Determining the right percentage of revenue to allocate to marketing is a common challenge for Australian small and medium enterprises. There’s no single ‘magic number’, but we can provide a practical framework to help you make informed decisions. A blanket ‘5% of revenue’ rule is often quoted, but it’s far too simplistic. Your ideal investment level depends heavily on your growth ambitions, industry competitiveness, and business lifecycle stage.
Generally, we advise businesses to consider a tiered approach. For established businesses maintaining market share, 5-8% of revenue is a reasonable starting point. However, if you’re aiming for significant growth – expanding into new markets, launching new products, or aggressively gaining customers – you’ll likely need to invest more. Businesses in highly competitive sectors, like retail or hospitality, often need to be at the higher end of that range, or even exceed it.
Here are some key insights to guide your decision:
- Growth Stage: Start-ups and rapidly growing businesses should allocate a higher percentage – potentially 10-20% – to marketing. This is because acquiring customers is more critical at this stage than preserving profit margins.
- Customer Acquisition Cost (CAC): Understanding how much it costs to acquire a new customer is vital. If your CAC is high, you may need to increase your marketing investment to improve efficiency and lower that cost.
- Industry Benchmarks: Research what your competitors are spending on marketing. While you don’t need to match them exactly, it provides a valuable context for your own investment. Industry associations often publish useful data.
- Lifetime Value (LTV): A higher LTV justifies a greater marketing spend. If customers remain loyal and generate significant revenue over time, you can afford to invest more upfront to acquire them.
Don’t view marketing as an expense, but as an investment in future revenue. Focus on tracking key performance indicators (KPIs) like website traffic, lead generation, conversion rates, and ultimately, return on ad spend (ROAS). Regularly analyse these metrics to optimise your campaigns and ensure you’re getting the best possible return. As you move into 2026, a data-driven approach to marketing spend will become even more crucial as consumer behaviour continues to evolve.
To determine your optimal marketing investment, we recommend conducting a thorough marketing audit and developing a detailed marketing plan aligned with your business goals. Start by calculating your current CAC and LTV, then benchmark against your industry. This will provide a solid foundation for making informed decisions and maximising your return.
