IT budgeting for a small business: how much is normal
A normal IT budget is the amount it takes to keep your people working and your data safe without paying for things nobody uses. There's no published figure that fits every business, but you can work out your own number in an afternoon. Add up what you pay each year, divide it by the people who use it, and set aside a reserve for the things that break. That gives you something real to compare against, which is more useful than any average you'll find online.
Start with a list of what you already pay for
Most small businesses underestimate their IT spend, mostly because it's scattered across lots of small charges. One subscription is cheap. Ten of them, renewing on different dates and billed to different cards, add up quickly. Pull your bank and card statements for the last twelve months and search for anything recurring. Then write down everything that falls into one of these groups:
- Email and office software, such as Microsoft 365 or Google Workspace, billed per user
- Cloud storage and file sharing
- Accounting, booking, or industry software you rely on every day
- Phone and internet lines, including any mobile plans for staff
- Backup services, antivirus, password managers, and other security tools
- Domain names and website hosting
- Licences that renew yearly, like a firewall or a remote access tool
- Hardware you've bought, leased, or financed, plus any repair bills from the last year
- Support, whether that's a person on your team or an outside provider
Be honest about the last line. If someone on your staff spends a few hours a week fixing printers and resetting passwords, that's a cost even if it never shows up as an invoice. Estimate their hours and put a figure on it. Leaving it out is how budgets end up looking healthy on paper while the work quietly gets done by someone who should be doing something else.
Turn the total into a cost per person
Once you have the list, split the recurring costs into monthly and yearly figures so they're all on the same footing. Add the monthly charges together, multiply by twelve, then add the yearly charges. That's your annual recurring total. Divide it by the number of people who use your systems, and you have a per-person number.
Here's how that looks with made-up figures. Say your recurring costs come to a total for the year and you have a team of eight. Divide the total by eight. The result is what each person costs to equip each year. If it looks high, you can check it line by line. If it looks low, look again at your list, because something is probably missing. Most often it's the support time or the software a single team uses that nobody thought to count.
Hardware needs its own line, because it doesn't renew every year and it's easy to forget until something dies. Most businesses plan to replace laptops and desktops every three to four years. Take the cost of a typical machine, divide by the replacement window, and add that yearly amount to your budget. That way the replacement doesn't arrive as an unexpected bill.
Keep a reserve for the things you didn't plan for
Even a well-planned budget gets hit by surprises: a laptop dropped in a parking lot, a drive that fails without warning, a router that dies on a Friday afternoon, or a bill for a security issue you didn't know about. Keep a separate reserve for these. The simplest rule is to set aside an amount you could cover in one bad month without borrowing or cutting something important. If you've had a rough year of repairs, raise it for next year.
Then decide who handles IT when something goes wrong. If you have no one on staff who looks after your systems, budget for an outside provider on a monthly basis and treat it as a fixed cost. If you do have someone doing it on the side, budget for their time as well as their tools, and make sure they have time set aside for it. A person who is stretched across their normal job and IT will do both badly, and the cost of that shows up later as downtime.
Once you have the total, the per-person figure, the hardware plan, and the reserve, you have a normal number for your business. You can compare it with the same list next year and see where it's moving. That comparison will tell you far more than an average from someone else's company.
This week, pull those statements and make the list. Work out the annual total and the per-person figure. If you'd like a second pair of eyes on the numbers or want help deciding who should look after your systems, reach out to Tech Parachute and we'll go through it with you.