How much should a small business spend on IT?

20 March 2018 by Mark Williams

Although life is full of surprises, there are a few universal truths. One of them, just as sure as the sun rises in the east, is that people don’t like spending money - especially if they get little in return.

But in the business world, there is one thing that you should always be willing to spend on: technology. Indeed, 19 percent of all small business expenditure is on IT.

So the question is: for the best return on investment, how much should you be spending on your IT? Here's what we recommend.

The (not-so) quick answer

The question of how much a small business should spend on IT is like asking how long a piece of string is. It’s entirely dependant on context. Although we aim to answer this question to the best of our ability, you should take our recommendations with a pinch of salt.

In this article, we'll base our recommendations on a case study of an average UK small business. When reading, take our advice and consider it in the context of your own business.

(If you'd like more information on how best to direct your IT spending, please don’t hesitate to get in touch for a more detailed conversation.)

Case Study: ‘Small Business A’

A professional services firm, which we'll call Small Business A, is looking to revamp its IT.

  • There is no internal IT department, so the business needs to outsource things like IT support, set up, maintenance and general operations.
  • It has about 35 employees using company IT for their day-to-day work.
  • There is little in-house IT knowledge to go on, so the business needs guidance.

Recommended Spend

For ‘Small Business A’, we'd recommend a monthly IT spend of between £2,000 and £3,000. This amounts to a £24,000 to £36,000 annual expense. However, as we’ve said, this isn't just a general spend; it's an investment.

 

What IT areas should you invest in?

So, we have our approximate monthly IT spend. But where should that money go?

Software

Eighty-three percent of businesses agree that investing in software has a positive impact on innovation. This makes sense; after all, software is the driving force behind your IT.

You need to make sure you have the best software. If you don’t, your security will suffer and so will your overall business performance. Indeed, older software can prevent you from sharing files or working on mobile devices, and even affect your reputation. If there’s anything worth spending money on, it’s software upgrades.

Further reading:

Click here to download our non-techie guide to running your business from your phone.

Hardware

In 2013, a Microsoft study found 90 percent of customers would consider taking their business elsewhere if a business used outdated technology. If you don’t invest in your hardware, you can find your competitiveness suffering.

There is always new hardware that can improve your productivity and competitiveness. Take advantage of it, or your competition will.

Further reading:

 

IT Support

When looking for outsourced IT support, you need someone who can help you make the most out of your IT investments. You'll want an IT support company that can do everything you need, from IT support and hosting to high-level, professional IT consultancy.

But here's the thing: even if you outsource your IT department, they should still feel like part of the team. Click here for a helpful guide to finding the right IT partner.

Further reading:

 

Cloud Computing

The cloud is a lot more secure than it used to be. In fact these days, cloud storage is more secure than on-premises servers.

Investing in the cloud provides you with a virtual environment where you can run your applications and products on a reliable, secure and cost-effective basis. Also, it allows your employees to work from any location where they have internet, improving productivity across the board.

Further reading:

 

Click here to download our non-techie guide to running your business from your phone.

IT is more than a numbers game

We hope that this article has been helpful to you. We also hope you realise that IT investment is much more than just a numbers game.

The focus shouldn’t only be on how much you're spending. You should focus on what you're getting for your investment. That is how your business will not only grow, but increase in profitability as well.

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