The short answer most consultants give — "spend 5–10% of revenue on marketing" — is almost useless on its own. It's roughly right in aggregate and almost always wrong in specifics. A bricks-and-mortar retailer at 5% of revenue is overspending. A SaaS business at 5% is critically underspending. A professional services firm at 5% is probably about right, depending on growth stage.
The better question isn't "what's the rule?" It's "what's the right number for your business shape, stage, and growth ambition?" Here's how to work that out.
The honest benchmarks
Across Australian SMBs in 2026, marketing spend as a percentage of revenue typically lands in these bands:
| Business type | Maintenance mode | Growth mode |
|---|---|---|
| Trades and local services | 1–3% | 3–6% |
| Professional services (legal, accounting, consulting) | 2–5% | 5–10% |
| Retail (physical) | 3–5% | 5–10% |
| Hospitality | 2–4% | 4–8% |
| E-commerce | 8–15% | 15–25% |
| B2B SaaS | 10–20% | 25–40% |
| Manufacturing / B2B industrial | 1–3% | 3–7% |
| Real estate | 3–8% | 8–15% |
"Maintenance mode" means you're holding share. "Growth mode" means you're actively trying to grow ahead of category or category-leader pace. The gap between the two is meaningful — usually 2–3x.
For most SMBs starting to invest seriously in marketing, the realistic target sits somewhere between 5% and 10% of annual revenue. Below 3% almost never produces visible growth. Above 15% almost never produces proportional growth unless your category demands it (e.g. early-stage SaaS or DTC e-commerce).
What the % actually pays for
If you've set, say, 7% of $2M revenue = $140,000/year as your marketing budget, here's roughly where it goes for a typical Australian SMB:
| Line item | Typical % of marketing budget | $ at $140k budget |
|---|---|---|
| People (in-house, agency, freelance) | 40–60% | $56k–$84k |
| Paid advertising spend | 20–35% | $28k–$49k |
| Tools and software | 5–10% | $7k–$14k |
| Content and creative production | 10–20% | $14k–$28k |
| Events, sponsorships, partnerships | 0–15% | $0–$21k |
| Brand and strategic projects | 5–10% | $7k–$14k |
Two things to notice. First, the biggest line item is almost always people. If you're at 5–10% of revenue but spending 80% of that on ad spend with no team behind it, you're under-resourced — even good ads don't compound without strategy, creative, and analysis behind them.
Second, brand and strategic projects are usually under-funded by SMBs. Most spend gets pulled into immediate paid acquisition and content production. The strategy and positioning work that compounds over years gets squeezed out — which is partly why so many SMBs feel like their marketing is busy but not effective.
How to set your number
Three frameworks, depending on how you think about the business.
Framework 1: % of revenue (the default)
Pick a target based on your business type and growth ambition. Most AU SMBs landing on 5–10% of revenue is a defensible starting point.
Pros: simple, scales with the business, easy to explain to stakeholders. Cons: doesn't reflect growth stage well, and "revenue" is a lagging indicator.
Framework 2: % of gross profit (more accurate)
If your gross margins are healthy (50%+), the % of revenue framework works fine. If your gross margins are thin (<35%), use % of gross profit instead — typically 10–25% — to avoid setting a marketing budget that exceeds your contribution margin.
Pros: aligns marketing spend with actual money the business has to deploy. Cons: more complex to communicate.
Framework 3: Customer acquisition cost (CAC) and LTV
For businesses with measurable customer economics (especially e-commerce, SaaS, and subscription services), the most honest framework is:
- Calculate your average customer lifetime value (LTV)
- Set a target CAC — typically 25–35% of LTV for sustainable growth, up to 100% of first-year revenue for high-growth phases
- Multiply target new customers per year × target CAC = marketing budget
Pros: ties marketing spend directly to revenue outcomes. Cons: requires customer-level data discipline most SMBs haven't yet built.
For most AU SMBs without solid CAC/LTV data, start with Framework 1 or 2, then transition to Framework 3 as your data matures.
Where the spend actually goes (by stage)
Marketing budget composition shifts predictably as a business grows.
Stage 1 — $500k–$2M revenue:
- Focus: foundation. Website, brand, basic content, local SEO, one paid channel.
- People: typically external (agency or on-demand team) rather than in-house. Building in-house at this stage is usually premature.
- Paid spend: small but learning — $500–$3,000/month, mostly Google or Meta.
- Total marketing budget: typically $20,000–$120,000/year.
Stage 2 — $2M–$5M revenue:
- Focus: channel expansion, content engine, structured paid acquisition.
- People: usually one in-house coordinator or junior manager + external specialists.
- Paid spend: $3,000–$15,000/month across 2–3 channels.
- Total marketing budget: typically $100,000–$400,000/year.
Stage 3 — $5M–$15M revenue:
- Focus: integrated funnel, brand building, conversion optimisation.
- People: senior in-house marketing leader + in-house specialists + external agency or on-demand team for depth.
- Paid spend: $15,000–$60,000/month, multi-channel.
- Total marketing budget: typically $250,000–$1,000,000/year.
If your spend looks dramatically different from your stage's typical band, it's worth understanding why. Sometimes there's a structural reason (e.g. you're in a low-marketing-intensity category like trades), but more often it's that you've underinvested for too long or overinvested without strategy.
The cheapest budget mistake
The single most expensive budget mistake AU SMBs make isn't underspending or overspending. It's spending the right amount on the wrong shape.
The pattern: a business at $3M revenue allocates $200,000 to marketing (~7%). Of that, $160,000 goes to paid ads. There's $40,000 left for everything else — no senior strategy, no real creative, no content engine, no analytics depth. The paid spend keeps running, the ads keep performing okay, but the underlying marketing function never compounds. Three years later they've spent $600,000 on marketing and built nothing they can point to other than last quarter's lead numbers.
The fix isn't to spend more. It's to rebalance the existing budget: less paid spend, more strategy and creative, more brand and content compounding. (We've broken down the structural alternatives — in-house, agency, freelance, on-demand — in our marketing agency vs freelancer vs in-house comparison.)
When to spend more, when to spend less
Spend more if:
- You can prove unit economics on a paid channel and the channel has scale headroom.
- You're in a category where competitors are visibly outspending you and winning share.
- You've underinvested in brand for years and need to rebuild salience.
- You have a launch or major campaign that requires concentrated spend.
Spend less if:
- You can't currently measure marketing performance with any confidence — get the analytics in place before scaling spend.
- Your fundamentals (website, positioning, offer) aren't ready to convert the traffic you'd buy.
- Your gross margins can't sustain higher marketing investment without affecting cash flow.
- You're in a category with low marketing intensity (e.g. some trades and B2B industrial) and growing through referral and reputation more than paid acquisition.
How to think about the people spend
The largest line item is people, and it's the one most SMBs get wrong.
A common pattern: a $3M business with a $200,000 marketing budget hires one in-house marketing manager at $130,000 base. After super, on-costs, and tools, that consumes $160,000+ of the budget — leaving $40,000 for everything else. The marketer is then expected to deliver across strategy, content, paid, SEO, and analytics — alone.
This is the classic underperforming structure. The fix is usually one of:
- Smaller in-house presence + on-demand team: e.g. a $75,000 coordinator + $5,000/month on-demand retainer = $135,000 in people cost with specialist coverage across 4–6 disciplines.
- No in-house, larger on-demand engagement: $8,000–$10,000/month gets you a full marketing function with senior strategy at roughly the cost of one in-house mid-level manager, with no hiring risk.
The full cost breakdown of what an in-house hire actually costs is here: the true cost of hiring a marketer in Australia.
FAQ
Is 5% of revenue enough? For a stable, established business in a low-marketing-intensity category — probably yes. For a growth-stage business in a high-intensity category — no. The 5% rule needs to be filtered through business type and growth ambition.
Should I include my own time as a founder doing marketing? For budget planning, yes. Cost your time at a realistic hourly rate and add it to the marketing line. Most founders dramatically underestimate how much marketing their own time funds — and undercount the opportunity cost of doing it themselves.
How fast should marketing budget grow? For most SMBs, marketing should grow slightly faster than revenue during growth periods (revenue +20%, marketing +25–30%) and roughly in line during maintenance periods. Cutting marketing during slower periods almost always extends the slowdown.
Is paid advertising worth it for small businesses? Yes, with discipline. Paid is one of the few channels that produces results inside a quarter rather than a year. But it only compounds when the rest of the funnel (creative, landing pages, follow-up) is built well — which usually requires team investment, not just media investment.
What's the simplest way to set a marketing budget if I have nothing in place? Start at 6% of revenue. Allocate 50% to people (in-house, agency, or on-demand), 25% to paid spend, 15% to content/creative, 10% to tools. Adjust quarterly based on what's working.
The right marketing budget for your business depends more on shape and stage than on any single percentage rule. Most AU SMBs land in the 5–10% of revenue band — but the split within that budget matters far more than the headline number. People, paid, content, brand, tools: get the proportions right, and even a modest budget compounds.
See how Alan Solutions helps SMBs allocate marketing spend more efficiently →