There is no single correct IT budget per employee. Published figures range from a few percent of revenue to a few thousand dollars per person per year, mostly from vendor and managed service provider pages that do not agree with each other. The reliable method is to price each category for your own headcount, convert one-time costs to a yearly figure, and add a contingency. This guide gives you the categories, the formula and a worksheet for a company of 10 to 50 people.
Who this is for and what you will have at the end
This is for owners, office managers and operations leads at US small businesses with roughly 10 to 50 employees who need to set or sanity-check an annual IT budget. You do not need a technical background.
By the end you will have a worksheet that produces an annual total and a per-employee figure, a list of the costs people most often forget, and a short process for validating the result against outside benchmarks. This article does not give a single dollar answer, because list prices change and your quotes will differ. Where it quotes a price, it names the source and the date checked.
What the benchmarks say, and why to be careful
A search for small business IT spending returns many numbers. In the pages checked on October 30, 2026, typical claims were:
- A share of revenue, with ranges such as 3 to 7 percent for small firms, and other pages claiming 4 to 6 percent, or well above or below that.
- A per-employee yearly figure in the low thousands of dollars.
The sources were mostly MSP and IT vendor blogs, several without a named data source, and some contradicted each other by a wide margin. The better-known benchmark studies, such as paid analyst reports, sit behind a paywall. For that reason this article does not adopt any single figure as "the" benchmark.
Use benchmarks in two ways only: as a rough check after you build your own number, and as a prompt to ask why you are far above or below. Percent of revenue is also a poor fit if you are a high-margin consulting firm or a low-margin retailer, so cross-check with a per-employee figure.
The budget formula
Use one formula for the whole sheet:
Annual IT budget =
recurring subscriptions (per user x users x 12)
+ recurring fixed services (backup, security, internet, support contracts)
+ one-time purchases spread over their life (cost / years of use)
+ projects planned this year
+ contingency (a percentage you choose)
Per-employee figure = Annual IT budget / number of employeesSeparate recurring costs from one-time costs. A new laptop is a one-time purchase, but you will buy another one in a few years, so spread it across the replacement cycle.
Category 1: Productivity and email licenses
Most small businesses pay per user per month for either Microsoft 365 or Google Workspace. Both are sold in tiers, and the tier you need depends mostly on security and device-management needs.
Google Workspace. Google's pricing page, checked October 30, 2026, lists the Business tiers per user per month in USD, excluding tax, with a user limit of 300 on all three:
| Plan | List price per user per month | Pooled storage |
|---|---|---|
| Business Starter | $7.00 | 30 GB per person |
| Business Standard | $14.00 | 2 TB |
| Business Plus | $22.00 | 5 TB |
The prices above are the monthly-billing figures. The page also advertises "Save 16%" with a one-year commitment and shows introductory discounts for new customers, so read the checkout page for the exact figure you will pay.
Microsoft 365. Microsoft sells Business Basic, Business Standard, Business Premium and Apps for business plans for organizations of up to 300 users. Microsoft's own Learn documentation describes Business Premium as a productivity and security solution for small and medium-sized businesses of up to 300 users that includes device management for Windows, Mac, iOS and Android. Prices and packaging change often, so get the current per-user price from the Microsoft 365 business plans page before you finalize your sheet.
How to enter this in the worksheet:
Licenses = price per user per month x 12 x number of usersAdd a few extra rows for shared mailboxes or service accounts only if your provider charges for them, and check whether you need a higher tier for a subset of users instead of everyone. For related setup guidance, see Small business Wi-Fi guest network security setup for the network side of the same budget.
Category 2: Devices and their replacement cycle
Devices are usually the largest single block of spend in the first year and a smaller recurring one afterward.
Include:
- Laptops or desktops for every employee, plus a small spare pool.
- Phones, if the company pays for them.
- Monitors, docks, headsets and keyboards.
- Printers and their consumables, if you still print.
- Network gear (router, switches, access points) and a UPS for critical equipment.
Spread each purchase over its life:
Yearly cost per device = purchase price / years you plan to use itFor example, a $1,000 laptop used for four years is $250 per year. A 25-person company with 25 such laptops carries $6,250 per year for laptops alone. These numbers are an example of the arithmetic, not a price quote. Choose the number of years based on the warranty length and when your operating system and key software stop receiving updates.
If you are comparing business laptop options before you set the figure, check the manufacturer's spec page for any model you plan to price, and only count the price you were quoted.
Category 3: Backup and security
The FTC's cybersecurity guidance for small businesses lists five basics: update software and back up files regularly, require multi-factor authentication to protect sensitive information, require strong passwords to access devices and your network, update security software regularly and automate those updates where possible, and train employees on a regular schedule. Each has a budget line:
| FTC basic | What to budget |
|---|---|
| Back up files regularly | A backup service or storage, for both cloud data and endpoints; copies kept separate from your main system |
| Multi-factor authentication | Usually included in your identity platform; a hardware security key for admins is an optional extra |
| Strong passwords | A business password manager, priced per user |
| Security software updates | Endpoint protection and device management, either bundled in a plan tier or bought separately |
| Training | A training subscription or staff hours |
Two budgeting notes:
- Check what your productivity plan already includes. Microsoft describes Business Premium as including security and device management, so the right comparison is a higher tier against a lower tier plus separate security products, not a higher tier against nothing.
- Cloud email and file storage are not automatically a complete backup. Ask your provider what its retention and recovery features cover, then price a separate backup if the gap matters to you.
Get at least two quotes for backup and endpoint protection, since pricing models differ (per user, per device or per terabyte).
Category 4: Connectivity
- Business internet service, plus a backup connection if downtime would stop the business.
- Phone or voice-over-IP service.
- Wi-Fi equipment, covered in the device line, and any licensing for a management controller.
- A VPN or secure remote-access tool if staff work remotely.
For network design with guests and staff separated, see VLAN setup for a small office with guest Wi-Fi.
Category 5: Support
Support is the line that varies most. You have three common options:
- Do it yourself. One employee handles IT on top of their job. The cost is hidden in their time, so estimate hours per month and multiply by their loaded hourly cost.
- Hire. A salaried IT person costs salary plus benefits and equipment, which for most small businesses is more than the rest of the IT budget combined.
- Outsource. A managed service provider (MSP) or break-fix contractor charges either per user or per device per month, or hourly. Request written prices and the scope each includes.
Whichever you choose, add a line for the specialist work you cannot cover internally, such as a migration, a security assessment or a new office setup.
Category 6: Line-of-business software and the items people forget
Accounting, CRM, HR and payroll, project tools and e-signature are rarely counted as IT, but they are subscription costs the same way. Decide whether they live in this budget or in each department's, and be consistent.
Commonly forgotten items:
- Domain names and certificates renewed yearly.
- Admin or break-glass accounts and their licenses.
- Licenses for departed employees that are still being paid.
- Shared mailboxes, meeting-room accounts and printers that need licenses.
- Onboarding and offboarding time.
- Disposal or secure wipe of retired devices.
- Training time, which is a real cost even when the course is free.
A worked worksheet for 25 employees
The following is an illustration of the structure with placeholder numbers. Replace every figure with your own quotes.
Line Basis Annual
----------------------------------- ------------------------------- ---------
Productivity licenses $A per user x 12 x 25 $
Password manager $B per user x 12 x 25 $
Endpoint protection / device mgmt quote $
Backup service quote $
Laptops (25 + 2 spares) price / years x 27 $
Phones (if provided) price / years x N $
Network gear price / years $
Internet and phone service monthly x 12 $
Support contract or hours quote or hours x rate $
Line-of-business software subscriptions $
Training subscription or hours $
Projects planned this year quotes $
Subtotal $
Contingency your chosen percent $
Total $
Per employee total / 25 $Pick the contingency percentage yourself. A larger figure makes sense when your equipment is old or your inventory is incomplete, a smaller one when most items are under warranty and on fixed-price contracts.
Validate the result
- Reconcile against real spending. Total the last twelve months of IT-related invoices and card charges, and compare them with your bottom-up estimate. A large gap means you missed subscriptions or your assumptions are off.
- Compare with an outside range. Compute the total as a percent of revenue and as dollars per employee, then compare with the published ranges mentioned earlier. If you are far outside them, find out why before you change anything. Sources differ, so do not treat the comparison as a verdict.
- Stress-test two scenarios. Add five employees and see how the sheet changes. Remove your most expensive subscription and see what breaks.
- Confirm the security basics are all funded. Walk down the FTC list and make sure each item has a line.
Troubleshooting a budget that does not add up
| Symptom | Likely cause | Fix |
|---|---|---|
| Actual spend is far above the sheet | Missed subscriptions, old licenses still billed | Audit invoices and cancel unused seats |
| Budget is far below benchmarks | Missing backup, security or support lines | Re-check each category above |
| Costs jump every January | Annual renewals bunched together | Make a renewal calendar and spread dates where vendors allow |
| Laptop spend spikes in one year | Everything bought at once | Stagger the refresh across years |
| Support costs unpredictable | Hourly break-fix billing | Ask for a fixed monthly scope with a written service description |
Summary checklist
- Headcount and expected growth for the year are written down
- Licenses priced from the vendor's current pricing page, date noted
- Devices spread over a stated replacement cycle
- Backup, MFA, password manager, endpoint protection and training each have a line
- Internet, phone and network gear included
- Support option chosen and priced, including hidden staff time
- Line-of-business software included or explicitly excluded
- Contingency added
- Total reconciled against the last twelve months of actual invoices
Comments
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