There is no perfect formula for an IT budget, and anyone who hands you one is skipping the part that matters. The useful question is not “what percentage of revenue should I spend?” It is “what does each person need to work reliably and securely, without wasting time?” Answer that, and most of the budget writes itself.
Per-user beats percentage-of-revenue
You will hear that IT should be some fixed share of revenue. As a rough gut-check against other businesses your size, fine. But it tells you almost nothing about what you actually need. A law firm, an accounting office, a contractor, a medical practice, a nonprofit, and a manufacturer can all pull similar revenue and have completely different technology requirements.
For most small businesses, IT is a per-user and per-device conversation. If you have 20 employees who all depend on email, Microsoft 365, file access, line-of-business software, printers, remote access, phones, security, backups, and support, then every one of those people carries a real technology cost. It may not sit in one tidy line item, but it is there whether you name it or not.
What a real budget actually covers
A budget built only around monthly subscriptions and the occasional emergency will come up short, because the whole environment has to be maintained. A complete picture includes user support, workstations, servers or cloud infrastructure, Microsoft 365 or Google Workspace, cybersecurity tools, backup and recovery, email security, network equipment, internet and firewall and wireless, any compliance needs, hardware replacement, and money set aside for projects and improvements.
Think about IT the way you already think about vehicles, equipment, insurance, or rent. It is part of the cost of operating. The goal was never to make it as cheap as possible — it is to make sure technology stops being the thing that slows the business down.
“Cheap IT” does not remove the cost — it relocates it
I get the instinct. I own a small business too, and nobody wants another monthly bill. But spending as little as possible on IT rarely eliminates the cost. It just pushes it somewhere harder to see.
It shows up as employees waiting on slow computers, old hardware dying at the worst possible moment, recurring printer and email and file-access problems, no real backup plan, weak security, messy onboarding and offboarding, and the owner or office manager quietly becoming the unofficial IT person. That is almost never a good trade. If a $35-an-hour employee loses time every week fighting computer issues, that is real money. If it is the owner — the person who is supposed to be growing the business — it costs even more.
The biggest bite tends to come when something breaks. A server fails, email gets compromised, a workstation dies, a former employee still has access, or a backup will not restore cleanly. That is usually when a business learns its “cheap IT” was only cheap because nobody was checking the things that mattered.
The line item almost everyone forgets
Hardware replacement. Owners will budget for monthly software and support, then forget that computers, servers, switches, firewalls, access points, battery backups, and printers all age out. One day you look up and several machines are six or seven years old, and replacing them feels like a surprise.
It should not be. Workstations belong on a replacement cycle. Network gear should be tracked. Servers should not drift forever just because they still power on. You do not need anything fancy — just know what equipment you have, how old it is, whether it is under warranty, when it should be replaced, and roughly what that will cost. That alone turns hardware from an emergency into a planned expense.
Projects are the other blind spot. Your monthly support covers the day-to-day, but it usually does not mean every larger improvement is included forever. Office moves, cloud migrations, server replacements, major network upgrades, compliance work, and software transitions need to be planned and funded on their own.
“Is that a lot to spend on IT?”
Compared to what? Compared to doing nothing, managed IT can feel like a lot. Compared to downtime, payroll disruption, a ransomware incident, lost files, or employees losing time every week, it is often very reasonable. The number on its own does not tell you much — you have to weigh it against what the business depends on.
And you are already spending on technology whether it is organized or not: Microsoft 365, internet, phones, software, aging hardware, random repairs, emergency service, cyber-insurance requirements, employee downtime. So the sharper question is not “is this a lot?” It is “are we spending in a way that makes the business more reliable, more secure, and easier to run?” If yes, it is probably not too much. If no, even a smaller number is wasted.
Worth-it spending versus wasted spending
IT spending earns its keep when it reduces risk, saves time, improves reliability, or helps the business run better. It is wasted when it is just buying tools with no plan behind them.
You do not need every shiny security product or every new platform that comes along. More tools do not mean better IT — a pile of disconnected tools can make things worse, because nobody is sure what is actually being managed. Good spending has a clear purpose: real protection against real threats, faster support, fewer recurring problems, tested backups, clean onboarding and offboarding, stronger Microsoft 365 security, current hardware under warranty, a stable network, and a plan for what is next.
Wasted spending looks like paying for software nobody uses, buying security tools and never configuring them properly, replacing hardware without fixing the underlying problem, keeping legacy systems alive too long, paying for duplicates, and making one-off decisions with no strategy behind them.
The best IT spending is boring in the best way. Things work. Employees are not constantly complaining. Backups are tested. Security is enforced. You know what is coming instead of getting surprised every few months. That is what a good IT budget actually buys: fewer surprises, less risk, and a business that runs better.
A simple next step
If you want a second set of eyes on where your IT spending is going — and where it might be quietly leaking — OST works with Rhode Island small businesses on exactly this. We are happy to take a look.
