The two ways businesses set a marketing budget
Most marketing budgets are set one of two ways. The first is top-down: take a percentage of revenue and hand it to marketing. The second is bottom-up: start from the sales target and work out what marketing has to produce to reach it.
Top-down is quick and easy to defend in a board meeting, but it says nothing about whether the amount is enough to hit the goal. Bottom-up ties spend to outcomes, but it depends on numbers (conversion rates, cost per lead) that a young business may not have yet.
The practical answer is to use both. Build the budget bottom-up from your goals, then compare the total with a benchmark. If the two are far apart, one of your assumptions is probably wrong, and finding out which is the most useful part of the exercise.
What the benchmarks say, and their limits
The most widely quoted benchmark is Gartner's annual CMO Spend Survey. In its 2025 survey (opens in a new tab), marketing budgets averaged 7.7% of overall company revenue, flat on the year before. Half of the respondents reported budgets of 6% of revenue or less.
| Measure | 2025 figure |
|---|---|
| Average marketing budget, as a share of company revenue | 7.7% |
| Respondents with budgets at or below 6% of revenue | About half |
| Average for IT and business services firms | 5.8% of revenue |
| Average for consumer products firms | 9.7% of revenue |
| Share of the marketing budget spent on paid media | 30.6% |
Source: Gartner, 2025 CMO Spend Survey (opens in a new tab) (press release, 12 May 2025).
Read these figures with care. The survey covered 402 chief marketing officers in North America, the UK and Western Europe, most of them at companies with more than US$1 billion in annual revenue. It is not an Australian survey, and it does not describe small or mid-sized businesses. A local SME's right figure may be well above or below these averages, depending on its margins, growth plans and how much of its sales come through marketing rather than referrals or a sales team.
The sector split is the most useful part for most readers: businesses selling to other businesses tend to spend a smaller share of revenue on marketing than those selling consumer products, because more of their selling happens through people.
Building the budget from your sales goal
A bottom-up budget works backwards from revenue. You need a handful of numbers from your own records; where you do not have them, use cautious estimates and replace them as real data comes in.
- Revenue goal from new customers for the year, separate from repeat business.
- Average first-year value of a new customer.
- Customers needed = revenue goal divided by average value.
- Lead-to-customer rate: of the enquiries you receive, what share become customers? Use your CRM, not a guess, if you can.
- Leads needed = customers needed divided by the lead-to-customer rate.
- Cost per lead by channel from your own past campaigns, or from tests if you have none.
- Media budget = leads needed multiplied by the blended cost per lead.
- Add the fixed costs: people, agency or freelance fees, tools, content and creative production, and the website.
The sum is what your goal costs on current performance. If it is more than the business can afford, you have three honest options: lower the goal, improve conversion (often the cheapest lever), or accept a longer timeline. Cutting the budget and keeping the goal is the option that usually fails.
For current Australian costs per click and per lead on the main ad platforms, see our guide to Google and Meta ads costs in Australia.
How to split the budget
Once you have a total, divide it by job rather than by channel. Channels change; the jobs do not.
| Job | What it covers | How to judge it |
|---|---|---|
| Foundations | Website, tracking, CRM, core content and case studies | Is every lead recorded with its source? Does the site convert visitors who arrive? |
| Capture demand | Search ads, SEO, comparison and service pages | Cost per qualified lead and per customer, monthly |
| Create demand | Social, video, partnerships, events, thought leadership | Growth in branded search, direct traffic and pipeline over two or more quarters |
| Retain and grow | Email, customer content, referral programmes | Repeat purchase, upsell and referral rates |
| Test | New channels or messages with a set stop rule | Did the test reach its threshold within the agreed time? |
There is no fixed ratio that suits every business. A new business with no brand awareness may need more in creating demand; an established one with strong search demand may get more from capturing it. Gartner's finding that paid media took about 30% of the average budget is one reference point, but your own cost-per-customer numbers should decide the split.
Spend aimed at capturing existing demand can compound when it is kept up. For Ofload, technical SEO and pages built for each freight corridor took shipper leads from 95 to 420 a month in 2025, the kind of result a quarterly review should be able to trace back to a budget line.
How the budget changes with the stage of the business
The same method gives different answers at different stages, because the numbers you feed it change.
- New business or new product. You have little data, so the first budget is partly a learning budget. Spend on foundations and on small, measured tests across two or three channels, and plan to rewrite the budget after the first quarter of real numbers.
- Growing business. You know which channels bring customers. The budget question becomes how far each channel can scale before its cost per customer rises. Increase spend in steps and watch that number at each step.
- Established business. Much of your demand may already arrive through search, referrals and repeat customers. The budget protects that base (brand, retention, search presence) and funds a smaller share of new bets.
- Entering a new market or state. Treat it like a new business with its own budget line, rather than spreading the existing budget thinner. Australian buyers in different cities can behave differently enough to justify separate tests.
Whatever the stage, write the assumptions down next to the budget: the cost per lead, the conversion rate, the average customer value. When results come in, those assumptions are what you check first.
Costs that are easy to leave out
- Creative production. Ads need new images and video regularly; tired creative raises costs.
- Software. CRM, email, analytics, scheduling and design tools add up across a year.
- Landing pages and site changes. New campaigns often need new pages.
- Time from your own team. Approvals, interviews for case studies and sales follow-up all take hours that someone pays for.
- GST. Check whether quotes and platform invoices include it, so the plan and the actuals use the same basis.
Review it every quarter
A marketing budget set once a year and left alone will be wrong by March. Review it every quarter with finance and sales, using the same report each time.
- Spend against plan, by job and by channel.
- Leads, qualified leads and customers, by source.
- Cost per customer by channel, compared with the assumption in the plan.
- Pipeline still open, so that long sales cycles are not mistaken for failure.
- What will change next quarter, and why.
Move money towards channels whose cost per customer beats the plan, and away from those that miss it two quarters in a row. Keep the test budget even in a tight year; it is how you find next year's best channel.
If you want the spend planned and run against pipeline, see how we approach performance marketing in Australia, or read our performance marketing guide first.