How much should an Inner West small business spend on marketing, and how much of it on ads?

The short answer

Most owner-led businesses on King St, Enmore Rd, Marrickville Rd or Darling St do not need a large budget to start. They need one number that is defensible, and a budget big enough to produce a readable result: enough enquiries in a month that you can tell what is working. A budget that produces two enquiries a month tells you nothing, whichever way it goes.

The usual way to get a number is a percentage of revenue. That is the wrong place to begin, and this guide explains why. It then replaces the percentage with three numbers you can work out from your own books in an afternoon: a floor, a ceiling and a cap.

Sources: Queensland Government; Gartner; Google Ads Help; King St Ads Co. audit, September 2026. Links are in the sources list below.

The percentage rules, and who publishes them

Search for “how much should I spend on marketing” and you will find a percentage of revenue. Here is what we could verify, and where it comes from.

• 5 to 15 per cent of revenue. The Queensland Government’s small business site says: “Some marketing experts suggest spending between 5–15% of total revenue on marketing.” The same page adds that most businesses are limited by what they can afford, and that the most important outcome is a positive return on investment. That is a state government repeating an expert rule of thumb, not an official benchmark.
• 7.7 per cent of company revenue. Gartner’s annual CMO Spend Survey reports that marketing budgets remained flat at 7.7% of company revenue (2025). It is a survey of chief marketing officers. The public page does not give the sample, so treat it as a description of organisations that employ a chief marketing officer, not of a Marrickville Road practice with one receptionist.

There is no official Australian benchmark. We did not find a percentage published by the Australian Government or a regulator that we could verify, and we did not find a verifiable Australian figure broken down by industry. Agency blogs quote plenty, but a precise percentage for “a business like yours” with no sample behind it is an opinion.

It is still worth seeing what the rule implies. Take a business turning over $600,000 a year (illustrative). At 5% that is $30,000 a year, or $2,500 a month. At 15% it is $90,000 a year, or $7,500 a month. If that business keeps 10% of revenue as net profit (also illustrative), net profit is $60,000, so the top of the range spends more on marketing than the owner takes home in profit. A rule that can recommend that is not a budget.

Why percentage rules fit owner-led local businesses badly

1. Revenue is an output, not an input. A new practice with thin revenue gets a tiny budget just when it needs to be found. A builder booked out for six months gets a large one when more enquiries would only create a waiting list.
2. They ignore margin. A dollar of revenue carries very different profit in a cafe, a dental practice and a renovation business. Spend should follow gross profit per customer.
3. “Marketing” is broader than ads. It includes the website, photography, signage, print, events, email, sponsorship and the owner’s time. A percentage rule says nothing about how to split those, and paid ads are often the smallest line for a shopfront business.
4. They ignore capacity and customer value. The same percentage for a $12 coffee and an $80,000 kitchen renovation is not describing the same decision, and extra demand is wasted if the diary is already full.

A percentage tells you what other companies spent. It cannot tell you what a customer is worth to you.

Working backwards from what a customer is worth

Start from the customer, not the platform. Four numbers decide how much you can sensibly pay for paid search clicks:

1. Value of a new customer. The gross profit you expect over the first year, not the first invoice. A new dental patient, a renovation client and a cafe regular are very different numbers.
2. Enquiry-to-customer rate. Of every 10 people who enquire, how many become customers? If you do not know, use your own phone-and-email history for the last month.
3. Click-to-enquiry rate. The share of website visitors who call, book or submit a form. This is a website question as much as an ads question.
4. Cost per click. Set by the auction and your account quality. Google Ads shows it to you after a week or so of data; do not guess it.

The first three multiply into a break-even cost per click: value of a customer × enquiry-to-customer rate × click-to-enquiry rate. For example, $900 × 1/4 × 1/20 = $11.25. If the auction charges more than that per click, each click loses money on average, however good the ad looks.

The floor, ceiling and cap method

The break-even figure gives you a ceiling: the most you can pay for a customer before the ads lose money. A ceiling is not a target: plan to pay well under it, because the rates are estimates and early months usually run worse than the model.

The floor is the smallest monthly budget that gives a readable result. We use roughly 10 enquiries a month as a working minimum, because below that, one good or bad week swings the picture. The arithmetic is: floor = target enquiries × clicks needed per enquiry × cost per click. For the builder above, 10 × 40 × $9 = $3,600 a month in clicks. For a Marrickville Road dental practice, assume (illustratively) a new patient is worth $700 in first-year gross profit, 1 enquiry in 3 becomes a patient, 1 visitor in 12 enquires and clicks cost $5. The break-even click is $700 × 1/3 × 1/12 = $19.44, and the floor is 10 × 12 × $5 = $600 a month.

The cap is the most your catchment can absorb. A shopfront serving a few suburbs has a limited pool of people searching for what it sells in a given month. Once your ads show on nearly every relevant search, extra budget buys either lower-quality searches or repeat views of the same people. The platform’s own reports, such as search impression share, show how close you are.

• If the floor is above what you can afford, paid ads are the wrong tool this quarter. Put the money into the website, your Google Business Profile or word of mouth.
• If the floor is below the ceiling and the cap, you have a range to work within. Start near the floor and increase only when readable results justify it.
• If the cap is lower than the floor, the channel cannot give you a readable result for this service. Look at a broader service area or a different channel.

The dental floor of $600 looks small against the modelled $2.3K to $5K in the table below, but they measure different things: the table is modelled spend across businesses, and the floor is the least that teaches you anything. As for how much of total marketing goes to ads, it is whatever is left after the foundations are paid for. An illustrative monthly split for that practice at $3,000 total: $300 for website upkeep and Google Business Profile, $300 for photography and content, $400 for local print and sponsorship, $200 for ad management, and $1,800 for paid search clicks. Ads take 60% in that example because the practice already has a working website, and a different business could sensibly choose 20% or 80%.

GST: decide whether your budget is ex or inc

Google Ads says that “All Google Ads sales in Australia will be subject to a goods and services tax (GST) of 10%”, and that this affects accounts with Australian business addresses. Google also says it cannot advise on tax. We could not read Meta’s own tax help page when researching this (Meta blocks automated access), so check the tax line on your own Meta invoices rather than assuming either way.

The consequence is simple and often missed. A budget of $3,000 that is ex GST costs $3,300 in cash. If you are registered for GST and the purchase meets the ATO’s conditions for a GST credit (you must be registered, intend to use the purchase for your business, and hold a tax invoice for purchases over $82.50), the $300 can come back through your activity statement. If you are not registered (the ATO says registration applies once GST turnover reaches $75,000 or more), the $300 is a real cost. If your business makes mainly input-taxed supplies, the credit conditions may not be met. Ask your accountant.

• Pick one basis and write it down. Say “$3,000 a month ex GST” in the plan, and use the same basis when you compare cost per enquiry.
• Reconcile the first invoice. Compare it with the budget you set. Do not assume the daily budget in the platform is the figure that appears on the invoice.

This is general information, not tax advice. The ATO and your accountant are the right sources for your situation.

Why Inner West strips can start small

For reference, here are the budgets we model for the businesses in our audit. They are modelled from the category mix, then divided across businesses in each group. Per business, the starting range is similar across industries. What changes is how competitive your suburb and service are, and how much one new customer is worth.

Use the table as a sanity check, not a target. If your spend sits far outside it, find out why.

Timing, and when not to spend

Search interest is not flat across the week. Google Trends data we pulled for Sydney (5 Sep to 4 Oct 2026) shows “dentist” searches averaging 69.5 on Mondays against 13.6 on Saturdays, on Google’s 0 to 100 relative scale, while “real estate” held between 50 and 79 every day. If your category looks like the first pattern, ad scheduling can move spend towards the days people search. It is a relative index, not a count of searches.

Local events. Newtown Festival and the Marrickville Music Festival change foot traffic on a strip, and a hospitality or retail business might lift spend around them. We have no data on how much search or sales move, so test it against your own takings and confirm dates with the organisers.

When not to spend yet. Do not run ads if your Google Business Profile is unclaimed or wrong, your website does not load properly on a phone, or you cannot tell when someone has enquired. In our audit, 22 of 108 businesses had a broken public record: a dead domain, the wrong suburb, or no confirmed site at all. Advertising on top of a broken record pays to send people to a dead end. The Google Business Profile checklist is the free place to start. Also hold off if you have no spare capacity, if gross profit per customer is too thin to leave room for the cost of winning one, or if you cannot measure enquiries yet. The tracking check covers that last one.

Once you do spend, see where the first $10,000 goes in what $10,000 of advertising buys. The usual first-month leaks are tracking that is not set up, targeting all of Sydney instead of the catchment, broad match with no negative keywords, and judging results after four days. A clinic and a tradie each have their own version.

How AI-assisted checking changes this: an agent can read a search terms export of 5,000 rows in minutes and flag spend that matches no customer you serve. A person still decides what is relevant, because only the owner knows which enquiries are worth having.

When this advice is wrong

• The inputs are estimates. The break-even formula is only as good as the enquiry-to-customer and click-to-enquiry rates. New businesses often have none. Start with a cautious guess and replace it with measured numbers after a month.
• First-year profit is not all collected in the test window. A dental patient or a renovation client may take months to pay. The formula can look better than your cash flow.
• Brand effects are invisible here. Some spending builds familiarity that later converts through a different channel. The method undercounts that, and we do not know by how much.
• Competition changes the click price. A new competitor on your keywords can move your cost per click without anything changing in your account.
• Not all marketing is measurable. A fresh shopfront, a good window or a reputation among neighbours matters, and no formula captures it.

What we would do first this week

• Work out gross profit per new customer over the first 12 months, using last year’s invoices.
• Count last month’s enquiries and how many became customers. That gives your enquiry-to-customer rate.
• Calculate your ceiling, then the floor using an assumed cost per click that you label as an assumption.
• Decide whether your figure is ex or inc GST and ask your accountant whether you can claim the credit.
• List every marketing cost you already pay: website, print, sponsorship, software. Add them up before you add ads.
• Check your Google Business Profile and that a test enquiry actually reaches you. Fix what is broken before spending.
• Choose a three-month review date and write down in advance what result would make you spend more, the same or less.

If you would rather have someone read your accounts for you, our audit looks at what your ad accounts are doing before it suggests any budget change. We work read-only. Ask for an audit here if that is useful.