Buckle up, it's time to talk about budgeting. We know, it's not the most engaging or exciting topic for start-up founders keen to get on with the task of implementing their vision. There's no getting away from it, though, as budgeting is part of the start-up gig.
There are recruitment, training, and staff salary costs you will need to account for, as well as office space, marketing, legal, and administrative costs. While they are all important, these areas are not within our sphere of expertise. We're IT people, so we're here to help with IT budgeting for your start-up.
The tips and advice in this article apply whether you have received your first round of funding and are just getting going, or already have operations and have secured additional funding to move to the next stage of development.
Why IT Budgeting is Important?
Let's start with why it's important to make smart IT budgeting decisions. After all, running a start-up is about being agile and making good decisions quickly rather than agonizing over making the best possible decisions.
Firstly, we're not advocating the latter.
However, not having a budget at all is worse than being pedantic or overscrupulous. Smart IT budgeting is about striking the right balance, and it brings with it a range of benefits, including:
- Sets expectations and priorities
- Establishes targets
- Helps secure future funding
- Maintains focus on essential areas
So, let's get on with our top tips for making smart IT budgeting decisions in your start-up.
1. Create a Cost Projection for Recurring Services
Your IT budget will include things that have a one-off cost, but it will also include essential services that you will need to pay for monthly. Examples of these recurring services include:
It can be helpful to associate these recurring costs on a per-employee basis.
2. Create a Cost Projection Per Workstation
Each member of your team will need a workstation that will enable them to do their job. It sounds simple enough, but this area of IT budgeting can be a banana skin for start-ups. This is because there is often a temptation to cut costs when investing in workstations.
The reality is there are some things in life that are not worth skimping on. Toilet paper, garbage bags, car insurance, and sunscreen all come to mind. Employee workstations can be added to that list too.
There is no point in saving a couple of hundred dollars when buying a new workstation when it can lead to underperformance that can be costly for your business. Poor productivity, user complaints, increased service requests, and shorter usable lifespans are all examples of the problems you can encounter after buying low-spec equipment.
The better and more prudent approach is to choose high-specification machines, particularly with specs like RAM. RAM is like a toddler throwing a temper tantrum when you don't get enough of it in the workstations you buy. It's America's hidden productivity killer.
3. Look for Smart Ways to Reduce Upfront Costs
The days of buying and installing a specific version of a software application are thankfully a thing of the past. Today, the norm is to buy a license for an app that you pay on a monthly basis. This has reduced the upfront costs of getting the software you need, plus it offers a range of other benefits, including the fact you always have access to the latest version of the software.
The same applies to servers, where the old way was to buy a physical machine that you would install on your premises. Today, running a cloud solution on a subscription basis is more common.
The same principles can be applied to other parts of your IT expenditure, including workstations. In the previous point, we talked about the dangers of buying lower spec machines to reduce costs. This doesn't mean you have to invest massive amounts of money upfront, however, as you also have the option of leasing equipment.
There are alternatives to leasing too. Implementing BYOD (bring your own device) policies is another approach you can use, while some start-ups find that an effective approach to IT budgeting is to provide employees with a tech allowance rather than purchasing the equipment as a company.
4. Forecast and Plan for Extra, Unforeseen IT Spending
It is always beneficial to plan for unexpected IT costs. As we have all experienced over the last couple of years, anything can happen. Being prepared is crucial, particularly in terms of IT given the mission-critical importance of IT systems and functions in many start-up businesses.
5. Communicate Your IT Budgeting Strategy with Your Team
Start-up businesses are places of innovation and energy, where everyone is working hard to make the company a success. However, in this type of environment, it is easy for things to fall through the cracks, particularly when it comes to internal company communications about topics as mundane as IT budgeting.
However, problems can arise when these communications are missed. For example, employees can become frustrated when they feel not enough is being spent on areas that they feel are important. You can reduce these frustrations by clearly communicating your IT budgeting strategy to the team. Keeping everyone on the same page and generally moving in the same direction is always the best approach in start-ups.
Here’s the thing: while you’re rightly passionate about your start-up and where you want to go, we’re passionate about things like IT budgeting and making good IT decisions. Let’s connect today.