How to Plan a Cybersecurity Budget for a Small Business

If you run a small or mid-sized business, you probably know that cybersecurity is important. But when it comes to creating a cybersecurity budget, most owners are stuck asking: How much should we spend? Where does the money actually go? And how do we make sure we’re not overspending—or worse, under-protecting?

The good news is, you don’t need a six-figure enterprise budget to build strong cybersecurity. But you do need a plan. In this article, we’ll walk you through how to build a practical, risk-based cybersecurity budget that fits your business size and goals.

Why Small Businesses Can’t Afford to Ignore Cybersecurity Anymore

There’s a common myth that hackers only go after big companies. The truth is, small businesses are actually the most frequent targets of cyberattacks. According to a 2024 report from Verizon, over 60 percent of data breaches involved small and medium-sized businesses.

Why? Because small businesses often:

• Lack of in-house cybersecurity expertise
  
  
• Use outdated systems or weak passwords
  
  
• Don’t invest in employee training
  
  
• Assume their MSP is "handling everything"
  
  

A single ransomware attack or data breach can cost tens of thousands of dollars—or even put you out of business. Planning a proper cybersecurity budget is not optional anymore. It is a necessary cost of doing business.

What Should a Cybersecurity Budget Include?

To create a meaningful cybersecurity budget, you need to understand the categories where your dollars will go. Here’s what should be on your radar.

Hardware and Software Tools

These are the technical tools that protect your systems:

• Firewalls
  
  
• Antivirus and anti-malware software
  
  
• Endpoint Detection and Response (EDR)
  
  
• Multi-factor authentication (MFA)
  
  
• Backup and disaster recovery tools
  
  

Services and Subscriptions

Ongoing protection often requires third-party services like:

• Managed Detection and Response (MDR)
  
  
• 24/7 threat monitoring
  
  
• Security Information and Event Management (SIEM)
  
  
• Cloud access security brokers (for cloud-heavy businesses)
  
  

Employee Training and Awareness

People are often the weakest link in cybersecurity. Your budget should include:

• Phishing simulation platforms
  
  
• Security awareness training modules
  
  
• Periodic refresher courses for new threats
  
  

Audits and Risk Assessments

You cannot protect what you haven’t assessed. Important budget items include:

• Vulnerability scanning
  
  
• Penetration testing (depending on your industry)
  
  
• Compliance gap assessments
  
  

How Much Should You Budget for Cybersecurity?

There is no magic number, but there are general guidelines that can help.

Rule-of-Thumb Estimates

• Overall IT spending: Most businesses spend 3 to 7 percent of revenue on IT.
  
  
• Cybersecurity portion: Cybersecurity should be around 10 to 20 percent of your overall IT budget.
  
  

So if your company earns $5 million annually and allocates 5 percent to IT, that’s $250,000. Of that, $25,000 to $50,000 might reasonably go toward cybersecurity, depending on your risk profile.

Factors That Affect Your Budget

• Industry: Healthcare, legal, and financial services often require higher investment due to compliance.
  
  
• Employee Count: More employees = more endpoints to secure.
  
  
• Remote Work: A dispersed workforce creates more access points and vulnerabilities.
  
  
• Current Maturity: If you are starting from scratch, expect to invest more upfront.
  
  

The Risks of Underfunding Cybersecurity

If you’re hesitant to allocate part of your budget to cybersecurity, consider what you might spend if something goes wrong.

Here’s what underfunding security can cost you:

• Ransomware recovery: Can easily cost $50,000 or more in downtime and data restoration
  
  
• Regulatory fines: HIPAA violations can cost up to $50,000 per incident
  
  
• Reputation damage: Harder to quantify, but long-lasting
  
  
• Legal liability: If customer or employee data is compromised
  
  

Many of these risks are preventable with thoughtful planning and relatively small investments.

How to Prioritize Your Cybersecurity Spending

Not every business needs every tool or service. The key is to prioritize based on risk.

Start With Must-Haves:

• Firewalls
  
  
• Antivirus and EDR
  
  
• Regular backups
  
  
• MFA for all users
  
  
• Security training for staff
  
  

Then Add Based on Risk:

• Advanced threat detection
  
  
• Compliance-specific tools (HIPAA, CMMC, etc.)
  
  
• SIEM systems
  
  
• Third-party risk management tools
  
  

If the budget is tight, start with the most critical protections and build from there. A good provider will help you phase your investments over time.

Sample Cybersecurity Budget: 25-Person Business Example

Let’s say you have 25 employees. Here’s a rough estimate of what your annual cybersecurity budget might include:

Total Estimated Range: $13,000 to $25,000/year

Your actual budget will vary, but this shows how a reasonable investment can cover multiple layers of protection.

How AIS Helps Clients Plan Their Cybersecurity Budget

At AIS, we help small and mid-sized businesses build practical, right-sized cybersecurity plans based on:

• Your risk profile
  
  
• Your industry
  
  
• Your existing tech stack
  
  
• Your business goals
  
  

We pair each client with a virtual CIO (vCIO) who leads the budgeting and planning process, ensuring every dollar you spend supports your overall strategy.

Related Article: How Can a vCIO Benefit Your Business?

We also offer vulnerability assessments and quarterly business reviews to help you update your security plan regularly.

Final Thoughts: Cybersecurity Is an Investment, Not Just a Line Item

Cybersecurity planning should not feel like a guessing game. With the right guidance, small businesses can build strong defenses without overspending.

Start with a clear understanding of your risks, align your spending with your goals, and revisit the plan at least once per year. A good cybersecurity budget is not just about tools—it is about protecting your ability to do business.

If you do not currently have a cybersecurity plan or budget, now is the time to start. You do not need to be a big company to protect yourself like one.