and a team to help execute it?

Shoot me a message: sean@tierlevel.com

SML

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