The One I.T. Mistake Nearly Every Small Business Makes
By: Chris Lavoie
Tags: Purchasinng, Budget, Small Business, It, Technology

Over the past five years, I have had the opportunity to work with a variety of clientele, including small businesses in many different industries. I have also worked with non-profit organizations, municipal governments, and school districts. The requirements of each entity vary widely, with some only requiring a dozen computers, while a school district might have a one-to-one device policy encompassing thousands of devices.

And yet, there seems to be one thing that school districts and governments know that many, MANY small businesses neglect:

IT Equipment Is A Recurring Expense That Must Be Included In Budgeting Processes

Let me say that again: computers, laptops, servers, storage drives, monitors, peripherals, printers, and any other electronic hardware you can think of, are items that will eventually need to be replaced. These are not one-time items that will last forever, especially if cheaper, slower computers are purchased initially.

Let’s work with a hypothetical company:

XYZ LLC is a brand new company with 12 employees working in an office. 9 employees have desktop computers with 2 monitors each. The CEO and 2 managers each have a desktop computer with 2 monitors, along with a laptop.

So far, we are up to 12 desktops, 24 monitors, and 3 laptops in the first year of business.

In year two, XYZ hires 12 more people, 3 of which are managers. In year three, XYZ hires six more people, 2 of which are managers.

By the end of year three, XYZ has 30 employees with 30 desktops, 60 monitors, and 8 laptops. But some of people the computers are beginning to experience issues with failing disks, dim displays, and general slowness. At the same time, the company has plans to hire an additional 10 employees over the next year.

This scenario also assumes that no computers have been damaged beyond repair over the past three years, or if they have, any expenses were covered under warranty. It also assumes that no mice or keyboards have failed either (an assumption which I can promise you is incredibly unlikely). As more machines begin to fail, the money that would be used for equipment for new employees will need to be diverted to replacing old equipment.

What should be done?

Information technology equipment is not a one-time expense, but is something that needs to be actively planned for on a schedule, and in a budget. If the lifecycle of the computer is assumed to be three years, then the cost of the items replacement needs to be budgeted for over the same period of time.

XYZ should be budgeting to replace one-third of their computers each year, in addition to any equipment for new employees. Whether or not it is absolutely necessary to replace the equipment is another discussion, and of course there are always tax considerations like depreciation (which should be discussed with a tax professional, of course).

We have also assumed that XYZ has no onsite servers, printers, etc.

If the goal of a business is to continually increase profits and growth to provide value to shareholders, information technology is an expense that small businesses cannot afford to ignore.