Tech Spend (the 1% Rule)
A helpful guide on how to strategically structure your team's tech spend budget.
Striking the right balance between spending and return on investment can be challenging. For many small teams, technology is also considered a luxury — yet is necessary to propel a business forward. In today's rapidly evolving digital landscape, it's important to identify exactly what's needed to streamline operations and enhance customer experiences.
In this guide, we'll share a framework for navigating tech investments effectively.
Overview
Developing your company's tech stack requires a strategic approach. There are key areas where technology can make a significant impact, such as improving customer service or enhancing marketing efforts. There are also areas that are "no-brainers", that many teams do not consider or re-approach after installation such as email or file management.
Your tech stack is like a gear system — they all turn together to move your business forward, and all it takes it one "gear" to jam. This is why it's crucial to have a dedicated team member who can stay updated on latest trends and features, and regularly update the efficiency of the system.
Tech Stack Ecosystem
There are several key areas of a tech stack ecosystem;
HR
Accounting
CRM (i.e. Clay)
Analytics / Reporting
Website and/or E-Commerce Management
Forms
API / Automations
Time Tracking
Email Marketing
Calendar Management
Appointment Scheduling
Email Management
File Sharing & Storage
Knowledge Management
Communications
Project Management
Customer Support
Social Media Management
Video Conferencing
Payment Processing
Inventory Management
Marketing & Design
It's important to identify which areas are applicable as you strategize your company's tech stack ecosystem, before researching and selecting tools to use. Many tools offer many of these areas within their product, so it's possible your team already have everything they need, but haven't identified them on a meta level.
Sample Tech Stack Ecosystem
We worked with a website copywriter in 2023. This is what their tech stack included:
Tech Spend ( 1% Rule )
A good rule of thumb is to allocate roughly 1% of annual revenue to technology, unless otherwise deem necessary. For larger teams, we recommend a budget of $1000/user, depending on the tools they need access to.
Tech Spend should not only include the software subscription itself, but hardware, training and maintenance as well.
Referencing back to our client above, their annual tech spend is ~$1000.
Wave Accounting (free + $0.30/invoice)
Fireflies.ai (free plan)
Zapier ($19/mo or $239/yr)
Acquity Scheduling (grandfathered free plan)
Stripe (free + 3% CC processing)
Canva ($119/yr)
Convertkit (free)
Tally Forms (free)
Notion ($180/yr seat; $360 total)
Squarespace ($276/yr)
Loom ($120/yr)
Tech Stack spends can fluctuate heavily based on users, apps increasing pricing, features release, or usage. In this client's instance, Convertkit used to have a limited free plan, and it could have become a $38/mo plan if the client grew their subscriber count. Now, Convertkit allows up to 10,000 subscribers on their free plan, so no budget needed there.
While it is true that committing to an annual subscription usually comes with a 20-30% discount, it's important to test all new software before spending money on a SaaS tool, as many no longer provide refunds for a remaining usage percentage.
Free vs. Paid Tools
Many tools offer free plans (like Tally Forms), where users have access to extensive features, but are required to keep the tools branding visible or pay an additional processing fee for example.
However, free plans may not offer the same level of security or support as paid subscriptions. It's worth understanding what each plan offers that is important to your team. If scalability is a goal of using a specific tool, then a free tool may not be sustainable long term, which in turn could deem disruptive and costly when transitioning to a paid solution later. For that reason, it's better to invest in the right tools from the start.
How to Audit Your Tech Stack
Conducting regular audits of your tech stack is crucial for identifying gaps and areas for improvement. Start by making a comprehensive list of all the software, hardware, and services your business currently uses. This includes everything from project management tools to communication platforms and accounting software.
Next, evaluate how each tool is being used. Are there any tools that are underutilized or redundant? This step helps you identify where you can cut costs and which tools need more focus. Then, analyze the costs associated with each tool versus the benefits they provide. Are there any tools that aren’t delivering the expected ROI? Consider replacing or eliminating them. Finally, look for areas where your current tech stack falls short. Identifying these gaps can guide your future investments and help you stay ahead of the curve.
Investing Wisely: Where to Focus
Once you’ve audited your tech stack, it’s time to decide where to invest. Customer Relationship Management (CRM) systems are a great place to start. CRMs can help you manage customer interactions, streamline sales processes, and improve customer satisfaction. They offer a centralized place to store customer data, making it easier to track interactions and build stronger relationships.
Cloud computing is another area worth considering. Investing in cloud solutions can enhance collaboration, provide scalable storage options, and reduce the need for expensive hardware. Plus, cloud services are often more secure and reliable than on-premises solutions. Automation tools are also a smart investment. Automating repetitive tasks can save time and reduce errors, freeing up your team to focus on more strategic activities. And don’t forget about cybersecurity! Protecting your business data is crucial, so invest in robust cybersecurity measures to safeguard against breaches and cyberattacks.
Conclusion
Investing wisely in technology is crucial for the growth and sustainability of your small business.
By allocating a portion of your budget to tech, following best practices, auditing your tech stack, and avoiding the pitfalls of free tools, you can ensure that your business stays competitive and efficient.
Remember, the goal is to leverage technology to drive better outcomes, streamline operations, and ultimately, enhance your bottom line. Investing in the right tech is not just about keeping up with the latest trends; it’s about setting your business up for long-term success.
Written By: Sara Loretta
👋🏼 Sara Loretta is the Chief Digital Architect & Founder @ _systms™ — she’s also the 10th US Certified Notion Consultant, and 1st Certified Paperform Expert. Through her work and creatorship, Sara is focused on connecting and educating teams on tech, workflows, and all the ways they can optimize their business to scale.
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