Knowing how to allocate business funds is a huge part of determining whether the company will succeed or not. While budgets look different from business to business, there are some general rules that most companies should follow.
So, what about IT? How much should the average business spend on IT services? Find out in this guide.
First – What is IT?
IT stands for information technology. It is essentially the entirety of your network, storage, and technological infrastructure. It encompasses things like your:
- Servers
- Routers
- Computers
- Data
- Network
- Cybersecurity
There are plenty of experts in IT. You’ll find a range of great companies offering stellar IT services. Firewall Technical is a managed IT service provider that specializes in offering tailored solutions to businesses in Ottawa, for example. Remember: when running a business, it’s important to delegate. Understand your own skills and utilize those, but also be aware that hiring experts is key to seeing genuine growth.
That being said, exactly how much should a business spend on IT?
Spend 3 – 8% of Annual Revenue on IT
How you spend your annual revenue will determine how successful your next business year is.
As a general rule, you should allocate about 3 to 8% of your annual revenue towards IT. So, if your annual revenue is £50,000, then that means spending between £1,500 and £4,000.
Who Should Spend More/Less?
So, should you aim for 3% or 8%? That number can be significantly different, especially for businesses that make a lot of revenue.
The key here is to consider the type of business you have. Financial or tech companies should generally spend more on IT, sometimes spending upwards of 10% of their revenue on the service. At the same time, other types of companies, like manufacturing businesses, can get away with allocating about 3 to 4% of their revenue.
Also consider your cybersecurity risks. Cybersecurity is a crucial issue for all businesses, but some companies may have more threats than others.
Why is 3 – 8% Necessary?
You might wonder if 3 to 8% of your revenue should actually go towards IT. The answer is yes, and here are the key reasons why.
- Better Cybersecurity: Cybersecurity is a serious issue for all businesses. There are some real threats out there, with hackers becoming more and more competent as time goes on. IT experts are in the know when it comes to cyberattacks and can create a tailored defense system that keeps your data safe.
- Customer Satisfaction: Hosting a good website is paramount for customer satisfaction. You need the website to be easy to navigate and speedy to keep users around.
- Minimizing Downtime: System and server issues can lead to downtime. Having IT experts on your side means that this downtime is reduced, so it doesn’t impact productivity too much.
- Maximizing Cost Savings: Hiring a good IT team (or outsourcing it) can lead to significant cost savings over time, as IT can lead to optimized technology that saves you time and energy.
As you can see, having a good IT team by your side is truly essential; it’s about saving time, being more cost-efficient, and keeping your data protected.