How Much Should I Spend on Ads? (An Australian Small Business Guide)

If the scariest part of marketing for you is handing over money for ads that might vanish, this guide is the antidote. The fear is reasonable. Plenty of people have watched an ad budget disappear with nothing to show. But that usually happens because the number was a guess. Once you calculate it properly, ad spend stops being a gamble and becomes arithmetic.

First, ignore the percentage rules

You've probably read that you should spend "7 to 8 percent of revenue" on marketing. Here's where that number actually comes from: a blog post on a US government small-business website, published back in 2012, that cited no research and quietly assumed your profit margins were 10 to 12 percent. Nearly every article since has copied it, usually dropping the margin caveat that made it mean anything.

The other common figure, "5 percent," traces to nowhere at all. And no Australian government body recommends any percentage. The official small-business advice sensibly declines to give one.

For the record, what do businesses actually spend? Surveys put the average around 8 to 9 percent of revenue, but that average is dragged up by big spenders. The typical business, the median, sits closer to 5 percent, and half spend 6 percent or less. Here's the catch, though: all those numbers answer "what does everyone else spend," which is a completely different question from "what should I spend to hit my goals." Yours could be higher or lower, and both be right.

The honest way to work out your number

Forget percentages. Work backwards from what you actually want. It's three steps.

Start with the customers you want. Say you want ten new customers a month.

Work back to leads. If you close one in four of the people you speak to, ten customers means forty leads a month.

Work back to budget. Decide what a lead is worth to you. If a customer is worth $2,000 and you're happy to spend 15 percent of that to win one, you can afford about $75 per lead that becomes a customer. Combine that with a realistic cost per lead for your field, and you have your monthly number.

That's it. It isn't elegant, but it's yours, built from your economics instead of someone else's average. And it immediately tells you whether the maths even works. If the numbers don't add up at realistic costs, no amount of budget will rescue the campaign, and that's far better to know before you spend than after.

As a rough guide to plug in, advertised costs per lead in Australia tend to run from around $35 to $90 for home services on Facebook, up to $120 to $280 for competitive fields like dental or legal on Google. Treat those as ballpark, not gospel, and there's a reason for that caution coming up.

Why you can't just spend $10 a day

A fair question: can't you start tiny and scale up? Not really, and it's worth knowing why, because it isn't the platforms being greedy.

The ad platforms use automated bidding that has to learn who converts before it gets efficient. Google's own system wants to see something like fifteen conversions in a month before it has enough to work with, and it asks for a few weeks before you judge the results. Meta's works similarly, needing a steady flow of conversions each week to get out of its "learning" phase. Starve it of data and it never learns, so it never gets cheaper, so you conclude "ads don't work" when really the budget was too thin to ever prove anything.

That's why, in practice, Australian operators tend to converge on a floor of somewhere around $1,000 to $3,000 a month for a real campaign. It's not a rule anyone can enforce, the platforms will happily take a dollar a day. It's just the level below which you're paying for noise instead of data.

A quick warning about the numbers you'll see

While we're on costs, one honest heads-up that ties back to choosing anyone to run your ads. Be very sceptical of confident-looking Australian ad benchmarks. When I went looking, there's no properly documented Australian cost-per-click or cost-per-lead dataset anywhere. The best-known ones openly use US figures, and I found at least one agency citing an "Australian benchmark study of 8,400 accounts" that, as far as I can tell, doesn't exist.

The lesson isn't to distrust all numbers. It's that anyone quoting you a precise Australian figure to two decimal places is probably repeating something invented. Your own arithmetic, from your own client value, beats any benchmark, because it's actually about you.

The most important rule: don't feed a leak

Here's the one that saves people the most money, and it's the opposite of what an ads salesperson will tell you. If your funnel is broken, do not spend more on ads.

More money pointed at a page that doesn't convert, or a follow-up that never happens, doesn't get you more customers. It just loses you money faster. If you're not sure whether your funnel is ready to receive traffic, that's worth checking before you raise a budget, not after. There's a whole guide on this, and it's the single most common way owners waste ad money.

How I handle it, so you're not guessing

Because I only get paid when the ads work, I have every reason to get your budget right rather than talk you into a big one. So the minimum ad spend I'd suggest isn't a fee, and it isn't a guess. It's the output of exactly the arithmetic above, worked out from your client value and the number you want to hit, and agreed with you in writing before anything starts. That money goes straight to Google or Meta, never through me, and I'll always say so plainly next to the word free.

If you want your actual number, not a percentage and not a guess, that's part of what a free funnel teardown works out. We run the maths on your business together, and you keep it whether or not we ever work together. No pressure, and no ad spend leaves your account until you've decided the numbers make sense.