Quick Answer
The 70-20-10 budget rule allocates resources across three tiers: 70% to core operations and proven activities that sustain the business, 20% to adjacent initiatives that extend current capabilities, and 10% to transformational or experimental projects. This framework balances maintaining current performance with investing in growth and innovation, and is widely used for R&D, marketing, and strategic planning budgets.
The 70-20-10 framework was popularised by Google, which famously allocated engineering resources this way: 70% on core search and advertising, 20% on adjacent products (Maps, Gmail), and 10% on moonshot projects (self-driving cars, balloon internet). The principle has since been adopted across industries for budget allocation, innovation management, and strategic planning.
The 70% — Core operations. This funds activities that keep the business running and growing predictably. For a SaaS company: current product development, existing customer success, proven marketing channels, established sales motions. These are your bread and butter.
The 20% — Adjacent growth. This funds initiatives that extend your current capabilities into new areas. New market segments using your existing product, new features for existing customers, expanding into adjacent geographies, or testing new sales channels. These have moderate risk and moderate potential return.
The 10% — Transformational bets. This funds experimental projects with high uncertainty but potentially high payoff. New product lines, emerging technology experiments, entering fundamentally new markets, or business model innovations. Most will fail, but the ones that succeed can transform the business.
For marketing budgets: 70% on proven channels (SEO, paid search, content), 20% on scaling newer channels (events, partnerships, community), 10% on experimental channels (new platforms, creative formats, emerging media).
For product development: 70% on core product improvement and technical debt, 20% on feature extensions and platform capabilities, 10% on new product concepts and R&D.
For overall company budget: 70% on run-the-business costs, 20% on strategic growth initiatives, 10% on transformation and innovation.
The 70-20-10 split is a starting point, not a rigid rule. A mature, profitable company might shift to 80-15-5. A startup in growth mode might use 50-30-20. The right ratio depends on your stage, industry, competitive pressure, and risk appetite.
Track spending against each tier separately. Review quarterly whether the allocation is holding and whether each tier is delivering expected outcomes. The biggest risk is the 70% absorbing the 20% and 10% during cost pressure — protect innovation spending deliberately.
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FAQ
Yes, but adjust the ratios. A small business might not have budget for a 10% moonshot tier. A 80-20 split (core vs growth) may be more practical. The principle still holds: don't spend everything on keeping the lights on — invest in growth.
Ring-fence innovation budget at the start of the year with executive sponsorship. Separate it from departmental budgets so it's not subject to individual department cost pressures. Assign a senior leader as the sponsor of the innovation portfolio.
Don't measure the 10% by traditional ROI metrics. Use learning-oriented metrics: hypotheses tested, experiments run, time to validate or kill ideas. The 10% is an option portfolio — most options expire worthless, but the winners should be transformational.
Similar concept, different origin. McKinsey's Three Horizons (H1: current business, H2: emerging opportunities, H3: future options) maps roughly to the 70-20-10 allocation. Both frameworks emphasise balancing current performance with future investment.
Tag budget line items as Core (70%), Adjacent (20%), or Transformational (10%) in Grove FP. Use custom reporting views to track actual spend against each tier and ensure the allocation holds throughout the year.
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