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Establishing an IT Budget for a Small Business?
tirthas asks: "I am the Information Manager of a small (20 person) architecture firm and have recently been asked by my employer to prepare a technology spending budget. While I have a good handle on what I would like to spend vs. what I must spend, I am having some difficulty establishing a justifiable budgeting method. I have seen examples of 'per employee' methods and 'percentage of revenue' methods, but the dollars and percentages vary widely. What methods do you use to establish your departmental/company-wide budgets, what are your monetary amounts or percentages, and what successes or failures did you have in establishing your budgets?"
You need to itemize your budget into categories such as "Software purchases and maintenance", "Hardware", "Supplies", "Communications", "Training", and so on. Your first time making the budget, this will be an extremely tough process. Rely on reviewing the past years' spending and think of those purchases have not been made that should have (Think backup power, corporate antivirus solution, license audit, backup solution, workstation and server refreshes). This list can be quite long, depending on the company. Make sure you get buy off on this list by talking to all those involved and getting their approval in writing. As an example, make sure everyone is agreeing on the same software products so you don't get blindsided half way into the year by some $10,000 package that you weren't expecting another manager would require. You'll be held accountable for your department's spending compared to what was budgeted, so you absolutely MUST aim high on the estimated cost of everything, even more so on items that are tough to pinpoint the cost on. If there's something that has a fluctuating cost, look at a several year history to recognize growth and aim for the highest cost month at the current growth rate.
Make your proposal as simplified and easy to understand as possible. Leave out the techie stuff and tell him what he is going to get out of each item. For items that you know will be a tough sell, bring statistics and case studies of other, big name companies that use said item. When your boss sits down with you to review your proposal, you're going to have to fight for your budget. If he/she wants a more granular view into the proposal, give it to him. If he comments that certain items seem a little high, tell him that you put it a little high to give cushion and provide breathing room for unseen costs. During this process, fight for the things that are most important and give him victories on the smaller things. This way, you get the money for the things that matter most and if the boss comes to you later asking for something not so important, you can refer to the budget and ask what he wants bumped. If he backs out and drops his ad-hoc request, save that as ammo for the next budget review in case you need it. If your boss wants to give you an unreasonably low amount, you must set expectations and clarify the items that will have to be bumped from the review. If he's trying to give you your own budget, remind him that you're the one responsible for the budget and that responsibility cannot be given without also giving authority. Most people understand this line of reasoning and those that don't shouldn't be running a business and you're better off finding an employer that you can grow under. There are plenty of companies out there that would hire an experienced individual that puts a real effort into their job and stands behind what they bring to the company.
When the dust settles, there may be important items that got bumped due to the high costs in catching up to where your department should be at. Do NOT try and squeeze money out of other items to make room for those items that are being bumped early in the year. If crap hits the fan due to that item not being approved in the budget, it's not your fault and your boss made the decision on his own knowing the possible consequences as you explained them. On the other hand, if you get to Q3 and have a little extra money, you'll be in a much better position to purchase that item as a bonus and sleep comfortably knowing that you'll still make budget. Keep in mind though that you'll rarely find yourself getting more breathing room on your budget as the year progresses, so don't count on this happening.
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