How much should a service business spend on marketing each year?

What are service businesses actually spending on marketing per year?

5-10% isn’t a number I made up, it’s based on quite a bit of research. Dr Grace Kite, a UK econometrician, looked at what works, rather than what businesses spend. And across three separate data sources, she found that spending 5-10% of turnover on advertising delivered the best return.

As for what businesses are actually spending, this tends to drift towards the higher end.

• Gartner’s 2026 CMO Spend Survey asked 401 marketing leaders in North America, the UK and Europe. Their budgets average 7.8% of revenue.
• The CMO Survey 2026 (Duke University, Deloitte and the American Marketing Association) splits spending by business model. B2B service businesses spend 10.1% of revenue, and B2C service businesses spend 7.2%.

With these surveys, there’s just one catch. Both asked senior marketing leaders at large companies, businesses big enough to have a dedicated marketing department, which most service businesses don’t. In my experience, most businesses with 5-20 staff spend less than these averages, but 5-10% is a great benchmark to aim for. Brand consultant and marketing professor Mark Ritson recommends aiming closer to 10%, especially if you want to grow! (More on how he actually splits that budget below.)

What about Australian businesses?

There are 2.8 million actively trading businesses in Australia. Of those, 232,912 employ between 5 and 19 people. If that’s you, you have a lot of competition.

It’s definitely getting more crowded too. In one year, Health Care and Social Assistance grew 6.7%, Financial and Insurance Services grew 4.3%. And across Australia, 16.9% of businesses are brand new each year.

Every year a new batch of competitors opens, usually with a shiny new website and a hefty marketing budget.

What does “marketing” mean?

Before you compare your spend to anyone else’s, work out what it is you’re counting. Marketing budget means different things to different people. Some may include staff and software, some only count the dollar value spent on paid advertising.

For a service business, marketing mainly includes:

• Your website: hosting, maintenance, security updates and changes
• Google Business Profile: posts, photos, reviews and keeping it up to date
• SEO and content: blog articles, and new services to keep you current across local and AI search
• Paid ads: Google, Meta, LinkedIn and paid management of ads.
• Social media and email marketing
• Brand and design: Logos, Canva templates, signage, brochures and other print.
• Tools: Booking software, email platforms, your CRM.
• Time: Yours or a staff member’s. Your time isn’t free just because you don’t invoice for it.
• Directories and listings: Paid profiles on industry directories and booking or referral sites.
• Networking and relationships: Association memberships, conferences, sponsorships, and referral partner thank-yous or client gifts.

Where to focus your efforts depends on what your acquisition and growth goals are for your business. All of these things add up, and most businesses find they’re already spending way more than they initially thought.

How much is right for my business?

It’s easiest to start with a percentage. Here’s what 5% and 10% looks like at different revenue levels:

• $500,000 a year: $25,000 at 5%, or $50,000 at 10%
• $1.5 million a year: $75,000 at 5%, or $150,000 at 10%
• $3 million a year: $150,000 at 5%, or $300,000 at 10%
• $5 million a year: $250,000 at 5%, or $500,000 at 10%

If you’re not prepared to invest this much, then work backwards from what a client is worth to you.

For example: if a new client is worth $2,500 to you and you spend $50,000 a year on marketing, around 20 new clients covers it. For a firm where one client is worth $10,000, it’s just five.

For most established service businesses, 20 new clients a year isn’t a stretch. It’s fewer than two a month. And many clients come back, stay on, or refer others, so the real return is actually a lot bigger than it looks.

When to spend more, and when to spend less

Spend more if:

• You’ve just opened, moved or added a location.
• You’ve hired a new practitioner and need to fill their books.
• You’re in a competitive suburb or a crowded specialty.
• You’ve rebranded or just launched a new service.

Spend less if:

• Your books are full and you have a waitlist.
• You’re already at capacity and happy to stay that size.
• You have referral partners sending you more work than you can take.

However, even when you’re spending less, make sure you never stop your marketing completely. Byron Sharp, the marketing scientist behind How Brands Grow, argues for staying visible all year. That means reaching people before they need you and spreading your marketing out rather than doing it in short bursts when you need new clients.

The reason for this is pretty simple. Researchers at Byron’s institute found that only about 5% of potential clients are ready to buy at any given time. The other 95% will need you eventually. When they do, they’ll pick the name that comes to mind first. If you’ve been active in your marketing and they think of your name first, you’ll get the first phone call. That’s why doing a whole lot all at once, then 6 months of nothing, just wastes money.

Those that stick it out consistently will get the highest results.

Where should you spend your marketing budget?

Mark Ritson splits every marketing budget into two pots, and this is the structure I like to follow for myself and clients. How much goes in each pot comes from research by Les Binet and Peter Field, who analysed hundreds of campaigns and found the best results came from roughly 60% brand and 40% performance. For B2B businesses, their later research actually put it closer to half and half. Treat these numbers as a starting point, pick a split that suits your business, and stick with it.

Performance | Gets you enquiries now

This might cover Google Ads, local SEO, your Google Business Profile and a website that makes booking with you really easy. It’s fast and measurable, but paid channels like ads stop working the moment you stop paying.

Brand building | Makes people choose you

Having a recognisable brand makes people know and trust you before they need you. Brand includes a consistent look, useful content, LinkedIn, community presence and great reviews. It’s slower, but it’s why someone will pick you over anyone else when they enter the market.

What should you focus on first?

Most businesses only do performance because they can see the results. But performance only reaches people who are already looking to buy. Brand building is what makes them remember you and look for you.

I recommend starting with your brand foundations: your logo and visual identity. Then build a website that shows up when people search and makes booking easy. From there, you can add more performance channels and advertising as you grow.

Prefer someone to do it all for you?

That’s most of the professional service businesses I work with. You’re past the stage where marketing is something you do on a Sunday night, but you’re not ready to hire an internal marketing manager. My clients are usually established teams of 5-20+ who are ready to grow and would rather work directly with a specialist than an agency.

My marketing retainers are built for this stage of business. I manage your website, Google Business Profile, content and strategy, and I understand how professional service businesses win clients. Get in touch and we’ll work out what your marketing budget should be, and come up with a plan.