I once took ten percent of a multi-million dollar marketing budget and parked it. Just set it aside as an emergency fund. Nobody asked me to. I thought we had too much money.
We hit our targets without it.
Not because the team was brilliant at efficiency. Because the budget was set by people who had never questioned whether the number made sense. It was a percentage of revenue, plugged into a spreadsheet, rubber-stamped at the start of the financial year. The same way every enterprise does it. The same way the "7 to 10% of revenue" rule tells you to do it.
That rule is the most popular answer to the most popular question in Australian business: how much should I spend on marketing?
It is also the wrong answer. Not because the number is off. Because the question is.
Australian digital ad spend wasted in a single year. That is 43% of total investment. The market is not short of money. It is short of knowing where the money goes.
The question nobody is asking
The reason you spend money on marketing is because you think that money will get you more business. It's really that simple. Some businesses don't spend money on marketing at all and they do just fine because they don't need marketing. Some businesses need marketing. Ultimately, it comes down to do you wanna grow? How fast? If you wanna grow sustainably, you have to spend sustainably. If you wanna grow aggressively, you have to spend aggressively.
That is the starting point. Not a percentage. Not a benchmark. A question about whether marketing earns its place in your business at all.
But most Australian businesses skip that question entirely. They set a budget, distribute it across platforms and check the dashboard at the end of the month to see if the line went up. If you can't understand what the ROI is, then you're guessing. If you're guessing, you're getting lucky.
If you can't understand what the ROI is, then you're guessing. And if you're guessing, you're getting lucky.
Where the 7-10% myth comes from
The widely cited "7 to 10% of revenue" benchmark comes from aggregated global CMO surveys. The number floats around 7-8% depending on the year and the research house. It is a useful number for analysts writing reports. It is a dangerous number for a business owner making decisions.
That percentage is a blended average across every industry, every business model, every growth stage and every geography on the planet. It treats a Melbourne plumber and a mid-market fintech and Adobe as the same thing. Very different businesses. Very different problems. Very different issues.
The backyard software developer versus a midsize fintech versus enterprise level. You cannot apply the same rule to all three and expect it to mean anything useful.
of all digital advertising spend in Australia was wasted in 2023. Nearly half of every dollar. The businesses spending it had budgets between $500K and $21M.
Next&Co audited more than 400 Australian companies and found that nearly half of total digital advertising investment went to waste. Not because the budgets were wrong. Because nobody was measuring whether the spend was earning its place. Retail was the worst offender. Google and Meta accounted for 90% of the waste. These are businesses following the percentage rule, distributing the budget and hoping for the best.
We have scored more than 700 Australian businesses across 70 industries on six dimensions of marketing performance. The spread is enormous. Trades and local services routinely outperform mid-market tech companies spending multiples more. Not because they have bigger budgets. Because they know what is working and do more of it. A tight referral network and strong local presence will beat a scattered digital spend every time if nobody is measuring the scattered spend.
The right marketing budget is not a percentage of revenue. It is a function of whether the last dollar you spent came back with more than it cost. Until you can answer that, the percentage is noise.
The budget conversation is broken before it starts
Forget "how much should I spend?" Start with two questions. Is marketing making me money? Do I have the infrastructure to know?
If the answer to either is no, spending more will not fix it. You are adding fuel to a fire you cannot see. The budget conversation is broken before it starts because the measurement conversation never happened.
This is where Australian businesses get stuck. Marketing was never a thinking thing. It was a dreaming thing. For decades, brand building was about creativity and gut feel. Now it has to be about evidence. The tools are more accessible than they have ever been. But the skill and the thinking have not caught up. So businesses have the instruments and no musicians.
What happens next is predictable. A business owner Googles "how much should I spend on marketing", finds the 7-10% rule, plugs it into a spreadsheet and carries on. Nobody asks whether last year's spend earned its place. Nobody runs the maths on which channels are contributing and which are dead weight. The budget becomes a ritual, not a strategy.
Scale when you know. Scale back when you don't.
If it is going well, why wouldn't you make it four percent? Or six? Or twelve? If your marketing is producing measurable returns, the conversation is not about a safe percentage. It is about how fast you want to grow and how much signal you have to support the decision.
Scale when you know. Scale back when you don't.
That is not reckless. It is the opposite. It means treating your marketing budget like a dial you adjust based on what the data tells you, not a fixed line item you set once a year because someone said 8% was the right number.
The enterprise story I mentioned at the top? After we hit our targets on 90% of the budget, we took the leftover money and invested it into infrastructure. We got a website up. We got a CDP in place. Enterprise-level tools that would help the business grow sustainably. We did not spend the surplus on more ads. We spent it on the ability to understand what the ads were doing.
I'm sure if you achieve 95% of your target on 90% of your budget, people are gonna love you.
That is rightsizing. Not land-grabbing. If you have more than you need, don't sit on it out of self-preservation. Don't treat it as a surplus you are entitled to burn. Give it back. Invest it in something structural. That earns more trust than spending money because it is there.
The pattern in the data
The biggest pattern across our benchmark dataset is not that businesses spend too little or too much. It is that they spend without knowing. They pick a number, distribute it and hope.
The budget question is really three questions. Do you know what you are spending? Do you know what it is returning? Do you have a plan for when the answer changes?
Most businesses can answer the first. Few can answer the second. Almost none have a plan for the third.
I have seen tradies with a better grasp of their unit economics than mature mid-market businesses with dedicated marketing teams. A plumber knows their call-out rate. They know roughly what they will make on a job before they get in the van. That is unit economics. Meanwhile, a marketing manager at a $20M company is allocating six figures in media spend and could not tell you the cost to acquire a customer or what that customer is worth over twelve months. It is not that tradies are better at numbers. They are just closer to the outcome. When you can trace the dollar from the ad to the job to the invoice, you make better decisions. Most marketing teams cannot trace anything past the click.
We see this constantly. Data and Tracking is the weakest scoring dimension in our benchmark dataset. Dead last across 70 industries. It is not that businesses do not care about their numbers. Most of them just are not across them. The plumbing to capture the data does not exist, and the people who are good at both building it and explaining what it means are thin on the ground. That is a supply problem, not a motivation problem. So businesses keep making capital allocation decisions in the dark and calling it a marketing budget.
If you are setting your marketing budget as a percentage of last year's revenue without knowing which channels earned their place, you are not budgeting. You are guessing with a spreadsheet.
What to do instead
Everything is risk. You might as well try to succeed. But trying to succeed without measurement is just hoping louder.
Stop asking "how much should I spend?" Start asking three different questions.
What did my last dollar of marketing spend actually produce? Which channels are earning their place and which are on life support? If I turned one off tomorrow, would revenue change?
If you can answer those, the budget sets itself. Scale what is working. Cut what is not. Put some infrastructure in place to not mess up again in the future. Put some guardrails in there. Capture as many data points as possible so the picture gets clearer over time, not blurrier.
If you cannot answer those questions, no percentage of revenue will save you. The 7-10% rule will feel comfortable. It will give you a number to put in the spreadsheet. But comfort is not the same as clarity, and the businesses that outperform in our data are the ones that chose clarity first.
If you want to see where your business actually sits, run the scorecard. It takes less time than the meeting where someone suggested benchmarking against 7%.
