How Much Should My Business Spend on IT? A Practical Guide
If you run a small or mid-sized business (SMB), there are data points, frameworks, and practical heuristics you can use to right-size your IT budget and avoid both overspending and under-investing.
Start with business drivers, not a magic percentage
Before you pick a number, anchor your budget to business outcomes: revenue growth targets, headcount plans, compliance obligations (e.g., HIPAA/PCI if applicable), and the role technology plays in your operations. A helpful way to translate strategy into spend is the NIST Cybersecurity Framework (CSF), which encourages risk-based investment across Identify, Protect, Detect, Respond, and Recover functions. Budgeting against these five functions helps you avoid gaps (e.g., great prevention but no response plan). NIST released CSF 2.0 with updated guidance that’s accessible to organizations of all sizes.
What SMBs are actually spending money on
One survey shows two-thirds of organizations plan to increase IT budgets this year, with security concerns, infrastructure updates, and new initiatives among the top drivers. The report also breaks down how budgets are allocated: among the smallest firms (<100 employees), a larger slice goes to hardware (24%), while managed services, facilities/power, and internal services take a bigger share as companies scale.
In practice, most SMB IT budgets fall across a handful of buckets:
Devices & infrastructure: laptops/desktops, networking gear, servers/Wi-Fi, backup hardware.
Software & cloud: productivity suites, line-of-business apps, security tools, IaaS/SaaS subscriptions.
Security & compliance: endpoint protection, email security, MFA/SSO, vulnerability management, awareness training, logging/response.
Services & talent: managed services (help desk, monitoring), specialized projects, and in-house/contract IT labor.
Cloud is great—cloud waste is not
Cloud and SaaS can improve agility and cash flow, but “set-and-forget” subscriptions lead to zombie spend. Cloud waste can be reclaimed with rightsizing, license hygiene, and better governance. For SMBs, routine audits of unused licenses, oversize instances, and duplicate tools can quickly yield savings without sacrificing capability.
Building a right-sized budget
Tie spend to headcount and risk.
As a quick planning lens, map essential per-employee costs (device + software + security + support). This yields a baseline you can scale with hiring or seasonal peaks.
Prioritize security as a first-order business risk.
Security remains a leading driver of budget growth for good reason. Ransomware and business email compromise disproportionately impact SMBs, and breach costs continue to rise. The increasing use of AI by bad actors is only going to make things worse. Investing in email security, endpoint protection, backup, and user training is typically far cheaper than incident response and downtime.
Modernize the foundation.
Aging switches, consumer-grade Wi-Fi, unsupported servers/OS, and decade-old PCs create hidden costs: slow staff, frequent outages, and higher security exposure. Make a rolling refresh plan—e.g., 3–4 years for laptops, 5 years for networking.
Audit subscriptions quarterly.
Create a central catalog of SaaS and licenses; reconcile it with HR offboarding and finance statements every quarter. Flag: unused seats, overlapping tools (two project trackers, two chat apps), and legacy contracts that no longer fit your workflow. Reclaiming even 10–20% of licenses is common after staff turnover or tool sprawl.
Use managed services to stabilize costs.
For many SMBs, a managed provider delivers predictable support (help desk, monitoring, patching), enterprise-grade tools, and security operations you couldn’t staff internally.
Budget for resilience, not just prevention.
A complete plan funds backup and recovery, incident response retainers, cyber insurance requirements, and tabletop exercises.
Track ROI with simple, meaningful KPIs.
Measure what matters to the business: help-desk mean time to resolve (MTTR), device age profile, patch compliance, backup success/restore time, phishing-simulation failure rates, endpoint coverage, and SaaS/license utilization.
How to know you’re in the right range
You’re likely under-investing if you have frequent outages, can’t pass security questionnaires, run unsupported software, or can’t restore quickly from backups. You’re likely overspending if you’re paying for overlapping tools, or you’re buying solutions without a roadmap.
There’s no one-size-fits-all dollar figure, but there is a good approach: Formulate cost per head, build right-sized solutions, and run quarterly audits to cut waste. Do those consistently, and your IT budget will stay in line—funding growth and security without lighting money on fire.