Small Business IT Budget: What to Include and How to Plan It

Article Summary: A small business IT budget should cover the technology you already use, the support needed to maintain it, and the upgrades you expect during the year. It should also include cybersecurity, backups, employee changes, planned projects, and a reserve for urgent repairs or replacements.

If your IT budget only covers computers, Microsoft 365, and the occasional repair, it’s probably missing several costs.

Your business may also pay for software subscriptions, cloud storage, backups, security tools, internet service, phone systems, a website, network equipment, staff training, and outside IT support.

Some of those costs show up every month. Others arrive once a year, or only when equipment needs replacing. Without a complete budget, an annual renewal or a failed computer can catch the business off guard.

A detailed budget shows what you pay for now, what needs replacing soon, and which improvements you plan this year. At Pacific Edge Technology, we help businesses across Richland, Kennewick, and Pasco plan their technology spending. Here’s what a small business IT budget should include.

There’s no standard IT budget for every small business

Online benchmarks often suggest spending a set percentage of revenue on technology. That number may have little to do with what your business actually needs.

A ten-person law firm, a retailer, and a manufacturer can have similar revenue but completely different systems. Your number of employees, locations, devices, cloud services, security requirements, and customer obligations all shape the budget.

Consider how much the business depends on each system. If losing internet access would stop customer payments, your connection deserves more attention than it would at a business that can keep working offline. If employees handle sensitive financial or health information, expect higher security and compliance costs.

Start by calculating what your business needs. Revenue benchmarks can add context afterward, but they shouldn’t set the budget.

Start with a complete technology inventory

You can’t build a small business IT budget without knowing what the business owns and pays for.

Create an inventory of computers, phones, tablets, printers, servers, network equipment, software, cloud services, websites, domains, backup systems, and phone services. For each item, record who uses it, what it costs, when it renews, who manages it, and how important it is. Include the supplier, contract term, billing frequency, and account owner.

The NIST Cybersecurity Framework 2.0 Small Business Quick Start Guide recommends keeping an inventory of hardware, software, systems, and services. It also suggests noting how the business would be affected if an important asset became unavailable.

Check invoices, company credit cards, bank statements, app stores, and department expenses. Software an employee bought directly may never show up in your main IT records.

Your inventory may uncover duplicate services, licenses for former employees, equipment that no longer gets updates, or subscriptions nobody uses.

Budget for computers and other equipment

Your small business IT budget should include every device you expect to buy or replace during the year.

A new computer often comes with monitors, docking stations, keyboards, headsets, webcams, cases, warranty coverage, and shipping.

Someone also has to prepare each device before an employee can use it. That means installing software, applying security settings, creating accounts, transferring data, connecting printers, and testing access to business systems.

Other equipment may include mobile phones, tablets, printers, scanners, payment terminals, security cameras, wireless access points, network switches, firewalls, and battery backup units.

Plan replacements on a schedule

Track each device’s purchase date, warranty status, operating system, and expected replacement date. Replacing a set number of computers each year is easier to budget than waiting until several fail at once.

Consider keeping a spare laptop ready to go. It can cut downtime when a device breaks.

Old equipment has costs too. Before you sell, recycle, return, or throw out a computer, phone, or storage device, someone must securely wipe the business data.

Include software and cloud subscriptions

List every subscription the business uses. These may include email and productivity software, accounting systems, customer management platforms, industry-specific apps, e-signature services, password managers, security software, backup services, cloud storage, device management, website hosting, and domain registrations.

Watch annual renewals

Check whether each service bills monthly or annually. Several annual renewals landing in the same month can strain cash flow, even when the monthly equivalent looks affordable.

Record each renewal date and your current number of licenses. Cancel licenses for former employees, unused accounts, and duplicate services. Confirm whether the provider requires a minimum number of users or an annual commitment.

Plan for growth

Allow for hiring during the year. A new employee may need more than an email license. They might also need security software, cloud backup, a business phone number, device management, and access to specialized apps.

Watch storage and usage charges, too. Some cloud services charge more as you store more data, send more messages, add locations, or use advanced features.

Finally, review what each subscription includes. Support, backup, security, data retention, and reporting may require a pricier plan or a separate service.

Account for employee onboarding and offboarding

A new employee may need a computer, accessories, software licenses, security tools, user accounts, phone service, and setup time. A brand-new role may also require more storage, internet capacity, or specialized software.

When someone leaves, IT must remove their access, transfer company information, collect equipment, and cancel or reassign licenses. The business may also need to keep their email or files for operational, legal, or compliance reasons.

Contractors and temporary staff add costs as well. Even when they use their own equipment, they may still need accounts, secure access, software, and support.

Estimate how many people you expect to hire and lose during the year. Budget for both the technology and the work these changes require.

Decide how you’ll pay for IT support

Your business may use a managed IT provider, employ internal IT staff, pay for support as needed, or combine these approaches.

Managed IT services

Confirm exactly what the monthly agreement covers. It may include help desk support, monitoring, updates, device management, user administration, security tools, vendor coordination, and routine maintenance.

Ask which services cost extra. Projects, after-hours work, office moves, major upgrades, equipment installs, and support for specialized apps may fall outside the regular agreement.

Pay-as-you-go and internal IT

If you pay for support as needed, review the last two or three years of invoices. Include emergency work, not just routine maintenance. Note how much you spent after equipment failures, account problems, internet outages, and security incidents.

Internal IT costs may include salary, benefits, recruiting, training, certifications, and coverage during vacations or sick days. Even one in-house IT person may still need outside help for specialized projects or serious incidents.

Set aside money for cybersecurity

Give cybersecurity its own line in your small business IT budget, even when some protections come bundled with your software licenses or IT support agreement.

Your cybersecurity budget may include endpoint protection, email filtering, multifactor authentication, password management, device management, security monitoring, updates, vulnerability checks, staff training, and incident response planning.

The right controls depend on the systems you use, the information you hold, and the damage an incident could cause. A business that stores payment details or confidential client records may need more protection than one with little sensitive data. Regulations, customer contracts, and cyber insurance requirements may also dictate what you need.

The NIST Cybersecurity Framework 2.0 covers six areas: governing risk, identifying important systems, protecting them, detecting incidents, responding, and recovering. Use those areas to check whether your budget covers more than just preventive software.

Not every small business needs every security product. Ask your IT provider which controls they recommend, which risks each one addresses, and whether another service already includes it.

Include backup and recovery costs

Budget for the entire backup and recovery process, not just the storage that holds the copies. Costs may include backup software, cloud storage, isolated copies, monitoring, restore testing, and professional help during recovery.

Confirm what gets backed up. Important information may live on employee computers, servers, cloud platforms, accounting systems, websites, mobile devices, and specialized apps.

Don’t assume every cloud service keeps deleted or damaged information as long as you need. Review each provider’s retention periods and recovery features. If they fall short, budget for a separate backup service.

Backups also need testing. A “backup successful” message only shows that a task ran. A restore test proves you can actually recover and use the data. The UK’s National Cyber Security Centre recommends regularly backing up essential information and testing that you can restore it.

Plan for growth here too. As your business creates more files, emails, recordings, and records each year, backup costs may rise.

Budget for internet and network equipment

Include your internet service, routers, firewalls, switches, wireless access points, cabling, and any support or security subscriptions tied to that equipment.

Consider a backup connection

If losing internet would stop the business, price out a backup connection. Compare that cost with the revenue, wages, and customer service time you’d lose during an outage.

Ask whether the backup uses a different type of service or a different provider. Two connections may still share the same local infrastructure, so one problem could knock out both.

Keep equipment current

Check whether your current connection can handle planned hiring, cloud apps, video calls, backups, and customer Wi-Fi. A service that works for ten employees may struggle as you grow.

Network equipment needs updates and eventual replacement. Track the support status of your routers, firewalls, switches, and access points, and schedule replacements for anything that no longer gets security updates. Budget for installation and setup too, since new equipment must be secured, connected, documented, and tested.

Include phones and communication services

Phone and communication costs may arrive on a separate bill, but they still belong in the technology budget. Include business phone systems, mobile plans, phone numbers, call recording, voicemail, video conferencing, messaging, and contact center services.

Check whether each service charges per user, phone number, call, recording, or storage amount. International calling, premium support, and extra features may add separate charges.

Budget phones and headsets for new hires. If you record calls, include the storage, access controls, and retention settings that requires.

Note when contracts end and whether you must return equipment. Switching phone providers may also involve setup, number transfers, training, and a temporary overlap between services.

Include website, domain, and online service costs

These can include domain registration, website hosting, security certificates, maintenance, updates, plugins, backups, online forms, analytics, and email delivery services.

Confirm who owns the domain and website accounts. They should belong to the business, not an employee, contractor, or web developer.

Track domain renewal dates and turn on renewal notifications. Losing control of your domain can take down your website, email, and every service connected to it.

If your website takes payments, bookings, or customer information, budget for keeping it secure and testing that it works.

Budget for staff training

Employees need training on the systems they use and the security risks they’ll face. Your budget may include security awareness training, phishing simulations, training for new software, and guidance for employees who handle sensitive information or approve payments.

Training should also cover what to do after a suspicious request, a lost device, information sent to the wrong person, or unusual activity. The Australian Cyber Security Centre’s Small Business Cyber Security Guide lists employee training as a key defense against email attacks.

Count the time employees spend in training, too. Even an inexpensive training platform still needs staff time during the workday.

New systems may require extra training. Include it in the project budget instead of assuming employees will figure out new software on their own.

Allow for compliance, contracts, and cyber insurance

Your industry, location, customer contracts, or insurance policy may require specific technology and security controls.

Costs may include security assessments, audits, policy reviews, vulnerability testing, data retention changes, access reviews, incident response exercises, or independent certifications.

A customer may ask you to complete a security questionnaire before signing or renewing a contract. Your answers may reveal controls you need to add. Cyber insurance applications ask similar questions about MFA, backups, endpoint protection, email security, training, and incident response planning.

Review upcoming renewals and audits before you approve the budget. That gives you time to gather quotes and finish required work.

Legal and compliance requirements vary by state and industry. Confirm your obligations with the right legal, compliance, insurance, and IT advisors.

Plan for technology projects

Keep planned projects separate from the normal operating costs in your small business IT budget. Projects might include moving offices, opening a new location, replacing a server, switching phone systems, improving Wi-Fi, moving data to a new cloud service, or adding a new business application.

Estimate the full project cost, including planning, licenses, equipment, setup, data transfer, testing, training, temporary services, and support after launch.

Some projects require running two systems at once while you move information and train employees. Budget for that overlap.

Ask department managers what changes they expect this year. A new service in one department may require extra security, storage, integration, backup, and support work. Business.gov.au recommends including both upfront and ongoing costs when planning digital spending, so check what each project will cost after launch.

Review supplier contracts and renewal dates

For each major supplier, record the contract owner, renewal date, notice period, billing method, and cancellation process.

Some services renew automatically. Others require advance notice to reduce licenses or cancel.

Check whether prices can change during the contract and whether it sets minimum quantities. If you expect to shrink your team or drop a system, make sure the contract lets you reduce licenses.

Confirm how you can export your data and what happens when the service ends. A cheaper replacement may still involve migration, setup, training, and overlap costs.

Never leave important technology accounts tied to one employee’s personal email or payment card. The business should keep access if that person leaves.

Keep a reserve for unplanned costs

A laptop gets damaged, a firewall fails, an employee urgently needs new equipment, or a problem requires work outside your support agreement. These things happen.

No single reserve percentage suits every small business IT budget. Base yours on realistic costs, like replacing an essential computer, paying for emergency support, or restoring an important service. Review unplanned IT spending from past years to guide the amount.

Keep the reserve separate from planned replacements. A computer already scheduled for replacement isn’t an unexpected cost.

Separate recurring costs from one-time costs

Recurring costs include software subscriptions, support agreements, internet service, phone systems, backup services, security tools, and equipment leases. One-time costs include new equipment, migrations, office moves, installation work, and major upgrades.

Track annual subscriptions separately from monthly ones, so you know when larger payments are due.

You may also need to separate operating expenses from capital purchases for accounting and tax purposes. Confirm the right treatment with your accountant.

How to build your small business IT budget

1. Create an inventory of your hardware, software, services, suppliers, and contracts.
2. Record current monthly and annual costs, renewal dates, and notice periods.
3. Identify equipment that needs replacing during the year.
4. Estimate hiring, departures, new locations, and other business changes.
5. Add support, cybersecurity, backup, training, compliance, and recovery costs.
6. Create separate budgets for planned technology projects.
7. Add a reserve based on realistic emergency support and replacement costs.
8. Review the finished budget with your IT provider and accountant.

Note who approved each item and who manages it. Then track actual spending during the year instead of waiting for next year’s budget.

Review the budget during the year

Check your small business IT budget at least once a quarter.

Compare actual invoices with what you expected. Look for new subscriptions, unused licenses, price increases, extra storage charges, and projects that cost more or less than planned.

Update the forecast when you hire, change locations, add new services, or sign a contract with new security requirements.

A quarterly review also gives you time to prepare for big annual renewals. Comparing providers is much easier when the deadline is still months away.

If you’re a Tri-Cities business planning next year’s technology spending, get in touch with Pacific Edge Technology. We’ll help you build a realistic IT budget and review it before you approve it.

Small Business IT Budget FAQs

How much should a small business spend on IT?

No reliable percentage works for every small business. Calculate the cost of the equipment, services, security, support, and projects your business needs. Industry benchmarks can add context, but they shouldn’t replace a budget based on your actual operations and risks.

Should cybersecurity have a separate budget?

Give cybersecurity its own clearly marked line, even when some costs come bundled with software or IT support. That makes it easy to see which protections you’ve funded and which improvements still need approval.

How often should we review the IT budget?

Build it once a year and review it every quarter. Also update it after major hiring, office moves, new systems, supplier changes, or new compliance requirements.

Should equipment purchases and monthly services be combined?

Include both in the overall IT budget, but track them separately. That makes it easier to tell recurring operating costs apart from one-time purchases and projects.

What costs do businesses commonly leave out of an IT budget?

Setup work, onboarding and offboarding, backup testing, staff training, security reviews, equipment disposal, project work, subscription price increases, and urgent replacements often get overlooked.

Who should prepare the IT budget?

The business owner or finance team should work with whoever handles IT. Department managers should also share plans for hiring, new software, projects, and changes to operations.

Sources and further reading

• NIST Cybersecurity Framework 2.0 for Small Business
• NIST Cybersecurity Framework 2.0 Small Business Quick Start Guide
• UK National Cyber Security Centre: Small organisations guide to cyber security
• UK National Cyber Security Centre: Small business response and recovery guide
• Australian Cyber Security Centre: Small Business Cyber Security Guide
• Business.gov.au: Develop your digital strategy

Featured Image Credit

This Article has been Republished with Permission from The Technology Press.