Determining the right marketing spend is a constant challenge for Australian small and medium enterprises. There’s no one-size-fits-all answer, but we can guide you towards a figure that delivers a genuine return on investment. Forget rules of thumb like percentages of revenue – those rarely reflect your specific business situation. Instead, let’s focus on a more strategic approach.

Firstly, understand your Customer Acquisition Cost (CAC). This is the total cost of acquiring a new customer – all marketing and sales expenses divided by the number of new customers gained in a period. Knowing your CAC is fundamental. If it costs you $100 to acquire a customer who then spends $200 with you, that’s a good result. If it’s the other way around, you need to adjust your strategy.

Secondly, consider your Lifetime Value (LTV). How much revenue does a typical customer generate for your business over their entire relationship with you? Comparing LTV to CAC is crucial. A healthy ratio is generally 3:1 – meaning your customer is worth three times what it costs to acquire them. If your ratio is lower, you’re likely overspending on acquisition or not retaining customers effectively.

Here’s a practical way to think about it:

• Start small and test: Don’t commit a large budget upfront. Begin with targeted campaigns and carefully measure the results.
• Focus on profitable channels: Analyse which marketing activities deliver the highest return. Double down on what works and reduce investment in underperforming areas.
• Prioritise return on ad spend (ROAS): For paid advertising, ROAS is key. For every dollar spent, how many dollars in revenue are you generating?
• Don’t neglect organic growth: Content marketing, SEO and social media can deliver long-term, sustainable results, but require consistent effort.

Finally, remember that marketing isn’t just about immediate sales. It’s about building brand awareness and customer loyalty. While tracking direct revenue is important, also consider the value of these intangible benefits. As you gather data and refine your approach, you’ll be able to optimise your marketing spend for maximum profitability. We recommend starting with a budget that allows for consistent testing and measurement, then scaling up as you identify winning strategies. A good first step is to book a consultation with a marketing specialist to analyse your current situation and develop a tailored plan.