When you are working out your business’ budget for the upcoming fiscal year, one of your main expenses will always be your technology. No business today operates without using some kind of technology or other, and although some rely on tech a lot more heavily than others, it is always important.
So how much should you spend on business technology?
It might be helpful to first look into how much the average business already spends on their IT services. As a rule, smaller and medium sized businesses normally spend around 3-4% of their annual top-line revenue on the technology in their business.
However, those companies in the midst of a period of considerable or sudden growth often spend around 5-7% of their revenue on technology. If you are working within these figures, you probably don’t have to worry – anything much below or above this could be a warning sign.
What Impacts The Price Of Tech?
There are so many factors that can impact how much you will need to spend on your tech each year, including:
- What outsourced services you use, if any.
- How up-to-date the tech solutions are.
- How well the IT in your business is maintained.
- Current market fluctuations.
Because there are all these factors influencing the price of tech, figures are going to change all the time – which is why it’s helpful to think of your spend in terms of the percentage of your revenue.
Important Components Of Any IT Budget
Ideally, your IT budget will include the following:
- Expenditure on hardware: workstations, computers, laptops, mobile devices. Without these, you won’t get far.
- Software. That will include everything from your email client to accounting software.
- Data services: internet, telephony and so on, so you can keep in touch with the outside world – and internally with every corner of the business.
- IT support services. How much do IT services cost? It depends, but this is one of the most vital components, so make sure to budget for it.
- Cloud technology. Few businesses don’t use the cloud in some way or another these days, so you should budget for this accordingly.
Determining Your Needs
It’s important that you are determining what your actual specific needs are, and not just following along with whatever you think other companies are doing.
For instance, you might not have a need for mobile devices, or you might want to rely extra on cloud servers. All of that will affect your pricing, so bear that in mind.
The Signs Of Good Budgeting
You will know that you have budgeted the correct amount for your IT and technology when you enjoy the varied benefits of good tech: improved customer relations, a better service to customers, stronger marketing, an easier set of internal processes for your employees and yourself, and the ability to streamline costs more effectively.
On the other hand, if you are lacking in any of those areas, it might mean that your use of technology is lacking too – which could be the result of poor IT budgeting.