How to Set an IT Budget For Your Business

How to Set an IT Budget For Your Business

How to Set an IT Budget For Your Business

Every year, technology advances by leaps and bounds. What seems like science fiction becomes commonplace, or even outdated, in just a few short years. This is true for tech in your personal life (how long did it take for smartphones to go from “futuristic” to widely adopted?), and it’s especially true for tech in your business life.

Almost every business today relies on technology in some way. A robust IT services plan will prepare businesses for when they need to install, update, maintain, fix, or implement new software, processes, and technology to help the business succeed and grow.

Businesses of all sizes should make sure that they are setting aside money in their budget for their IT needs, but one of the biggest challenges for businesses is knowing how much money to spend on their IT budget.


What Goes Into An IT Budget?

Your tech budget is important for several obvious reasons.

At its basic level, the budget will provide the funds that allow your IT department to do its job. Unfortunately, crafting a budget can be a long and sometimes painful process, and many IT or company leaders tasked with coming up with a proposed budget don’t take the time to do it properly.

That’s why so many companies just look at what was included in the previous year’s budget, add some flat percentage increases or decreases, and call it a day. Or worse, the individual in charge of proposing the budget just asks for as much money as they can get with no clear plan or strategy on how to use it.

businessman looking at budget paperwork

Your IT budget should reflect your strategy and goals for the coming year, essentially becoming a roadmap for how the next 12 months will proceed and include a realistic price point of what it will cost to accomplish everything. If leadership is already aware and has approved of those plans and strategies, then the budget should be approved with minimal pushback.

There are two main categories of expenses to consider when preparing your budget: ongoing expenses and project expenses.

Ongoing expenses will include things like your staff’s salary and wages, software licensing or subscription fees, hardware costs, etc. If you’re undertaking any projects, then costs associated with that project should also be included.

It’s also important to consider whether something is a fixed cost or a variable cost. Accounting for those fixed costs in your budget that cannot be changed will not only make your budget more accurate but will also make it easier to plan for those variable costs that can blow up a budget and cause headaches during the year.


How Much Do You Need In Your IT Budget?

Unfortunately, it’s impossible to say with certainty exactly how much your business needs to budget. There is no magic dollar amount that we can tell you to set aside that will guarantee you have the proper amount of funds.

Everything from the size of the business to your industry can have an effect on how much should be set aside for your IT department. But a rule of thumb is that companies—especially small and medium businesses—should spend between 3% and 6% of their revenue on their IT budget.

The size of the company seems to have a large amount of influence over the size of the budget. Smaller companies often spend a higher percentage of their revenue on their IT, while larger companies can get away with spending relatively less.

The industry the company is in also plays a major factor. Tech companies and industries that rely on expansive networks will naturally have to spend a higher percentage of their yearly revenue on their IT department than, say, a construction company.

The success of the company, and any potential desire to grow over the next few years, also can play a part in how much to budget. Spending money on IT is an investment in your company. The technology exists to help everyone be more efficient, and even automate certain workflows, which in turn can allow a business to level up to the next level.

More important than the size of your IT budget is how you use it.

It’s How You Use It That Counts

By now it should be clear that in order to properly prepare a budget, you need to have a plan.

This isn’t about throwing the maximum amount of money you can at your IT department and hoping for the best. Businesses who spend the most aren’t the ones who succeed, it’s the businesses that have a well-thought-out strategy and have the budget that allows them to properly execute it that finds success.

We here at Consortyo Networks & Security have years of experience serving hundreds of clients with their IT services and network security. We’ve worked with businesses of all sizes from across Central Florida and throughout the United States. If you have questions about your IT budget or need to discuss options that will help you and your business be more efficient, reach out to us today. We’re always excited to talk and provide a free written estimate for our services.