What a Proper IT Budget Really Looks Like

As a business owner, you’ve probably wondered at some point, “Are we spending the right amount on IT?” If you’re like most small to mid-sized businesses, your IT budget might be based on what you spent last year, plus a little extra.

Here’s the thing: IT isn’t just a cost, it’s a critical investment that directly impacts how your business runs, how secure it is, and how ready you are for growth.

I’ll walk you through what a proper IT budget really looks like, how to tell if you’re underinvesting, and what to include to protect and power your business.

Investment vs. Expense: A Mindset Shift

Before we talk numbers, let’s talk mindset.

Too often, IT is seen as just another expense. A proper IT budget should be seen as an investment. One that supports your business goals, helps you manage risk, and keeps your operations running smoothly.

If you’re only looking at what you spent last year and adding 5%, that’s not a strategy. Instead, look at your business goals, risk tolerance and operational needs to help build your optimal IT budget.

How Much Should You Be Spending?

Industry standards suggest that 5% to 7% of your top-line revenue should go toward your IT budget. Of that amount, 10% to 15% should be set aside specifically for cybersecurity.

To make it easier, here’s what that might look like for a mid-sized business bringing in $10 million in annual revenue:

Category	% of IT Budget	Dollar Amount
Infrastructure & Hardware	20%	$120,000
Software & SaaS	20%	$120,000
Internal IT Staff Salaries	25%	$150,000
Cybersecurity	20%	$120,000
Cloud & Hosting	10%	$60,000
Training, Support, Other	5%	$30,000
Total IT Budget		$600,000

This kind of budget isn’t just a nice-to-have. It ensures you’re investing in the right tools, people, and systems to support and protect your business.

Signs You’re Not Spending Enough

Here’s how to tell if your IT budget might be too low:

• You’ve had a security breach.
• You’re spending less than 2% of revenue on IT.
• You don’t have a forward-looking security roadmap.
• You’re still using legacy systems or outdated tools.
• No one’s monitoring or proactively managing your systems.

Does any of this sound familiar? If so, it might be time to reevaluate.

What Happens When IT Is Underfunded?

Let’s talk about what’s really at stake. When companies underinvest in IT, they face serious consequences like:

• Unplanned downtime: The most expensive kind. It’s hard to troubleshoot and fix without a solid infrastructure.
• Inability to scale: If your systems can’t keep up with growth, neither can your team.
• Slow or inefficient systems: Which lead to frustrated employees and unhappy customers.
• Damage to your reputation: A tech issue might seem small until it hits your brand and bottom line.

These issues don’t just create headaches; they create real business risk.

What Should Be in Your IT Budget?

A well-rounded IT budget includes more than just computers and servers. Here are the essentials I recommend, especially when it comes to protecting your business:

• Endpoint management and monitoring: Antivirus, device tracking, and security updates.
• Email filtering: Keeps spam and phishing out.
• Password managers: Improves login security across your team.
• Security awareness training: Educates employees to spot threats.
• Responsive help desk: Fast support that actually solves problems.

Don’t forget maintenance. Buying new equipment is great but keeping it running well is just as important.

How to Know If Your IT Budget Is Paying Off?

IT ROI isn’t always about dollar-for-dollar returns. It’s about performance, protection, and peace of mind.

Here are some of the indicators we use to measure ROI on IT and security investments:

• Uptime: Are systems consistently available?
• Onboarding speed: Are new hires set up quickly?
• Help desk response times: Are issues resolved faster each year?
• Vulnerability scans: Are we finding fewer issues over time?
• Security awareness scores: Are phishing attempts failing more often?

In addition to measurable results, a proper IT budget delivers intangible, but equally important, benefits. It helps build greater trust with your customers, boosts employee satisfaction by giving your team better tools to work with, and strengthens your overall brand reputation as a company that prioritizes security and efficiency. Now that’s real ROI!

Use Industry Benchmarks to Stay on Track

Not sure how your IT budget compares to others in your space? I recommend two great benchmarking tools:

• Gartner IT Key Metrics: Paid access with deep industry comparisons.
• Spiceworks State of IT: Free annual report for SMBs and mid-market businesses.

They show how IT dollars are being spent across hardware, cloud, software, and security. A great starting point if you’re building a case for increasing your budget.

Common Budgeting Mistakes to Avoid

Here are four things I see businesses get wrong with their IT budgets:

1. Underestimating cybersecurity: Thinking “we’re too small” is a mistake.
2. Not aligning IT with business goals: Your tech plan should support your strategy.
3. Skipping maintenance and updates: New tools still need upkeep.
4. Choosing cheap tools over smart investments: Lower costs today can mean higher costs tomorrow.

Planning properly now can save you from future headaches.

A Simple KPI Tracker for IT Performance

One of the best ways to get the most out of your IT budget is to track your metrics. Here’s a simple KPI chart I use with my clients:

AREA	KPI	BENCHMARK
Uptime	Downtime Reduction	<5 hrs/month
Support	Ticket Resolution Time	<4 hrs average
Cybersecurity	Security Incidents	<2/year
	Time to Detect/Respond	< 8 hrs
	Vulnerabilities Resolved	90% patched within SLA
Financial Impact	IT Cost per Employee	<$3,000/user
	License Utilization	>90%
User Satisfaction	Help Desk Rating	> or equal to 4.5/5
Compliance	Audit Pass Rate	100%

Set your benchmarks, track over time, and use this data to guide your decisions each year.

Final Thoughts on An Optimal IT Budget

Your IT budget isn’t just about keeping things running. It’s about setting your business up successfully, efficiently, and with confidence.

Whether you’re building your first budget or trying to improve your existing one, I hope this gives you a clear path forward.

If you’re not sure where your business stands or just want a second opinion on your current strategy, contact us. Helping business leaders like you make smarter IT decisions is what we do every day at All in IT.