IT Budgets That Grow with Your SMB (+Template)

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Let’s be honest, building an efficient information technology budget can be tricky; but it’s absolutely essential for driving your business forward. A solid budget ensures you’re allocating resources wisely, streamlining operations, and setting the stage for sustainable growth. 

The challenge lies in developing a comprehensive, strategic plan. 

Drawing from decades of experience supporting SMBs like yours, we’ll walk you through budgeting best practices that drives your success. 

Whether you’re scaling your startup or fine-tuning operations at a medium-sized organization, you’ll discover:  

  • Current trends 
  • How to optimize your IT spending 
  • How to communicate the budget with stakeholders 
  • And a lot more! 

 

In a hurry? Grab our Excel template to map out your budgeting strategy in minutes and bookmark this page for later reference. 

IT Budget Template Icon

Managing IT expenses doesn’t have to be overwhelming. This template is designed to help you plan, track, and optimize your IT spending.  

Current IT Trends

Gartner projects a 9.3% increase in worldwide IT spending in 2025, reaching approximately $5.75 trillion. This surge reflects increased US business investments in: 

  • Cybersecurity tools  
  • Automation 
  • Rising technology costs 
  • Replacement of devices acquired during the COVID era 
  • Artificial intelligence 

According to the 2025 State of IT Report, cybersecurity is poised to be a major growth driver, with 53% of organizations planning to boost spending in this critical area. Alongside this, the end-of-life for Windows 10 in October 2025 is accelerating IT budgets, as many businesses prepare for widespread computer upgrades. 

Automation continues to be a top IT investment for delivering value, with an impressive 76% of leaders identifying it as their best opportunity. Emerging technologies are also making waves: 68% of executives see significant potential in AI and edge computing, while 64% are exploring blockchain’s possibilities. 

Over the past year, AI has proven to be a massive disruptor – reshaping industries and redefining best practices. Companies that fail to embrace AI tools like Microsoft Copilot are increasingly at risk of falling behind, as the pace of innovation shows no signs of slowing. 

“More than 50% of companies plan to spend more on security solutions and generative AI in 2025. These are the two technologies where companies are most likely to increase investments.”

These trends reveal a dual focus for IT leaders: Addressing immediate operational needs while also investing in future-ready innovations in order to maintain a competitive edge in 2025 and the future. 

SMB IT Priorities & Budgeting Overview

Technology is a key driver of growth and competitive advantage, making it a smart investment in your organization’s future. To maximize your ROI, align your IT strategy with both short- and long-term business goals. 

Expected 2025 IT Budget Priorities, by Industry

Industry IT Budget Drivers
Healthcare
Cybersecurity, telemedicine & digital experiences, modernizing cloud infrastructure, & generative AI
Nonprofit
Cybersecurity, donor management systems, remote work technologies, software as a service
Government Contractors
CMMC, data utilization, modernization
Construction
Building Information Modeling (BIM), supply chain management solutions, sustainable construction practices
Manufacturing
Cybersecurity, automation, generative AI
Financial Firms
Cybersecurity, digital transformation, generative AI, blockchain
Professional Services
Client management software, cybersecurity, cloud services, generative AI

Be realistic when creating your budget.

Account for:

  1. Recurring OPEX (subscription costs for software, managed services, and cloud solutions).
  2. One-time CAPEX (hardware upgrades or new infrastructure investments).
  3. Employee and business growth needs.

Then, establish a maximum spending threshold that’s aligned with your industry’s trends and business goals to remain financial stable – without compromising on innovation or security.

Example 

A construction company may allocate 4% of its revenue to solutions like Building Information Modeling (BIM) and automation. Conversely, financial firms may allot up to 10% to meet stringent compliance requirements and for investing in advanced technologies like AI and blockchain. 

How to Do More with a Limited Budget

Managed IT services can help SMBs achieve more with less by providing expert support, robust security, and cost-effective strategic guidance. Investments in managed services typically range between $110 to $400 per user/month, depending on your needs and provider. 

Managed IT Services Cost Guide eBook Mockup

Optimizing your IT investment starts here. Explore our MSP pricing guide to understand costs, factors, and models.  

Key Strategies for Building an Effective IT Budget

1. Understand Your Business Goals

Align your IT strategy with your business objectives to ensure strategic and informed decisions.  

Use these questions to guide your budget planning: 

  • Where do you see your business in one, five, or ten years? 
  • Does your current IT infrastructure support that vision, or are investments needed? 
  • What IT assets or processes are nearing the end of their lifecycle? 
  • Which past technology investments provided the highest ROI? 
  • Are you budgeting for growth, including resources for expansion or increased demand? 
  • Is your cybersecurity spending sufficient for current threats? 
  • How can cloud solutions or managed IT services improve scalability and reduce costs? 

2. Implement Asset Lifecycle Management

Outdated IT assets can quickly drag your business down, leading to:  

  • Inefficiencies 
  • Unexpected breakdowns 
  • Costly disruptions  

Stay ahead of issues that cause problems, like downtime, by proactively replacing old hardware and software. Think of it like tuning up your car – you’re avoiding bigger issues and keeping everything running smoothly. 

By regularly assessing the performance and lifespan of your IT assets, you can plan replacements strategically, rather than rushing into emergency fixes. This approach not only optimizes performance, but also ensures your team has the tools they need to work efficiently and effectively.  

3. Plan for Future Scalability

Growth is exciting, but it can strain your IT systems if you’re unprepared. By planning for scalability, you ensure your technology can expand effortlessly to meet future demands without having to scramble for quick fixes.  

Whether it’s upgrading your networking equipment, adopting flexible cloud solutions, or investing in scalable hardware, planning for the future now prevents bottlenecks and unnecessary expenses later.

Trust us when we say, being proactive about scalability means your technology will always keep pace with your ambitions. 

4. Consider Total Cost of Ownership (TCO)

Making smart IT investments means looking beyond the upfront price. Because the truth is, the cheapest option upfront often isn’t the smartest choice in the long run. That’s where the Total Cost of Ownership (TCO) comes in.  

TCO looks beyond the initial purchase cost and considers:  

  • Implementation 
  • Maintenance 
  • Upgrades 
  • And eventual replacement 

This complete picture helps you avoid surprises down the road and ensures you’re getting the best value for your money. 

Crafting an IT Budget

Assess Your IT Landscape

To create a robust IT budget, you need a clear picture of your current IT infrastructure and its role in supporting your business operations.  

Conducting a thorough assessment identifies weaknesses and helps you plan for upgrades. 

Professional IT Programer Working in Data Center on Desktop Comp

Evaluate Your IT Infrastructure

Start your assessment by taking a detailed inventory. 

Hardware and Software
  • Review workstations, laptops, servers, and peripherals. 
  • Identify outdated equipment or programs that need upgrades or replacements. 
Network Infrastructure
  • Assess the size and scope of your network. 
  • Document the brand and condition of routers, switches, and other equipment. 
  • Pinpoint any bottlenecks or vulnerabilities impacting performance or security. 
IT Processes
  • Examine workflows to identify opportunities for automation or streamlining. 
Managed Microsoft Services

Dive Deeper into Specific Components

Software Infrastructure
  • Do you use on-premises Active Directory or Azure AD? 
  • Are you using Exchange Server or Exchange Online? 
  • What services are part of your Microsoft 365 subscription? 
Cloud Services
  • What platforms (AWS, Google Cloud, Azure) and services (IaaS, PaaS, SaaS) are in use? 
Business-critical Software
  • What ERP systems do you have? 

  • Accounting software? 

  • Proprietary applications? 

Mobile Device Management (MDM)
  • Are you using an MDM solution? 

Phones
  • What system do you use (VoIP, PBX)?  

  • Is it vendor-supported? 

Vendor and Service Review

  • Who provides your internet services? 

  • Are you partnered with an IT consultant or managed service provider? 

Align Your Findings with Your Needs

Use your assessment insights to: 

  • Identify areas requiring immediate attention or investment. 
  • Align your technology spending with business priorities. 
  • Plan for future scalability and ensure your IT environment is ready to support your growth. 

5 Steps to Prioritize Your IT Initiatives

1. Evaluate Business Needs

Start by identifying the challenges your organization is facing, such as improving productivity, enhancing cybersecurity, or adopting artificial intelligence. Consider how new IT solutions can address these issues while aligning with broader goals like streamlining operations or enhancing the customer experience. 

2. Assess Impact and Feasibility

Assess the potential impact of each initiative on your business operations, revenue, or competitive edge.

Then, evaluate feasibility by factoring in costs, resource availability, and complexity.  

3. Conduct a Cost-Benefit Analysis

Perform a cost-benefit analysis to quantify the value of each initiative. Compare upfront and ongoing costs (such as hardware, software, and implementation) against potential benefits like efficiency gains, cost savings, revenue growth, or competitive advantage.

Projects with a strong ROI and manageable risks should take precedence. 

Example Cost-benefit Scenario

Cloud Migration 

  • Costs: Subscription fees, data migration, and potential downtime. 
  • Benefits: Reduced hardware costs, improved scalability, and enhanced collaboration tools. 

In this scenario, you may want to transition to cloud services for scalability and reduced costs. 

4. Align with Business Objectives

Ensure each initiative you’ve selected supports your organization’s strategic priorities – such as scaling operations, entering new markets, or boosting efficiency.  

5. Create a Priority List

Finally, rank your initiatives based on their potential ROI, strategic alignment, and feasibility. Focus first on high-impact, high-feasibility projects.  

Examples of IT Initiatives to Prioritize in 2025

Cybersecurity Enhancements 

Upgrading firewalls, implementing MFA, getting MDR with a SOC, or conducting employee security training. 

Infrastructure Updates 

Replacing outdated hardware or upgrading software critical to operations, such as computers running on Windows 10. 

Track and Analyze IT Spending

Keeping a close eye on your IT expenses isn’t just good practice…it’s how you stay in control of your budget. Regularly monitoring your spending helps you:

  • Spot trends
  • Identify areas of overspending
  • Uncover opportunities to save

Futureproofing Your IT Budget: Insights from a Trusted IT Partner

As an IT services provider, we’ve helped countless businesses craft financial plans that meet today’s needs and position them for tomorrow’s opportunities.  

Futureproofing your IT budget is all about striking the right balance: addressing immediate priorities while staying flexible enough to adapt to emerging trends and technologies 

Plan for Emerging Technologies

The pace of innovation isn’t slowing down. From artificial intelligence to edge computing and blockchain, these aren’t just buzzwords—they’re tools transforming industries. Allocating funds for emerging technologies ensures you have the resources to adopt them when the time is right.  

How to Approach 

Start small by piloting a solution, such as AI-powered analytics, to gauge ROI before scaling up. 

Build in Flexibility

Futureproofing doesn’t mean predicting the future. It’s staying adaptable.  

How to Approach 

Reserve part of your budget for unexpected needs or opportunities, such as responding to cybersecurity threats or seizing a chance to automate processes. Think of it as a “strategic cushion” that gives you room to maneuver when market conditions or business needs shift. 

Prioritize Scalability

Whether it’s expanding storage, adding users, or boosting computing power, scalable solutions help you avoid overinvesting upfront – while ensuring your tech infrastructure can keep pace with your ambitions. 

How to Approach 

Invest in solutions that grow with you. Cloud services, for instance, offer scalability on demand – perfect for seasonal spikes or rapid growth. Other examples include: 

  • Automating workflows 
  • Investing in scalable network infrastructure (e.d., PoE switches, Wi-Fi 6 access points) 
  • Use SaaS solutions (i.e., subscription-based software licenses) 

Keep Security Front and Center

New technologies often bring new security risks.  

How to Approach 

Future-proofing your budget means being proactive: investing in modern security tools, conducting regular assessments, and staying ahead of compliance requirements. A secure foundation ensures the innovations you adopt don’t expose your business to unnecessary risks. 

Developer, man and programmer code on computer screen with cybersecurity hologram, analytics and seo or working at night. Technology, coding and hacker on dark software, safety and iot password

Collaborate with a Trusted IT Partner

As a managed service provider, we’ve seen firsthand how CEOs and IT directors can feel overwhelmed by the rapid pace of tech changes. That’s where providers like us come in.  

How to Approach 

By working together, you and a managed IT services provider can identify trends relevant to your industry, evaluate the potential impact of emerging tools, and prioritize investments that align with your strategic goals. This expert consulting and support ensures you’re prepared for what’s next. 

Think Long-term, Act Incrementally

This is a journey, not a one-time task.  

How to Approach 

Build your budget with a long-term vision, but approach implementation step-by-step. Small, thoughtful investments over time can compound into significant advantages, keeping you ahead of competitors without stretching your budget too thin. 

Teal's IT Investment Recommendations for SMBs

1. Invest in Cybersecurity

Tools like firewalls, EDR, antivirus, and encryption aren’t just line items on your budget (or cyber insurance). They’re your first line of defense against cyber threats.  

And don’t forget about your employees. A well-trained team is often your greatest asset in preventing breaches; something as simple as phishing awareness training can save you from costly mistakes. 

How to Create a Cybersecurity Awareness Training Program Ebook

Learn how to implement an engaging and successful cybersecurity awareness training program.

Plus, these proactive security measures give you peace of mind. By staying ahead of potential threats, you’re safeguarding your business from downtime, financial losses, and the damage a breach can do to your reputation.  

Cybersecurity isn’t an expense; it’s an investment in the stability and success of your business…and it’s worth every penny. 

Small Business Cybersecurity Cost Guide

Learn the financial impact of cyber threats on your business’s data. Plus, unlock the financial implications of in-house vs. outsourced cybersecurity. 

Pro Tip: We recommend Microsoft 365 Business Premium over other platforms, like Google Workspace. Why?

Because it offers advanced security features, such as built-in threat detection, conditional access policies, and seamless integration with tools like Intune for device management. These features help secure your data more efficiently and effectively, giving you greater control over your business’s cybersecurity posture. 

2. Opt for a Cloud-first Approach

Switching to the cloud is a transformative move for small and medium-sized businesses, offering a smart path to growth while maximizing your IT budget.  

By adopting cloud computing, you eliminate the high upfront costs of hardware and the ongoing burden of maintaining on-site servers. Instead, you gain a flexible, scalable solution that adapts to your business needs—allowing you to only pay for what you use. 

The cloud also streamlines operations and positions your business to stay ahead. Need additional storage or processing power during peak seasons? It’s ready and available. Plus, most cloud providers handle critical tasks like security, updates, and backups – freeing your team to focus on strategic goals and innovation. 

3. Look for Ways to Automate

Automation is a game-changer for small and medium-sized businesses, helping you do more with less. By automating repetitive tasks and streamlining workflows, your team can focus on high-impact work that drives growth and innovation. From marketing to HR to operations, automation tools are versatile and scalable for your needs. 

How to Approach 

Start with practical applications like automating customer follow-ups with tools like HubSpot, simplifying payroll with Gusto, or managing patches through Ivanti.

Other solutions you might use include: 

Tools like these eliminate bottlenecks and reduce human error, saving time and money. 

4. Focus on Practical AI Applications

AI works best when it solves real problems for your business. Tools like Microsoft Copilot, ChatGPT, or CRM-integrated AI features can help streamline workflows and enhance productivity.  

Example 

AI-driven analytics can uncover trends in customer behavior, allowing you to fine-tune your marketing strategies, while automation tools can handle routine tasks like scheduling or data entry, freeing up your team for higher-value work. 

Remember, the key is to align AI with your business goals. By focusing on practical, actionable use cases, you’ll not only see a strong return on investment, but also position your business as a forward-thinking leader in your industry. 

How to Communicate Your IT Budget to Stakeholders

Effectively communicating your IT budget to stakeholders is critical for gaining support and ensuring alignment across the organization. Here’s how small business CIOs and IT Directors can present their IT budget in a way that resonates with decision-makers and non-technical stakeholders alike. 

Engage in Early Discussions

Start conversations with key stakeholders well before the formal budget presentation. This proactive approach allows you to understand their priorities, address concerns, and build consensus. 

Speak the Language of the Business

Frame your IT budget in terms of business outcomes, not just technical needs. Highlight how proposed investments will: 

  • Increase revenue or reduce costs. 
  • Mitigate risks, such as cybersecurity threats. 
  • Enable growth, like entering new markets or scaling operations. 

Use clear, concise language that connects IT spending to tangible business benefits. Use analogies or straightforward explanations to make complex IT concepts accessible. 

Use Data and Visuals

Present your budget with supporting data and visual aids. Use charts, graphs, or dashboards to show: 

  • Spending breakdowns by category (e.g., hardware, software, security). 
  • Forecasted cost savings or revenue gains. 
  • Benchmarks against industry standards. 

This makes complex information easier to digest and helps stakeholders grasp the bigger picture. 

Encourage Collaboration and Input

Invite stakeholders to ask questions or share feedback. Collaborative discussions build trust and can uncover additional ways to align IT spending with organizational goals. Position your IT budget as a shared plan for achieving business success, not just a technical document. 

Address Concerns and Risks

Proactively address potential objections by discussing risks and how your budget mitigates them. For example, explain how allocating contingency funds for disaster recovery reduces downtime costs, or how investing in cybersecurity protects against data breaches. 

Building a Smarter IT Strategy for SMB Growth

Remember, your IT budget should be as dynamic as your business. Regularly reassess your priorities, stay informed about industry trends, and don’t shy away from adopting tools and solutions that drive efficiency and value.  

At the end of the day, a well-thought-out IT strategy enables your business to grow smarter, faster, and more securely. And with the right planning and tools in place, your IT investments will pay dividends for years to come. 

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