IT Budgeting for Small Businesses: What to Spend and Where

A typical small business spends 3-6 percent of revenue on IT, depending on industry and tech maturity. Professional services and tech companies skew higher at 5-8 percent, while retail and hospitality skew lower at 2-4 percent. For a 2 million dollar revenue business with 20 employees, expect 60-120k annual IT spend covering hardware, software, support, and security.

Hardware refresh cycles matter. Budget for replacing desktops every 4-5 years, laptops every 3-4 years, and servers every 5-7 years (or migrate to cloud). A typical business laptop costs 1000-1500 dollars, desktop 800-1200 dollars, server 3000-8000 dollars. Spread costs by replacing 20-25 percent of devices annually. For a 20-person office that is 4-5 devices per year or roughly 5-7k annually.

Software licensing is often underestimated. Microsoft 365 Business costs 12-22 dollars per user per month. Add design tools (Adobe 55 dollars per user per month), collaboration tools, accounting software (QuickBooks 50-200 dollars per month), CRM, project management, and industry-specific apps. A 20-person business easily spends 500-1500 dollars per month on SaaS or 6-18k annually.

Security spending is non-negotiable. Budget for antivirus and EDR (5-15 dollars per user per month), backup (10-30 dollars per user per month), password manager (4-8 dollars per user per month), email security (often included in M365 or 3-10 dollars per user per month), and security awareness training (5-20 dollars per user per year). For a 20-person business, baseline security costs 5-10k annually.

Internet and connectivity are foundational. Business-class internet in Albuquerque or Santa Fe ranges from 100 dollars per month for basic cable to 500 plus dollars per month for fiber with SLA. Add VoIP service (20-40 dollars per user per month for cloud VoIP), mobile data plans, and backup internet. For 20 users, expect 1000-2000 dollars per month for connectivity or 12-24k annually.

Managed IT services versus in-house staff. A full-time IT person costs 50-80k salary plus benefits, equipment, and training for a total of 70-100k annually. Managed services for a 20-person business cost 2000-5000 dollars per month (24-60k per year) and include helpdesk, monitoring, patching, security, and project work. MSPs scale better for small businesses. Hire in-house at 50 plus users.

Project work and one-time costs. Budget 10-20 percent of your IT budget for projects: office moves, network upgrades, new software rollouts, or server migrations. A typical small business spends 5-15k annually on project work. Build a reserve or work with an MSP on a retainer that includes project hours.

Cloud versus on-prem cost tradeoffs. Cloud services have predictable monthly costs but add up over time. On-prem has high upfront costs but lower long-term opex. For a 20-user file server, you spend 5k upfront and 500 dollars per year on maintenance, or 300-600 dollars per month for cloud storage. Over 5 years, cloud costs 18-36k while on-prem costs 7.5k. However cloud includes backups, redundancy, and no hardware refresh.

Plan for unexpected costs and emergency support. Reserve 10-15 percent of your IT budget for unplanned incidents: failed hardware, breach response, or emergency consulting. If your annual IT budget is 60k, keep 6-9k in reserve. Many small businesses burn this reserve and then defer necessary projects.

Track ROI and adjust annually. Review IT spending quarterly. Are you paying for unused licenses? Is security tooling delivering value? Are users satisfied with support response times? Use metrics like helpdesk ticket volume, system uptime, and user satisfaction surveys. Adjust budget allocations based on what drives productivity and reduces risk.

If you need help building an IT budget, selecting cost-effective solutions, or comparing managed services to in-house staffing, HelpTek can provide transparent guidance and fixed-price proposals tailored to your Albuquerque or Santa Fe business.