Digital Marketing Budgets: What a Small Business Should Actually Spend
“How much should I be spending?” is the first question most small business owners ask us, and the honest answer is that nobody can give you a single number without knowing your business. At Bolder Digital, we are an agency, so you should be suspicious of any budget advice from us that conveniently adds up to what we sell. Here is a method that works whoever you hire, including nobody.
The Percentage Rules, and Why They Only Get You Started
Most guides suggest a share of revenue. For established Australian businesses, five to ten percent is the commonly quoted range. Newer businesses or those pushing for growth often see ten to twenty percent. Large company surveys, such as Gartner’s, put average marketing budgets at around eight percent of revenue, and the US Small Business Administration has suggested seven to eight percent for smaller firms.
Two cautions. First, no credible dataset shows what Australian small businesses actually spend, so treat those figures as planning ranges, not observed norms. Second, a percentage ignores your margins. If your gross margin is thin, a share of revenue can exceed what you can afford. Some advisers suggest using ten to twenty five percent of gross profit instead.
A Worked Example
Take a Tasmanian trade business with $600,000 in annual revenue and a 35 percent gross margin, which is about $210,000 in gross profit. These numbers are illustrative.
Six percent of revenue is $36,000 a year, or $3,000 a month.
Ten percent of gross profit is $21,000 a year, or $1,750 a month.
The gap between those two figures is the point. The right number depends on what the business actually keeps from each sale.
A Better Method: Work Backwards From Customers
A more useful way to set a budget is to start with what you want to achieve and what a customer is worth.
Using the same example, assume:
an average job is worth $800 and earns about $320 in gross profit
customers return once on average, so lifetime gross profit is about $480
a common rule of thumb is to keep the cost of winning a customer to around a third of that, which is about $160
If one in four enquiries becomes a customer, you can afford roughly $40 per enquiry. To win ten new customers a month, you would budget around $1,600 a month. That figure comes from your own numbers, not a generic percentage, and you can test it against what channels actually deliver.
What Published Costs Look Like in Australia
Prices vary a great deal, but published Australian guides generally suggest:
Google Ads: ad spend of roughly $1,000 to $2,500 a month for a small business, plus a management fee, commonly $800 to $2,000.
SEO: local, single location work often runs from about $750 to $1,500 a month, with broader small business retainers around $1,500 to $3,000, and competitive markets higher.
Combined agency retainers: often $2,000 to $6,000 a month.
A realistic floor for a local service business: one guide suggests about $2,500 to $5,000 a month in total, management and ad spend together, for meaningful results.
These come from agency pages with a stake in the answer, and a regional Tasmanian market has fewer searches than a capital city, so budgets and expectations should scale accordingly.
Where the First Dollars Should Go
The order matters as much as the amount.
Foundations. A website that converts visitors, an accurate and complete Google Business Profile, a steady flow of reviews, and tracking so you can see what works. These are cheap and often make everything else work harder.
Capturing people already looking. Local search and Google Ads aimed at people searching for what you do.
Compounding assets. SEO and useful content, which take months to build and keep working.
Creating demand. Social and video, once the basics are working.
Do not forget what happens after the click. Slow or missed enquiries waste whatever you spend above them, which is why we put follow up and call handling in the budget, not outside it.
Concentrate Your Spend
A common mistake is spreading a small budget across five channels. Each gets too little to work. Most advice, including ours, is to pick two or three channels and fund them properly. One agency’s suggested split for a modest monthly budget puts the majority into SEO and content and roughly a third into paid ads, with the remainder on web improvements. Treat that as one example, not a rule.
The Costs People Forget
A budget is more than the headline fee:
Ad spend is separate from management. You pay Google or Meta, and you pay whoever manages it.
GST. Check whether quotes include it.
Content and photography. Good photos and video cost money.
Tools. CRM, call tracking, and booking software.
Your own time. Replying to reviews and approving work takes hours.
Capacity. There is no point buying leads you cannot serve.
Watch for Cheap Management Fees
At typical Australian hourly rates, a management fee of a few hundred dollars a month buys only a handful of hours. It may be enough for a tiny account, but be sure you know what you are getting.
Pitfalls to Avoid
Judging results after one month, particularly for SEO.
Cutting spend during a quiet patch, then wondering why enquiries dry up.
Signing long contracts without a way to check the results.
Letting an agency dictate the number, instead of deciding what you can sustainably invest.
Spending without tracking.
When to Spend Less, and When to Spend More
Spend less if you are full, if referrals already fill your calendar, or if you cannot serve more work. Spend more if you are new, entering a new market, or if each customer is worth a lot over time, provided tracking and follow up are in place. Our piece on measuring marketing ROI covers how to check.
A Sensible Way to Start
If you have nothing in place, a simple approach looks like this:
Pick a starting percentage of revenue or gross profit that you can sustain for six months.
Work out what a customer is worth and what you can afford to pay for one.
Fund the foundations first, then one or two channels.
Review at three and six months using customers and cost per customer, not clicks.
Adjust based on what you see.
How Bolder Digital Approaches Budgets
At Bolder Digital, we start with your numbers: your margins, what a customer is worth, and what you can sustain. We then recommend where the first dollars go, usually foundations such as your Google Business Profile and reviews, before paid or more expensive work, and we show the results by customers won. You can see how this fits into our Google Business Profile optimisation and review management services.
The Bottom Line
The right marketing budget is not a universal percentage. It comes from your margins, what a customer is worth, how fast you want to grow, and what you can keep up for long enough to see results. Start with the foundations, concentrate on a few channels, track customers, and review honestly. A modest budget spent well beats a large one spread thin.
Frequently Asked Questions
What percentage of revenue should a small business spend on marketing?
For established Australian businesses, five to ten percent of revenue is a common planning range, with newer or fast growing businesses often higher. If margins are thin, using a share of gross profit instead can be safer. These are planning guides, not observed averages.
How much does Google Ads cost for a small business in Australia?
Published guides suggest roughly $1,000 to $2,500 a month in ad spend, plus a management fee that commonly runs $800 to $2,000. Check whether quotes include GST.
How much should I budget for SEO?
Published Australian ranges vary widely. Local, single location work often starts around $750 to $1,500 a month, and broader small business retainers are commonly $1,500 to $3,000. Results build over months, not weeks.
What should I spend on first?
Foundations: a website that converts, a complete Google Business Profile, a steady flow of reviews, and tracking. Then fund one or two channels properly instead of spreading a small budget thinly.
How do I know if my budget is working?
Track enquiries and customers by source and cost per customer, and review at three and six months. Clicks and visits alone do not show whether money is well spent.
Jarryd Holmes, Founder & Owner, Bolder Digital | Prospect Vale, Tasmania | bolderdigital.com.au
