IT Budget

How to develop a strategic IT budget for your small business

When you’re running a small business, proper budgeting can mean the difference between sinking and swimming. IT governs a lot of modern business activities, especially when you want to be future-focused or hold a lot of client data. Because of how important IT is, you need to take a strategic approach to create a budget. With a few simple tips, you’ll enjoy an IT strategy that benefits your business, without breaking the bank.

Look at what you have to work with

Always start your IT budget by looking at how much you have to work with. An easy way to do this is to look at what you’ve been able to use toward your IT expenditure so far and examine whether that figure is still available. If you’ve never directed money toward IT before, look at your revenue and identify how much you can use for IT purposes.

While looking at your revenue, examine whether there are any monthly or seasonal changes. Try to identify whether there are any scenarios where you’ll need to work with much less than you initially anticipated. While doing this, look at your absolute IT essentials and consider whether there are any areas of your business you could scale back on to accommodate them.

Budgeting

Decide which IT features will contribute to your business’s vision

Your business has a vision, and one of the best ways to achieve that vision is to allocate resources appropriately. When you’re deciding on different IT tools to use, it’s easy to get sucked into the idea of trying anything and everything that’s popular right now. However, if you base your choices on fads rather than what your business needs, you may spend money unnecessarily. To avoid this, consider whether your business could exist without the feature you’re considering.

One example of choosing a solution that’ll contribute to your business’s vision involves selecting cloud-based services to promote telecommuting.

Around 3.7 million employees work from home at least half the time.

If you plan on contributing to that statistic, you could count cloud-based services among your must-have items.

Consider maintenance costs among everything else

Your IT budget shouldn’t focus on services alone. Depending on the type of business you’re running, you’re likely to need routine maintenance too. Considering your IT maintenance costs will probably impress lenders and shareholders too. When they can see you’re taking everything into account, you’ll gain their trust.

You may also want to plan which vendors you’ll use for maintenance costs. Grab quotes wherever possible as this way you’ll be able to clearly compare costs so you know what is reasonable.

IT essentials

Examine previous budgets for feasibility

If this isn’t your first time creating an IT budget, you need to take a look at previous years to identify how feasible your plans are. Looking at your previous spending habits helps you to see whether you’re underestimating your requirements. If you find that you did overspend in previous years, you need to decide whether to broaden your budget or start making cost savings.

In addition to examining a previous IT budget for feasibility, you need to look at where you wasted money. If something didn’t prove as efficient as you thought it would be, avoid using it this year too. If you suspect that something in your IT budget could become more efficient, look at alternatives to the products you’re currently using.

Decide on absolute essentials

Even with the best of intentions, plenty of businesses face unexpected failures. Failing to prepare for such hardships could see your entire IT budget fall to pieces.

As of 2018, the annual hard drive failure rate was 1.25%. While that number is small, you don’t want to contribute to it.

While examining your budget, decide on the items you cannot manage without. That way, if you need to make cuts, you’ll already know which items require a firm commitment. You may also want to look at whether outsourcing some services could prove more efficient than contracting people in-house.

Look for expenses that may be variable

Depending on the nature of your business, you might find that some IT expenses are variable. For example, if some periods are busier than others and you need additional resources during those periods to meet demands.

Highlighting expenses that are variable prevents you from facing shocks when your IT budget needs to increase. It also allows you to align your resources during those periods with the IT services you require.

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Create a contingency fund

When one-off IT costs crop up, they’re unavoidable. For example, if you depend on local storage rather than cloud storage and your hardware breaks, you’ll need to pay to replace it. You’ll probably also need to pay for data recovery, especially if you want everything to continue running as normal.

It’s often the case that one-off costs appear when you least expect them. The best way to ensure they don’t have a significant impact on your business is to allocate some funds for dealing with them. Although those funds may not cover all the costs, they’ll at least cushion the blow.

Take a future-focused approach to periods of growth

Did you know that 85% of business pioneers agree that they need an AI strategy?

Even if your business isn’t considering AI right now, you may have a need for it in the future. If you’re planning on scaling your business in the upcoming year, consider whether you’ll need to include AI in your plans.

One example of a need to include AI involves changing your approach to customer service. If you envisage having an increase in the number of customers you’re serving, you could include a chatbot on your site to offset some of the customer service demands. When planning your budget for periods of growth, remember to treat the IT items you include as nice extras rather than absolute essentials.

With enough forward planning and a focus on contingencies, creating your IT budget is manageable. All you need to do then is put your plans into action.