How much of my initial starting budget should I invest into the business technology to run the business?

28 September 2009

The importance of IT in today’s business is for some a top priority. Let’s take the average small business. We are not talking about a web hosting business that would spend 80% or more of its budget on IT. What should one spend on the IT side of the average small business?

Make a list of your needs and wants for your business. This is easy; whether an existing business or a startup, you must know what it takes to do business in the sector you choose. Taking a look into the competition, they can offer some insight into the hidden or unseen items needed during the planning phases of your budget.

Keep in mind any business should set aside at least 5% for future innovations. Starting there that 5% will usually go towards the IT side of the budget. Huge advancements are made in the IT world daily and companies often have trouble keeping up due to the lack of planning ahead with their budget. So, we start with 5% automatically. This may not be spent for a few years, but when updates to equipment like PC’s or phones are needed, you will be ready.

Get ahead of the competition from the beginning. Whether you are currently running a business or starting one, it is vital that you stay ahead technologically of the businesses competing with you. This will bode well when looking for new consumers by being able to offer potential customers the latest in technology.

Or maybe you are using that technology to seek out new business; state of the art communication is key to top sales teams. If you keep your sales-force in the IT stone-age, sales will slow. But this may not mean that in every area.

Spend where it counts most. Having the latest PC with the newest processor isn’t always necessary. Also, you more than likely do not need to update every software package you own, if it is working for you now, leave it!

You are not spending this money to save money! Any IT firm trying to sell you more than you need tries to pump this into your head. In fact, little is sometimes more for many businesses, no matter the size. The key though is efficiency in what you do have or decide to get. Smart business executives can do more in a day with a cell phone and laptop than an entire sales team running off some overblown network.

Efficiency now seems to be one of biggest components. Assess each module of your business. Find areas you need to be at the top of your game and find others that really just need to flow at a steady pace. For each area, determine whether it will be an asset or end up a liability. The IT within an organization can be both for sure.

For most organizations their IT becomes a liability. Why? They spend based on desires not needs. Stay needs-based and keep your personal desires at home. If possible, consult a team to get some key members of your organization together to make these decisions. The more input, the better the output.

With all this said, including your 5% on innovation, companies will typically invest 20 to 30% on the IT side of their company. These percentages may not be as high from year to year, but on average this will be a good number to have in mind.