In 2022, there was a massive increase in the need for IT professionals. Demand was up by 28% compared to the previous year.
As a consequence, the payouts for IT employees are going to be massive in the upcoming months. Make sure your IT budgeting practices accommodate these changes.
As cyber-attacks and other security hazards continue to surge, safeguarding your organization’s data is vital. Having the right financial plan means you can rest easy knowing your company’s information is protected. Here are 5 crucial IT budgeting tips for small businesses.
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1. Identify Your IT Needs
Look at what similar companies are doing with their technology expenses. This can give you a sense of what’s important and how much you need to spend.
Determine what hardware you have and how many employees you need to operate it effectively. This will help you assess whether it’s time for replacements and how much those upgrades might cost. If you have a network that needs more than one person to function, it’s time for your hardware to be upgraded.
Consider whether a dedicated IT team is necessary, or if your current staff could handle the workload. If you need to hire more technical personnel, include this in your budget.
2. Speak to Your Accountant
Before you think about additional expenses, get a clear understanding of what your company can afford. Talk to your accounting department and ask if they have a set budget for the IT department. If so, ask about their upcoming bills and whether there’s wiggle room for new purchases.
3. Understand Your Regular Expenses
As a small business owner, it’s up to you to understand what it costs to run your business. This means knowing how much money goes into maintaining your technology infrastructure. It’s also important to have an accurate picture of how many employees are working on IT-related issues so you can account for their salaries in future budgets.
4. Take a Business Budgeting Class
Many small businesses use Google Sheets to keep track of their cash flow and expenses, but you can also use an online tool like Mint or YNAB (you need a budget). If you’re going with digital instruments like YNAB, join one of their free classes so you can learn how to best use the tool.
Besides learning your budgeting program, it’s essential to learn how much money you should allocate for IT services. Budgeting classes will teach you the skills necessary to balance your finances and make reasonable expectations for your business. There are free courses available online, but you can also take a certificate course from a local training institution.
5. Prepare for the Worst
Budgeting for the worst-case scenario ensures that you have enough money to keep your business afloat in emergencies.
Imagine you have an employee who’s been managing your cybersecurity for several years but abruptly quits without explanation. In that case, you’ll need to hire a new cybersecurity manager before your database is breached. If you planned for this scenario in your budget, you’d be able to hire a new employee quickly and prevent the loss of sensitive data.
Average IT Budget
The average IT budget for a small business is 6-7% of total revenue. This can vary widely depending on what kind of business you’re running. Businesses that use less sophisticated technology, such as restaurants and retail stores, usually have lower IT budgets.
What Does an IT Budget Include?
Hardware and hardware as a service are major expenses for a small business. You’ll need to budget for servers, storage devices, routers, and other physical hardware. The amount of hardware you need will vary based on how many employees are using your network.
Any software your business uses on a regular basis should be included in the budget. This covers accounting software, payroll software, and other productivity tools.
The price of security tools such as firewalls, antivirus programs, and antispam software is also important.
Consider the cost of a security audit as well. Make sure you can afford one if your business is hacked.
Employee training is another important consideration. Your employees need to know how to use the network and any software programs you purchase. Prepare to spend money on training materials and classes.
If there are tasks that require outside help from an expert, such as upgrading hardware, then these costs should also be in your monthly budget.
How Big Does the IT Department Need to Be?
The size of your IT department depends on the size of your business. In general, it’s recommended that there be one IT professional for every 100 employees.
Use your discretion to determine the appropriate size based on the technology you’re using. For example, if you have 500 employees who only use email and spreadsheets to get their jobs done, one IT person may be enough to manage those systems. However, a larger IT department might be necessary if half of your employees use complex programs like Salesforce or Quickbooks Online (QBO).
Make IT Budgeting Simple
If you’re a small business owner, it’s tempting to think that IT budgeting isn’t worth the time. But remember that a solid IT department is an integral part of your business’ profits. If you don’t take the time to plan for it, you could end up with a system that isn’t secure—or worse, one that fails when you’re serving customers.
Make sure you put aside enough money in your budget to have the necessary IT services for your business. But if budgeting is giving you a headache, check out our finance section for tips on money management.
