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Budget Planning for a Technology Business

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Developing Technology Business

Ease of access to the internet has led some entrepreneurs to falsely believe that developing a business plan is not necessary. The opposite is true. The tech business needs a business plan that addresses each critical success element, including marketing, management, operations, and financial goals. To stay on track with financial goals, the tech business also needs an annual budget in order to have something to measure actual results against.

Tech companies can quickly careen out of control in the expense and capital equipment areas because technology changes so quickly. A good budget can help businesses keep expenses under control while allowing room for incorporating new technology.

Making Sense of Budget Planning

Following are some quick tips to ensure the budget planning process makes sense:

• Consider the Big Picture – Some of the most difficult decisions every business owner makes concern buying new equipment. It may be tempting to maintain old equipment because new equipment is expensive. However, old equipment can be even more expensive if it requires increasing maintenance and repairs. Consider all the costs associated with the old equipment and compare that total to the cost of new equipment.

• Look at All Technology Options – There are several routes a tech business can take to minimize the expense of upgrading equipment. One approach is to buy refurbished or overstocked equipment from a major manufacturer like HP. Another is to lease rather than buy new equipment when the technology is expected to rapidly change. When possible, a third option is to upgrade existing equipment to accommodate a growing business. Identify the costs associated with each option, list the pros and cons of each option, and make an informed decision.

• Determine Server Maintenance Options – Data centers have become very popular because they offer server space, security, maintenance, and utilities efficiency. Larger tech businesses may decide to maintain an in-house server space, but smaller businesses may find that leasing servers in a data center is more cost efficient. It takes a large investment in climate control equipment, server equipment, and equipment maintenance staff to manage an in-house server room.

• Compare Buy or Build Tech Options – Should the business buy equipment or software, or should it build either one? The buy or build question applies to filling internal operational gaps and to meeting customer needs. A business that sells customized products as part of its brand will likely build the products sold. Another option is to buy basic equipment or software that can be customized and branded to meet internal or customer needs. The first step is comparing the costs of identified options, including the staff and other costs associated with long-term maintenance.

• Fit the Technology Budget within the Total Budget Plan – Technology can overrun financial aspects of a business. The technology budget should not be developed within a vacuum, separate and distinct from the rest of the business. It needs to be integrated into the overall budget plan to ensure planned expenses are covered by revenues.

• Use Technology Internally to Improve Efficiency – Tech companies offer products and services to customers that are intended to help customers become more efficient and competitive. The tech company needs to consider how technology can be utilized internally to improve its own business. This includes using web conferencing and purchasing some services from outside tech vendors.

Staying Financially Viable

Technology businesses are challenged with staying current in an industry that is ever-changing. The business plan should be reviewed at least annually which forces business owners to review current business strategies and financial projections. There are many options as to how a company can stay financially viable while offering customers competitive products and services.
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