How to Budget IT Support and Expenses for Small and Medium Businesses
Many small businesses struggle to estimate their monthly and yearly IT expenses.
Without the appropriate knowledge of potential needs, growth, replacement costs, and support, unexpected IT costs can quickly put a strain on a small business’s budget.
General estimates of price ranges fail to account for the unique needs of your business. For example, a graphic design company may need specific software subscriptions and computers with large graphics cards, whereas a law firm may need reliable business phone systems and multiple printers.
Knowing your specific business needs is only half of the battle. You also need to know the costs of critical equipment, ongoing support, replacement costs, subscriptions, and vendors. Plus, with the increasing costs of computers and memory, it’s crucial for businesses to plan out their IT budget so they have enough not just for the year but in case of critical equipment failure.
Here’s what to consider when building your IT budget.
Why Small Business Need an IT Budget
An IT budget is more than simply planning for replacing computers and renewing software subscriptions, it’s also for maintaining critical systems that your business needs to operate such as the Wi-Fi network, phones, and servers.
When one of those systems fails, you don’t just pay the cost to get it back up and running, you also pay in lost employee productivity, delays in customer requests, and a stall of daily business operations. Those costs can hurt your bottom line more than the cost of calling IT out to fix it.
A well planned IT budget helps you:
- Understand your ongoing technology expense
- Plan for equipment replacements
- Identify unnecessary software subscriptions
- Plan for cybersecurity and data protection
- Anticipate business growth
- Reduce unexpected technology expenses
The goal isn’t to spend more money on IT, but instead to ensure you’re spending money in the right places and have enough funds in case of critical issues or technology failures.
What Should Be Included in a Small Business IT Budget?
Every business uses technology differently, so there isn’t one strict budget or range that will work for every business.
A medical office, law firm, and retail store may have the same number of employees, but their needs will be drastically different.
However, most businesses can generally expect to spend their budget in some common categories.
Computers and Equipment
This includes laptops, desktops, monitors, printers, network equipment, tablets, and any other devices that employees or your company uses. (Network equipment can be counted here or under network and infrastructure, just make sure it is included somewhere).
This also includes the additional costs associated with new equipment such as installation and configuration, warranties, and accessories.
Multiple computers purchased at the same time will likely come to their useful end at the same time too. Rather than waiting for computers to become unavailable, establish a replacement schedule so expenses can be spread across several years.
Software, Website, and Cloud Services
List the applications your business uses such as Microsoft 365, your accounting and payroll software, CRM systems, cloud storage, and any industry specific software.
Similarly, your business website requires domain registration, website hosting, regular maintenance, software updates, plugins, and backups which all need renewed. If your website accepts payments, or takes customer information, include the cost of maintaining secure payment portals and forms.
Make a note of how each service is billed (yearly or monthly) and when each subscription renews. Additionally, it may be useful to keep track of how each service is paid for. If it is on a company card, when does the card expire and does it always have sufficient funds for each renewal. Do you know what subscriptions would need to be updated if the card is lost or stolen? Missing a renewal for your needed software, website, or other service could mean website downtime, lost productivity, and potentially even the loss of important business data.
Setting reminders for upcoming renewals can help you avoid missed payments while giving you a chance to review your subscriptions, eliminate unused licenses, and cut costs from overlapping services.
Internet and Network Infrastructure
Your internet connection, firewall, network equipment, switches, and cabling are critical for daily operations, and all will likely require security updates, maintenance, and eventual replacement.
If your business relies heavily on internet access, it’s worth considering whether a backup connection would be worthwhile.
Include your monthly internet costs in this estimate and check when your contract is due to renew or increase.
Business Phone Systems
Your business phone costs may include monthly subscriptions, physical phones, headsets, call recording, and employee smart phones and phone plans.
If your business relies heavily on working phones, it may be worth considering a backup system in case of failure.
Backup and Disaster Recovery
Data loss from hardware failures, accidental deletion, or cyberattacks can disrupt your business and lead to unexpected expenses.
Your IT budget should include backup software, storage, monitoring, and recovery testing. Make sure important information stored on computers, servers, and cloud platforms like Microsoft 365 is protected.
Understanding the Cost of IT Support for Small Businesses
Small businesses generally have three options for IT support, each with its own costs and benefits. The best approach depends on your business’s specific needs, challenges, and budget.
Pay-As-Needed/Break-fix IT Support
With this approach, you contact an IT provider when something breaks.
This works well for businesses with simple technology needs, but it also means unpredictable costs. One month you may only need IT support for a few helpdesk tickets, but if the next month there is a critical equipment failure, network outage, or even data loss, your IT expenses could be enormous.
The break-fix approach also means that there are no guaranteed response times, so when something breaks, an IT company could take days to get it working again.
Break-fix support means unpredictable monthly costs making it hard to plan for.
Managed IT Services
Managed IT Services involve paying a regular monthly fee for an agreed upon set of services and guaranteed response times.
This may include helpdesk support, cybersecurity monitoring, user management, and routine maintenance.
This approach makes an IT budget easier to predict as all your support needs are bundled into a single monthly rate.
When comparing IT support companies, be sure to look past the monthly price and understand what is and isn’t included, guaranteed response times, and what kind of support you can expect both during and after hours.
Internal IT Support
Some larger businesses may find it more cost effective to hire their own internal IT technician(s) instead of outsourcing them.
This solution is really only available to large companies that can justify the salary and benefits, training, certifications, equipment, and other expenses incurred when hiring their own IT staff.
Don’t Overlook Cybersecurity and Data Protection
Cybersecurity should be a planned expense, not something you only think about after an incident.
Depending on your business, cybersecurity costs may include:
- Endpoint protection and security monitoring
- Multifactor authentication
- Email Security and phishing protection
- Password Management
- Employee cybersecurity training
- Data backup and recovery solutions
- Security assessments and compliance support
If your business handles confidential client records, financial information or health information you will likely have additional security and compliance requirements.
A good Managed Service Provider should also be able to help with these points.
Expect the Unexpected
Even with thorough IT budget planning, unexpected problems happen.
A laptop gets damaged, a phone stops working, a network device fails, or a security incident requires additional support.
Setting aside money for unplanned IT expenses, helps prevent these situations from disrupting your budget and business.
There isn’t one amount that works for every business. Instead, consider the cost of replacing your most important equipment, getting urgent IT help, or restoring critical systems and set the amount aside. Only use that amount for urgent and unexpected expenses, not planned upgrades or growth.
How to Build a Practical IT Budget
1. Review Your Current Spending.
Gather invoices for hardware, software, internet, phones, IT support, and security services.
2. Separate recurring and one-time expenses.
Identify what you pay monthly, quarterly, or annually as well as equipment purchases and repairs.
3. Identify upcoming replacements.
Determine which computers, network devices, and other equipment may need replacing.
4. Consider business growth and changes.
Hiring employees, moving offices, or adding services may increase technology expenses.
5. Review your security and backup needs.
Confirm that important systems and business information have appropriate protection.
6. Include a reserve for unexpected expenses.
Only use your reserve for unexpected expenses.
7. Review your budget quarterly.
Compare actual spending with your plan to see where you are spending more or less than you should be.
Your budget shouldn’t be something you create once and then never review. Regular check-ups can help you identify IT changes and needs before they become an unexpected expense.
How a Managed IT Provider Can Help Control Costs
Many small businesses assume that hiring a managed IT service provider (MSP) is too expensive or more than their business needs. However, an MSP can actually help reduce long-term IT costs by preventing costly problems, improving security, and making technology expenses more predictable.
Beyond day-to-day help desk support, an MSP can provide ongoing threat monitoring, employee cybersecurity training, and guidance for future growth. They can also review your existing systems, identify unused or overlapping subscriptions, plan equipment replacements, and help prioritize technology investments.
With the right expertise, an MSP can help you choose cybersecurity protections, backup solutions, and support services that fit your business’s needs and budget, without paying for unnecessary tools or services.
Frequently Asked Questions
How much should a small business spend on IT?
There isn’t a universal amount that works for every business. Your budget should reflect the number of employees, devices, software subscriptions, security requirements, and importance of technology to daily operations.
What is included in IT support for small businesses?
Depending on the provider, IT support may include troubleshooting, help desk assistance, software updates, device management, network support, cybersecurity, and user administration. Always confirm the scope of your agreement.
Are managed IT services worth it for small businesses?
Managed IT services can be useful for businesses that want ongoing technical support and more predictable service costs. Whether they’re worthwhile depends on your technology needs, internal resources, and the services included.
How often should a small business review its IT budget?
Reviewing the budget quarterly can help identify changes in software costs, equipment needs, staffing, and planned technology projects.