One of the basics of running a successful business is to make and stick to a budget. We all know that is much easier said than done, but this vital tool can allow you to see the complete picture of what your small business is spending on IT services. Analyzing spending, profits, and cash flow enables you to anticipate future ways to spend your money—because, as you know, technology always needs updates and more or better software and hardware, all of which cost money.
Here are 9 tips for developing an IT budget for your small business.
1. Detail total costs and expenses.
Your calculations should include fixed, variable, and semi-variable expenses. These prices may sometimes fluctuate due to inflation, price increases, and other factors, but having them on paper is critical.
2. Involve multiple employees in the IT budgeting process.
If you have a dedicated IT person on staff, then of course, they should lead the IT budget; if you work with a managed service provider (MSP), they can help you identify what needs to be included in a budget. It’s prudent, however, to also ask your employees what IT items are on their wish lists that will help them do their jobs better and to keep them updated on the company’s short and long-term financial goals so everyone on your team can help to work toward them. After your IT budget is drafted, ask a committee of employees review it.
3. Keep both short and long-term risks in mind.
As the leader of a small business, you need to anticipate what is ahead and be able to steer your business to meet those needs on the horizon. For example, changes in IT staff, increased prices from your MSP, or inflation can impact your business’ bottom line.
4. Err on the side of overestimating costs.
Overestimating expenses is a good way to hedge your funds while making sure IT expenses are covered. Talk with your IT staff or MSP to thoroughly identify what an anticipated expense will include and include an additional amount for any unexpected overages.
5. Pay attention to business cycles.
With any business, there are always busy and slower phases during the year. Your IT budget should reflect these phases. During boom times, spending on IT can be a little higher, while it should decrease during slower seasons. You can also use those slower times to review your IT budget and identify where costs could be cut.
6. Don’t forget to budget time.
One of the most commonly overlooked pieces of a budget, even an IT budget, is time. IT projects can certainly end up taking more time than anticipated, so it is critical to make sure to estimate time accurately. Once again, rely on your IT staff or MSP to help you estimate the length of an IT project or update so your monthly IT budget can accurately reflect those costs.
7. Expect variation.
No budget ever stays the same, and an IT budget is no exception. Once you understand the business cycle for your small business, you can anticipate new or fluctuating costs that might affect IT. It’s a good idea to revise your monthly and annual IT budgets on a regular basis and make adjustments where needed. The need for cloud backup storage, for example, will continue to grow and offers a lot of important benefits. Cloud solutions are easy to implement and can save money and mitigate risk. You should also include wiggle room for emergency funds and unexpected costs that may arise.
8. Include infrastructure updates.
Your IT budget should always include money set aside for updating infrastructure. Whether you are getting a brand new option for a certain function or feature or updating a system that requires continuous upgrades, keeping your IT infrastructure up to par is a necessity.
9. Consider less expensive options.
One way to supplement your IT budget is to find and utilize less costly alternatives to some of the big-name programs you use. For example, Google Apps and LibreOffice provide suites of programs that execute the same functions as the higher-priced Microsoft Office suite. You could try it on a trial basis and see how it works for your small business before switching over entirely.
For a closer look at how managed IT can help save your company money and keep your operations running smoothly, watch our video that highlights the benefits of preventive maintenance.