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Do you know what your IT really costs?
A business of five to fifty people pays for IT in lots of small places: the support contract, Microsoft 365, a few software subscriptions, a laptop when someone joins, the odd emergency call-out. Few owners have ever added it all up.
The bigger cost never shows on an invoice. Most of what you spend on IT is really spent on the person using it, so when a computer is slow, out of date or broken, you are paying someone to wait.
Write down three things: what you spend now, what you should spend, and what needs replacing over the next three years. Then the big bills stop arriving all at once, and you can see whether the money is helping the business grow.
What should a small business budget for IT?
Over the life of a PC, the computer, the licences and the support are small next to the cost of the person sitting in front of it. So if a tool or an upgrade saves someone time, it usually pays for itself. Dave Lane, who runs GoodChoice IT, puts it simply: “I would rather you spend £300 to save £3,000.” If you spend a bit too much, you have wasted a little money. If you spend too little, you don’t get the thing you needed, so you have wasted the money and the time, and time is worth more than money.
Plan over the life of the kit, not year by year
Give everything you own a life expectancy and a replacement cost. A PC lasts three to four years; the network cabling in your walls nine to twelve. Put it all on a lifecycle budget and you know what you have to spend each year. Technology runs smoothly for ages and then things start breaking at once, so “it still works” is not a plan. And if you depreciate computers over ten years, they will not last ten years.
“I’ve worked for two companies that did this differently,” says Dave. “One replaced everything when it reached the end of its life. The other kept things going until they broke.” The first was the more profitable. A lifecycle budget also gives you room: in a lean year you can sweat the kit a little longer, and in a good year you can catch up. Light users can have lower-spec machines kept a bit longer; people doing design work need more powerful ones replaced more often. Keeping kit going for ten years or more costs you more than replacing it.
Give cyber security its own line
A lot of businesses pay for cyber security out of the IT budget, and pay for compliance and certifications out of the marketing budget because they need them to bid for contracts. Pull it into one line of its own and make sure it is enough. A serious cyber attack can be big enough to close a small business, so the board should make this decision. Dave’s rule of thumb: spend roughly as much on cyber security as you spend on IT services (services, not kit). In practice a realistic budget is around £50 per staff member per month on cyber management, and that money goes on finding the risks and fixing the processes as much as on tools.
Cut waste, not the things that keep you trading
When money is tight, stop paying for licences and devices nobody uses, bring software buying into one place so you are not paying for two tools that do the same job, and sign up on terms that let you cancel as people leave. Do not cut cyber security, and do not put off getting off old systems: obsolete kit costs more to run and slows your team down. Saving money on IT can mean spending more on it.
For real figures, see our IT support pricing.
What does IT support cost in the UK?
What you pay depends less on the hourly rate and more on how you buy your IT support: paying someone when something breaks (break-fix), or paying a monthly fee for someone to look after your computers so things break less often. At about four or five people it is time to stop waiting for things to break, and at about ten the cost takes a big step up because there is more to look after.
For what each way costs, what a cheap quote leaves out and what to ask before you sign, see our guide to IT support costs.
Part One: Add up what you spend now
The seven places your IT money goes
Take last year’s bank and card statements and put every IT cost into one of these seven groups. Most owners find a few they had forgotten about.
1. Computers and other kit
Laptops, PCs, screens, phones, printers and the network boxes in the comms cupboard. Work out a yearly figure one of two ways.
Option 1: look back three years
Add up what you spent on kit over the last three years and divide by three.
Example: £8,000, £9,500 and £7,200 is £24,700. Divided by three, that is about £8,233 a year, or £686 a month.
Option 2: what it would cost to replace
List everything you have and what it would cost to replace today, then divide by three.
Example: 20 computers at £1,200 each plus £3,000 of network kit is £27,000. Divided by three, that is £9,000 a year, or £750 a month.
Why three? A PC lasts three to four years, so each year you replace about a third of your kit, with a little spare for the one that dies early. If Option 2 comes out well above Option 1, replacements have been put off and the bill is still waiting for you.
Watch Dave’s video: IT Business Budgeting, the sum for an office of five or more computers worked out over three lifecycles.
2. Software and subscriptions
Microsoft 365, your accounts package, estimating or design software, and every monthly subscription someone has signed up to.
How to find them all:
- Search your card statements for “subscription” and “renewal”
- Look for licences nobody is using, including ones for people who have left
- Ask each team what they pay for
Put them all on one list. Plenty of software gets bought, tried and never used again: cancel it.
Watch Dave’s video: how to cut IT costs quickly, on paying only for what you use and buying software in one place.
3. Cyber security and insurance
Antivirus, email filtering, your cyber insurance premium, Cyber Essentials, and any security testing. These are often paid from different budgets, some from IT and some from marketing because you need them to win contracts. Add them up as one figure so you can see what you really spend on keeping the business safe.
Watch Dave’s video: Cyber Things Your Business Must Do, Part 6: Budgeting, on why cyber security needs its own line in the budget.
4. IT support
Your managed IT support contract, any IT staff you employ, call-out and hourly charges, and the support you pay other suppliers for (your phone system or your accounts software, for example). If you pay when things break, add up last year’s bills, and remember the time your team lost while they waited.
Watch Dave’s video: Break fix vs managed IT services, on the point where paying when it breaks stops making sense.
5. Training
Courses, and the hours your people spend learning a new system. Training staff to spot scam emails goes here too. It looks like just a cost until you set it against what a cyber attack would cost you.
Watch Dave’s video: If These 2 IT Red Flags Exist, You’re at Risk, on why every member of staff needs regular training to spot scam emails.
6. AI tools
AI tools such as ChatGPT and Copilot, and any automation tools. Watch this line. A trial for a few people is cheap, but give everyone a Copilot licence without changing how you work and the cost climbs very quickly. Before anything goes out to the whole team, decide how you will pay for it and how you will know it is making the business more profitable.
Watch Dave’s video: Your AI Costs 10X More Than Expected, on how a cheap trial turns into a big bill when it goes out to everyone.
7. Projects
One-off jobs: moving to the cloud, replacing an old system, an office move, or new software for the whole firm. Put each one in the year you expect to do it, so it doesn’t land as a surprise. Putting off getting rid of old systems doesn’t save money: they cost more to keep running and slow your team down.
Watch Dave’s video: how to cut IT costs quickly, on why old systems cost more to keep than to replace.
Part Two: Work out what IT costs you per person
Put it all on one sheet
Put the seven groups from Part One on one sheet, one line each, with a yearly figure next to each. Add them up: that is what your IT costs you a year. Then turn it into a monthly figure for each person:
Yearly total ÷ number of staff ÷ 12 = what IT costs you per person each month
Why the per-person figure helps
- You know what a new starter costs. When you take someone on, you know roughly what their IT will add each month on top of their pay.
- You can compare quotes. IT support is usually priced per person per month, so you can set your own figure next to what a provider charges. Ours are on our IT support pricing page.
- Not everyone costs the same. Someone who only uses email and a web browser can have a simpler computer that lasts longer. People doing design work or running heavy software need more powerful computers, replaced more often, so they cost more.
Set it against what the person costs
When I worked through the numbers for one desk over nine to twelve years, the computers, screens, phones, software and support came to well under £20,000. The person sitting at that desk cost at least £200,000 over the same time, before the chair, the heating and the office space. So the question is never only “how do I get this figure down?” It is also “is this money saving my people time?”
Part Three: What your figures tell you
Look down your sheet and ask five questions.
Is the bill for new computers being put off? If replacing everything (Option 2 in Part One) comes out well above what you have actually spent (Option 1), you are running kit past its life. It will keep going for a while, then a lot of it will fail at once. Part Four shows how to spread the cost.
Is cyber security getting enough? If your cyber security line is well below what you pay for IT services, you are probably under-investing. Aim for roughly the same on both.
What is paying when it breaks really costing? If you pay by the hour, add the hours your team spent waiting for things to be fixed. If that comes to more than a monthly support contract, it is time to switch.
Is there a line for projects at all? If replacing an old system has been “next year’s job” for three years running, it is costing you more to keep than it would to replace.
Do you know what your AI tools are doing for you? If you can’t say how each subscription helps the business make money or save time, decide how you will measure it before you buy more.
Part Four: Three-Year Planning
How Costs Change Over Time
Your monthly per-user cost doesn’t stay static. It changes based on:
Year 1: Foundation building
- Higher hardware spend (replacing old equipment)
- Higher project spend (moving to new systems and setting them up)
- Normal support costs
- Typical increase: 5-20% above baseline
Year 2: Consolidation
- Lower hardware spend (replacements over, not emergency purchases)
- Lower project spend (the move to new systems is done)
- Normal support costs
- Typical baseline year
Year 3: Getting the most from it
- Normal hardware spend (replacing a share of your kit each year)
- Optional innovation spending
- Possibly lower support costs (if newer systems)
- Typical baseline or slight decrease
Key Decisions That Move The Costs
Decision 1: Cloud, or servers kept in your office
This single decision often changes monthly costs by 30-50%.
Decision 2: Consolidate or Duplicate Licences
Do you have both Microsoft 365 AND Google Workspace? More than one customer database (CRM)? Each duplicate is pure waste.
Decision 3: Managed Service vs. Internal Staff
Under 50 people, often managed service wins. Over 150 people, internal staff wins.
Decision 4: Invest in Security
Cyber security isn’t optional. Budget roughly as much for it as you spend on IT services.
Part Five: Reducing Your Costs
Find the Quick Wins
Software audit: List every subscription, check how many people use each, kill the ones nobody uses. Potential savings: 15-25% of licence spending
Lease audit: List every equipment lease, calculate would buying be cheaper?
Hardware consolidation: Standardise on 2-3 computer models, negotiate volume pricing. Potential savings: 10-15% of hardware cost
Duplicate tools: One customer database, not three. One communication platform, not five. Potential savings: 10-30% of licence spending
Your support contract: often the biggest single line. Before it renews, check what’s actually included and how much notice you have to give. Our free Small Business IT Buyers Guide lists the contract terms that catch people out.
Questions about your IT budget
We don't know our exact costs. Where do we start?
Start with the biggest bills. Your IT support contract or IT staff, then Microsoft 365 and your other software, then computers and cyber insurance. Last year’s bank and card statements will turn up most of it. A rough figure for each of the seven groups in Part One is enough to start planning, and next year’s will be better.
How often should we do this?
At least once a year, before you set next year’s budget. Look again when a big contract comes up for renewal, when you take on or lose several people, and before any big project.
What if our IT cost per person seems high?
Find the line that is pushing it up. A year of replacing old computers, or a one-off project, will raise it for that year, and that is fine if you planned it. Software nobody uses, licences for people who have left and two tools doing the same job are waste: cut those. Don’t bring the figure down by cutting cyber security.
How do we present this to the board?
Show them the one sheet. Seven lines, the yearly total and the cost per person per month, with the three-year plan underneath so they can see when the big bills land. Give cyber security its own line. A serious cyber attack can be big enough to close a small business, so the board should decide how much to spend on it.
How do we cut IT costs without cutting quality?
Cut waste first. Stop paying for licences and devices nobody uses, cancel software someone tried once and forgot, and bring software buying into one place so you are not paying for two tools that do the same job. Leave cyber security alone, and don’t put off replacing old systems: they cost more to run and slow your team down.
Why do AI tools end up costing more than we expected?
Because a trial gets rolled out to everyone without being rethought. A few people testing a tool is cheap. Give everyone a Copilot licence without changing how they work and the cost climbs very quickly. Before anything goes to the whole team, decide how you will pay for it and how you will measure whether it is making the business more profitable.
Is IT spending purely a cost or an investment?
An investment, when it saves your people time. Most IT spending is really for the person using it, so £300 that saves £3,000 of staff time is money well spent. It turns into a cost when it buys technology for its own sake, or when old kit is kept going until it breaks.
Is pay-when-it-breaks IT support good enough for a growing business?
Up to about four or five people, often yes. After that, waiting for things to break costs more than it saves: updates and antivirus get missed, and that is how small businesses get caught out.
