How much should a company spend on marketing to ensure sustained growth and long-term success?
This guide will explore that question and provide the insights needed to make informed decisions about marketing investments.
Imagine this: You’re the CEO of an established SME with a growing revenue stream. You’ve allocated a portion of your budget to marketing, but as you review the expenses, you notice something concerning.
Your marketing budget is being drained by costs that don’t directly contribute to driving business results — perhaps a CRM system or even accounting fees. You start to wonder if your marketing dollars are genuinely being spent effectively.
The Importance of a Strategic Marketing Budget
For CEOs and directors of SMEs with AUD $1 to $10 million in annual revenue (approx. £518,300 to £5,183,000), budgeting for marketing isn’t just about setting aside a percentage of your income — it’s about making strategic decisions that drive your business forward.
A well-planned marketing budget is the foundation of sustained growth, yet many businesses need help with correctly allocating their funds.
Whether you’re questioning how much to allocate to marketing or where those funds should go, this guide will help you navigate the complexities of marketing budget allocation and set your business on the path to long-term success.
Short of time to read this complete guide? Download our free Marketing Budget Planner spreadsheet to easily organise your marketing spend and quickly decide where to allocate it, saving you valuable time. |
Table of Contents
Determining Your Marketing Budget: How Much Should You Allocate?
Determining the right marketing budget is critical for any business, particularly for SMEs aiming to achieve sustained growth.
Many business leaders ask a common question: “How much should I spend on marketing my business?” or “How much should you spend on marketing to see real results?”
The answer isn’t one-size-fits-all, but industry standards often suggest allocating 5-10% of your annual revenue to marketing. For instance, if your business generates $5 million in revenue, your marketing budget might range from $250,000 to $500,000. However, the exact figure can vary depending on several key factors.
Factors Influencing Your Budget Allocation: When deciding on your marketing budget, consider the following:
Industry Type: Some industries, especially highly competitive ones, may require a more substantial marketing investment to stand out.
Growth Stage: Is your business rapidly growing, or are you maintaining your market position? Companies in expansion mode often need to allocate more of their budget to marketing.
Market Competition: In crowded markets, it might be necessary to increase your spending to outpace competitors.
Marketing Goals and Objectives: Are you focused on brand awareness, lead generation, or customer retention? Each goal demands a different level of investment
Case Study: |
We once worked with a client who mistakenly included CRM costs in their small business marketing budget. This misallocation highlighted a common issue where businesses include unrelated expenses in their marketing budgets. After helping them reallocate their funds correctly, they could focus their spending on activities that directly drove results. |
Understanding these factors and correctly identifying what should and shouldn’t be included in your marketing budget is crucial. By using effective marketing budget methods, you can ensure that your investments are driving the growth your business needs.
Schools of Thought on Marketing Budget Allocation
When determining your marketing budget, there are various schools of thought on how much you should allocate. The most common approach is to base your budget on a percentage of your annual revenue. But what’s the correct percentage? And how does this vary by industry and business type?
Percentage of Annual Revenue
One widely accepted approach suggests businesses allocate 5-10% of their annual revenue to marketing. For example, if your annual revenue is $2 million AUD, your marketing spend might range from $100,000 to $200,000 AUD (approx. £52,000 to £104,000 GBP).
Research by Deloitte shows that marketing spend as a percentage of revenue by industry varies significantly, with some sectors requiring a higher investment to remain competitive. For example, industries like retail and consumer goods often spend more on marketing due to the need for constant consumer engagement.
Differences in B2C and B2B Marketing Budgets
There’s also a notable difference in how B2C and B2B companies allocate their marketing budgets.
B2C companies typically spend a more significant percentage of their revenue on marketing. This is due to the need for broad consumer reach and the constant effort required to stay top-of-mind with customers.
In contrast, B2B companies might allocate less to marketing, focusing more on business development and sales efforts.
B2B Considerations: Balancing Marketing and Business Development
Aligning your marketing efforts with business development and sales strategies is critical. Unlike B2C, which focuses on broad consumer engagement, B2B businesses must build deeper, long-term relationships. This requires a careful balance between marketing, which creates awareness and nurtures leads, and sales, which closes deals and drives revenue.
Integrating Sales and Marketing
Marketing and sales are often treated as separate entities but should work hand-in-hand.
Your marketing efforts—whether content marketing, digital ads, or SEO—should be directly aligned with your sales strategy to create a seamless customer journey. Marketing needs to attract and nurture leads, while sales convert those leads into clients. Without this alignment, there’s a risk of disjointed communication and wasted budget.
Deciding the Split
How much of your overall budget should go toward marketing, and how much should be dedicated to business development or sales roles?
For businesses making AUD $1 to $10 million (approx. £520,000 to £5.2 million) in annual revenue, the budget allocation for marketing and business development/sales roles should be considered based on industry standards and business goals.
A 2019 Gartner UK study found that businesses allocated 9.3% of their overall revenue to marketing. However, Gartner’s 2024 CMO Spend Survey data shows a decline in CMO spending power, with marketing budgets now making up 7.7% of total company revenue in 2024, down from 9.1% in 2023.
Here’s a breakdown of how you might allocate your budgets across marketing and sales:
Marketing Budget:
7-12% of total revenue.
E-commerce companies may spend up to 30% of their revenue on customer acquisition, which includes marketing.
Business Development/Sales Budget:
30-35% of overall operational budget.
Budget Breakdown Example:
Of course, this ratio can vary depending on your industry, growth stage, and objectives. For instance, if your business is rapidly growing, you may need to increase your marketing spend to generate more leads.
Real-World Example: How Strategic Management Reduced CPC by 90% and Boosted ROI |
We recently worked with a client who had been running their own Google Ads and was also working with another agency. They were achieving a cost-per-click (CPC) of around $10. When The Change Starter took over, we reduced their CPC to under $1 in just two weeks — without increasing the ad spend. This shift significantly improved their ROI, demonstrating how expert budget management can deliver better results with the same marketing investment. |
Balancing marketing and sales investment is critical to maximising growth in B2B. Getting it right ensures your marketing generates quality leads while your sales team focuses on closing deals and driving revenue.
Breaking Down Your Marketing Budget: Understanding Key Cost Types
When businesses consider their marketing budget, they often focus solely on ad spending. However, a comprehensive marketing strategy involves multiple cost types across key categories.
To build an adequate budget, consider the following four categories: agencies, media, technology, and people.
1. Agencies:
Campaign Management: Running ads or marketing campaigns often involves working with external agencies. These agencies charge management fees to monitor and optimise campaigns like Google Ads or social media marketing.
Vendors & Consultants: You may need to hire outside consultants for specialised tasks such as SEO, content creation, or marketing strategy. These professionals bring expertise that supports your marketing efforts.
Public Relations: Engaging PR agencies to manage media relations, press releases, and brand positioning can also be part of your marketing spend.
2. Media:
Ad Creation and Production: Crafting high-quality ads requires skilled designers, copywriters, and production teams. Whether for print, digital, or video, ad creation is crucial to your media spend.
Advertising (Digital & Print): Whether buying Google Ads, Facebook Ads, or traditional print media, direct advertising costs are a core part of your budget.
Events/Trade Show Costs: Participating in or hosting events and trade shows can be an important media expense to drive brand awareness and leads.
3. Technology/Software:
Marketing Automation Tools: These tools help streamline repetitive tasks like email marketing, social media posting, and lead nurturing, saving time and improving efficiency.
Analytics and Measurement Tools: Essential for tracking campaign performance, these tools provide data-driven insights to help optimise your marketing strategy.
Personalisation Tools: These tools allow marketers to tailor content and messaging to individual customer preferences, enhancing engagement and improving conversion rates by delivering more relevant experiences.
In-House Marketing Technology: Depending on your company’s needs, additional investments in technology infrastructure, such as website hosting and analytics tools, may also be necessary.
4. People:
In-House Marketing Employee’s Salaries: If you have an in-house team, their salaries and benefits are a significant part of your budget. This includes content creators, social media managers, and marketing specialists.
Support Roles: Hiring freelancers or agencies for additional roles, such as web developers or graphic designers, ensures you can scale your efforts without overwhelming your core team.
Training & Conferences: Investing in your marketing team's ongoing education and training is vital for staying up-to-date with industry trends and improving performance.
Additional Revenue Generation Tactics: Incorporating creative strategies, such as new sales initiatives or loyalty programs, can require additional personnel or outsourcing.
You can build a comprehensive and realistic marketing budget by understanding and categorising these costs—agencies, media, technology, and people.
At TCS, we help businesses ensure that every aspect of their marketing spend is accounted for so there are no surprises when planning their growth strategies.
Understanding the Limits: How Much is Too Much to Spend?
While investing in marketing to fuel growth is important, there’s a fine line between spending enough and overspending. Businesses can easily fall into the trap of over-investing in specific channels or campaigns without seeing a proportional return.
So, how can you identify when you’re overspending?
Let’s explore this.
Identifying Over-Spending
If you continuously increase your marketing budget but do not see a corresponding rise in leads, conversions, or sales, it could be a sign that you’re overspending.
Overreliance on a single channel, like paid ads, without diversifying into organic growth strategies can also indicate a budget imbalance.
Overspending often results in diminishing returns, where each additional dollar yields fewer benefits than the last.
Linking to Strategic Decision-Making
The solution isn’t necessarily to cut costs but to spend smarter.
Strategic adjustments—like redistributing your budget to a mix of channels—can prevent wasteful spending and enhance ROI. This is where working with experienced agencies can make all the difference.
Wondering how much does a marketing agency cost? This will vary depending on what you need them to do and the services provided.
A well-chosen partner can help you optimise your spending, making every dollar count.
Real-World Example: Optimising Budget for Maximum ROI |
We had a client who was over-investing in Google Ads, driving up costs without seeing quality results. After evaluating their spending, we reallocated their budget across SEO, content marketing, and paid ads. The result? We reduced their overall spending and increased lead quality and volume. This strategic shift maximised ROI and demonstrated the value of expert management in optimising marketing budgets. |
Understanding your marketing limits ensures every pound/dollar is spent wisely, delivering results without unnecessary costs.
The Importance of Consistent Marketing: Long-Term Investment vs. Short-Term Gains
One of the biggest misconceptions in marketing is the idea that a short, one-off campaign will lead to sustainable growth. Many businesses fall into the trap of thinking they can “do some marketing” and then pause, expecting long-term results. This couldn’t be further from the truth.
The Myth of "One-and-Done" Marketing
Marketing isn’t a one-time effort. To achieve sustainable growth, marketing activities need to be consistent and ongoing. Sporadic campaigns may create short bursts of activity but rarely lead to long-term gains.
Consumers and prospects need regular engagement to keep your brand top of mind.
Always-On vs. Burst Campaigns
The most effective strategies include a combination of “always-on” marketing—ongoing activities like SEO, content marketing, and social media—and burst campaigns, which are short, intensive efforts designed to create immediate impact.
Both are valuable, but relying on burst campaigns alone can leave your pipeline dry between efforts.
Sustained Investment
Ongoing marketing efforts are essential for maintaining visibility, generating leads, and driving consistent growth. It’s the steady, long-term investment that builds a solid foundation for success.
The Change Starter Approach: Maintaining Consistency for Long-Term Success
At The Change Starter, we work with businesses to create balanced marketing strategies that combine always-on activities with well-timed burst campaigns. By maintaining consistency and adaptability, companies can see continuous growth without the peaks and valleys that come with sporadic efforts.
Working with a marketing consultant ensures your strategy remains flexible and optimised for long-term success.
Access Your Free Marketing Budget TemplateNeed help structuring your marketing budget? Our free spreadsheet provides a clear guide on what to include and how to allocate your resources so you can save time and focus on growing your business. |
Expert Insights: How Industry Leaders Approach Marketing Budgeting
We collected the following practical insights from experienced professionals in the field.
Tania Allen, CEO, Vision Alliance:
We reverse engineer budgets starting with getting clear of the objective, who we are targeting and what our offer is.
We lay foundations to drive results and reduce uncertainty around marketing budgets. Foundations start with mapping customer journeys, defining realistic revenue targets and considering the lifetime client value for each marketing strategy and tactic.
We then review and redefine the sales process and work to close gaps in the customer journey to ensure that we can optimise every step of the customer journey.
When your budget allocations are backed by a predictable customer journey - with automated lead nurturing, engagement, and sales conversion touchpoints - it becomes much easier to build, grow, and scale any marketing campaign.
Kayla Medica, Fractional Product Marketer:
You can work bottom up or top down:
Option A: We have $X in sales targets. We expect a Y% ROI from marketing spend, therefore the marketing budget is $Z with expected return of Y%.
Option B: From past results, we know CAC is $X, and we have $Y in budget, therefore expected sales outcome is $Z.
Option C: Here's $X, turn it in $Y (where Y is completely pulled out of thin air).
Kaylee Liu, Marketing Manager, SurePact:
Something that needs to be forecasted alongside media is scaling headcount/resourcing alongside an increase in activity.
There's no point spending more in media if you, for example, don't scale content and creative alongside it, because you're just dropping your own ROI due to saturation and fatigue.
Trent McLaren, Founder, Journey:
Essentially don't set a budget, create a business case for each campaign.
E.g. Here's the strategy, here's the marketing plan, and here's the allocated amount we think we need, and we think this is the ROI that's achievable based on the research we've done.
If it's experimentation, the reverse. We're going to spend $1000 on an ad campaign, measure the data to see what worked / what didn't and what we would do differently in 30/60/90 from now.
Much rather see this ^ than... ‘here's $20K for the year, and here's your target. Because you may not need $20K, maybe you can do it in less, or maybe you need 40K but if you haven't done the work above, it's hard to say.... this is how much I'm gonna need to spend.
Sara Berry, Fractional CMO:
My budgeting approach is campaign-driven, and I always make sure the foundations are set to maximise results and monitor each campaign’s performance closely.
Chris Oatway, Marketing Coordinator, AutomateTek:
Allocation of a marketing budget should be carefully considered and informed by proposed strategy.
The amount you spend on social media, search engine advertising, in-print and digital ads, as well as trade shows and in-person events—including collateral, literature, and graphic assets—should be carefully researched and analysed to ensure a strong projected ROI.
If you plan to work with influencers and suppliers to produce visual assets, like video and photography, then they should be accounted for in a marketing budget too.
We have also been successful as a finalist and winner of various awards and, whilst these are free to enter, there is a cost attributed to attending. Is it important/useful to bear in mind that a lot can be done for free/not much or negotiated - having useful connections and a varied but well-connected network helps.
Stevie V Brown, CEO, The Change Starter:
We advocate a spend of 7-10% of revenue in line with global benchmarks.
The clients that invest at that level see the results, their brand awareness builds, they get regular leads, and they have a system in place that adds to their business' saleable value. The ones who are too afraid to spend the recommended budget, or afraid to test new tactics, usually see mediocre results, which becomes a self-fulfilling prophecy... 'I knew it wouldn't work'.
We see B2B services businesses typically needing to spend at the higher end of the range to obtain high value leads, unless they have an established Business Development system in place.
For products, it's all about brand awareness or eComm sales, with brand awareness needing significant, consistent spend to cut through the noise, and sales ads delivering ROI based on either individual sale, or ideally measured by cost of acquisition relative to lifetime value of a customer. In that case, spend is per campaign and adjusted according to results.
We typically set up a full year budget and plan based on the client's allocated annual marketing budget. The spend per activity depends on the priority of each activity relative to the objectives set.
FAQ: Common Questions About Your Budget for Marketing
How much do small businesses typically spend on advertising?
On average, small businesses allocate 7-10% of their annual revenue to advertising and marketing, but this can vary based on industry and growth objectives.
What is the average price for social media marketing services?
The cost of social media marketing services depends on factors like the scope of the campaign, platform management, and content creation. Small businesses can expect to spend between $1,500 and $9,500 AUD per month (approx. £785–£5,000 GBP) for comprehensive social media services.
What is the cost of social media advertising on platforms like Facebook and Instagram?
Social media ad costs vary by industry and target audience, but businesses typically spend between $0.95 and $5.70 AUD per click (approx. £0.50–£3 GBP). Small businesses typically spend $950–$3,800 AUD (approx. £500–£2,000 GBP) on ads monthly.
What are typical social media price packages for small businesses?
Social media price packages generally include content creation, posting, and ad management. Costs start from $1,500 AUD per month (approx. £785 GBP) and scale up based on the complexity of the strategy.
How should small businesses in the UK budget for marketing?
UK-based small businesses should consider allocating 7-12% of their annual revenue to marketing efforts, depending on their industry and growth goals.
What is the average marketing budget for small businesses in the UK?
The average marketing budget for small UK businesses typically ranges from £20,000 to £200,000 annually, depending on the company's size and stage.
What is the average marketing budget for small businesses in Australia?
The average marketing budget for small businesses ranges from $38,000 to $380,000 AUD annually, depending on the company's size and stage.
Maximising Your Budget for Marketing Success
In summary, determining the right budget for marketing involves careful consideration of factors like industry, growth stage, competition, and specific business objectives. It’s not just about how much you spend, but how you allocate that budget to generate the best possible results. A balanced approach combining ongoing activities and well-timed campaigns is key to long-term success.
At The Change Starter, we help businesses maximise their marketing budgets by providing strategic planning, precise allocation, and continuous optimisation. Our team works with you to ensure that every pound spent drives meaningful results, whether through lead generation, brand awareness, or long-term growth initiatives.
Where to from here?
Grab Our Free Marketing Budget Allocation Spreadsheet: Do you need help to organise your marketing budget? Download our free spreadsheet to learn what to include and how to allocate your spending.
Meet with an Expert to Elevate Your Marketing: Ready to take your marketing to the next level? Let The Change Starter experts craft a strategy tailored to your business that drives real, measurable growth. Book a free consult today.
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