TEC Communications
Most small and mid-size companies don't have an IT budget. They have an IT expense line that gets adjusted after something breaks.
That works until the year three things break at once — a server dies, the cyber insurance renewal demands MFA and EDR you don't have, and Microsoft ends support on the OS half your machines are running. Suddenly a "flat" IT year is a $90,000 year, and it lands in Q3 when there's nothing left in the budget.
The usual guidance is 3–6% of gross revenue, and by industry:
2–4%
4–7%
5–8%
6–10%
2–4%
For a $10M Grand Rapids manufacturer that's roughly $200,000–$400,000 a year, all in.
Treat that as a sanity check, not a target. Percentage-of-revenue breaks down badly at the edges. A high-revenue, low-margin distributor and a low-revenue software firm can have the same headcount and near-identical IT needs. Per-employee budgeting is more honest for most companies under 200 people: figure $1,800–$4,000 per employee per year for everything.
Split the budget so a bad month in one doesn't eat the others.
1. Run — 50–60%. Managed services, Microsoft 365 and other SaaS licensing, connectivity, phones, the security stack. Predictable, monthly, boring. This is the bucket that should never surprise you. (Detailed breakdown in our [Grand Rapids managed IT pricing post].)
2. Refresh — 15–25%. This is the one everybody skips and everybody regrets. Workstations on a 4-year cycle, servers on 5, firewalls and switches on 5–7. The trick is to fund it annually rather than in lumps: 40 workstations at $1,400 on a four-year cycle is $14,000 a year, every year, not $56,000 in the year you finally admit the fleet is dead.
3. Security and compliance — 10–20%. Separate from Run on purpose. Cyber insurance requirements move every renewal cycle. Compliance obligations arrive from customers with no warning. If security is buried inside your managed services line, you can't see it changing, and you'll fight about it every time it does.
4. Projects and contingency — 10–20%. The ERP integration, the second location, the M&A cleanup, plus a genuine contingency. If your contingency is zero, your project budget is your contingency and your projects don't happen.
Cyber insurance underwriting keeps tightening. MFA, EDR, immutable backups, and a documented incident response plan are increasingly table stakes for a policy at a reasonable premium. Renewals are landing 15–30% higher for companies that can't check those boxes, and some are getting non-renewed. Price the controls; they're cheaper than the premium delta.
Hardware lead times and tariffs are unpredictable. If you have a known refresh in 2026, order early. This is not the year to run a fleet to failure.
Microsoft licensing keeps drifting upward, particularly for the security-inclusive tiers most businesses eventually need. Audit your seats — most companies are paying for 5–15% more licenses than they have employees. That's free money sitting in your tenant.
Compliance flow-down. For manufacturers, CMMC clauses in customer contracts are becoming a budget event with very little notice.
Start with headcount, not last year's spend. Last year's spend encodes last year's mistakes.
Count employees. Count locations. Count servers and business-critical applications. Then:
Run cost = employees × per-user managed rate × 12, plus licensing, plus connectivity per site. Refresh = (device count × replacement cost) ÷ cycle years, for each asset class. Security = your baseline stack, plus anything your insurer or customers require. Projects = your actual roadmap, plus 10% of the total as contingency.
Add it up, divide by revenue, and see where you land against the benchmark. If you're at 1.5%, you're accruing debt that will come due. If you're at 9% without a compliance driver, something's inefficient.
Not "what does IT cost?" but "what does an hour of downtime cost?"
Take fully-loaded labor for the affected group, add lost production or billable hours, add recovery labor. For a 50-person manufacturer, one hour commonly prices out between $5,000 and $15,000. A three-day ransomware recovery — and three days is optimistic — is a six-figure event before you count the customers who quietly move volume elsewhere.
Against that, the difference between an adequate IT budget and a thin one is a rounding error. That's the comparison to bring to the board.
Annual budgets go stale in Michigan's economy by about April. A 30-minute quarterly review — actuals vs. plan, what changed, what's coming — catches the drift while it's still cheap to fix.
Want a second set of eyes on your IT budget? TEC has can do this for your West Michigan business as soon as this week. Talk to us about your Grand Rapids environment → Learn More