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IT is a fundamental part of your business and it can be a major part of your budget. However, that doesn’t mean you should overspend or underspend. Understanding your costs is important to knowing if you’re doing it right.

So how do you begin to calculate how much you should spend on technology?

Here’s where to start.

Begin by calculating the average by industry

Before we dive into numbers, let’s clarify what’s covered in an IT budget.

We’re talking about hardware and software investments that relate to IT, as well as personnel costs. Anything from computers to servers and cloud services to IT support staff counts.

Deloitte shows us that most organizations spend 3.28% of their total revenue on some form of IT. Companies in the financial sector, such as banks, actually spend the most at 7.16%.

That’s primarily due to the fact that they have lots of regulations to follow, and a single breach of their data could cause problems big enough to shut their business down.

On the other hand, four major industries came in below the average for IT spending:

  • Energy and resources (2.50%)
  • Consumer business and retail (2.04%)
  • Manufacturing (1.95%)
  • Construction (1.51%)

Despite these sectors spending below average levels on IT, they’re all growing. For example, the construction industry grew their IT budget by 45% over the previous year.

So why the sudden explosion in IT investment?

Simply put: There’s ROI to be found in IT because the right technology can help you work faster and more effectively while making your people happier.

Want to know how to get started in adjusting your budget to get the right numbers? Begin with:

1. Build the skeleton of the budget

You’ll find it’s hard to measure and compare your IT finances to other areas of spending if you aren’t tracking any of them. If you’re interested in a guide to building your budget from the ground up, Capterra has a helpful guide to get you started.

2. Prioritize your business expenses

In IT, as with many other things, more spending is not the same as better spending. Give some thought to where you need the biggest technology boost.

You might not necessarily need to buy more storage capacity in your local storage. However, you might determine that faster computers would help your staff do their jobs faster.

Understanding where your priorities lie is the key to ensuring that you can build a budget that strategically fits your business needs.

3. Change your mindset to investment, not expense

IT was once the elephant in the room for budgeting. It was an annoying expense that seemed to never go away.

However, SMBs are quickly discovering that selectively implementing good technology, along with proactive support, keeps everything running smoothly. In fact, it can even help you gain and retain clients by giving others a better experience in working with you.

Shifting your mindset to viewing IT as an investment, not an expense, makes it easier to understand what kind of technology makes the best use of your company’s money and why.

Let MCA help you build a better budget

Partnering with a managed IT service provider can be extremely beneficial to businesses. They can help you determine where your technology should go to best support your business needs.

That means anything from helping you build a scalable IT budget to proactively supporting your day-to-day needs with a responsive help desk.

At MCA, we want the chance to earn your business. Let’s have a chat – we can help take your company to new levels by working together.