Small business marketing
What to budget
for marketing.
Start from what you can afford to test, not a percentage. The common '7 to 8% of revenue' rule is often credited to a 2012 US government blog post that assumed US businesses with 10 to 12% margins. No credible Australian figure for small business marketing spend was found. Work out a three-month test from your own margin and cash flow, measure it, then decide.
Written by Dan Picken, a marketer who checks the sources. Last checked 2 November 2026.Where the
percentage rules come from.
The '7 to 8% of revenue' figure is usually credited to a 2012 US Small Business Administration blog. It assumed revenue under US$5 million and margins of 10 to 12%. Applied to a cafe on thin margins or a consultant on high ones, it can be badly wrong in either direction.
Other figures you'll see online often come from a single company's sign-up data or mixed international surveys. Treat them as conversation starters, not targets.
Cash flow
comes first.
Xero's small business data for mid-2026 showed sales growth easing to 6.5% and businesses still waiting an average of 22.9 days to be paid. The Australian Small Business and Family Enterprise Ombudsman described a less forgiving trading environment with squeezed margins.
So budget in a way that survives a slow month. Money spent on marketing this month may not come back until next month or later. Decide in advance what you can put at risk, and for how long.
Count your time as budget too. ABS figures show 996,203 employing businesses among 2,814,778 actively trading at 30 June 2026, so roughly two in three Australian businesses have no employees. If that's you, every hour spent on marketing comes out of paid work. Price your hours in, and a 'free' channel that takes ten hours a month can cost more than a small ad budget.
Test budget
How much can you test
without a cash squeeze?
Marketing is paid now and earns later. Put in your own numbers to see a three-month test budget you can afford, and how many new customers it needs to pay back.
Monthly test budget
Where the
first dollars go.
A common order, adjusted for your business.
- Free first: Google Business Profile, reviews, a clear website, and asking past customers to come back.
- Then one paid channel, matched to how customers find you: Google Ads if they search, social if they scroll.
- Tracking from day one, so you know which dollars brought customers.
- Keep a little for testing something new each quarter.
Know what
it brought in.
A budget only makes sense if you can see what it brings back. Ask every new customer how they found you, count calls and forms from the website, and use the conversion tracking in each ad platform. One simple sheet with enquiries per week by source is enough.
After three months, compare the cost per new customer for each channel against what a customer is worth. Keep what pays, cut what doesn't, and test one new thing. The Google Ads budget maths shows what a monthly figure buys.
What I see most often
What I see
most often.
- 1
A percentage picked from a blog
A budget set as 7% of revenue, with no link to margin or cash flow.
- 2
Stop-start spending
Ads on in a good month, off in a slow one, so nothing ever settles.
- 3
Spending before the basics
Ads running while the Google profile is unverified and the website has no phone number.
- 4
No idea what a customer is worth
Every channel judged on gut feel.
The honest bit. Sometimes the right budget is close to zero for a while: fix the profile, get reviews, ask past customers back. Paid ads work better once those are done.
Questions
people ask.
What percentage of revenue should a small business spend on marketing?
The common '7 to 8%' rule comes from a 2012 US blog post. Work from your margin and cash flow instead.
How much does marketing cost for a small business in Australia?
It depends on the channel and your goals. No credible Australian average was found. Start with a test budget you can afford for three months.
Is $500 a month enough for marketing?
It can be, if it's focused on one channel, one service and one area, and the free basics are already done.
What marketing is free for a small business?
A Google Business Profile, reviews, a clear website, email to past customers who agreed to hear from you, and asking for referrals.
Related
Keep
going.
Get a free
Google Ads audit.
Takes a minute. Audits come back within 1 to 2 business days. For anything else, I'll get back to you as soon as possible.
What happens next
- 1I'll ask for read-only access, or just your website for a search audit.
- 2I go through it and write up the 3 biggest fixes.
- 3A 20-minute call to walk you through it. No pitch unless you ask.