Small businesses face a challenging cybersecurity paradox: they're increasingly targeted by cybercriminals who view them as easy marks, yet they typically have the most limited budgets and resources to defend themselves. The stakes couldn't be higher—the average small business data breach costs $120,000, an amount that could be devastating or even fatal to a company with fewer than 50 employees.
Perhaps most alarming: 47% of small businesses with fewer than 50 employees have no cybersecurity budget at all. If you're reading this article, you're already ahead of nearly half of your peers simply by recognizing that security spending is necessary.
This comprehensive guide provides practical, actionable guidance on how much small businesses should budget for cybersecurity in 2025, what to prioritize with limited resources, and how to maximize protection without overspending.
The Small Business Cybersecurity Landscape
Before diving into specific budget recommendations, it's important to understand the threat environment facing small businesses:
Attack Frequency: Small businesses now face cyberattacks every 11 seconds, a rate that has accelerated dramatically in recent years.
Success Rate: Small and medium businesses are three times more likely to be targeted by cybercriminals than larger enterprises because they typically have weaker defenses.
Human Error: Approximately 74% of cybersecurity breaches involve human error, making employee training one of the most critical investments for small businesses.
Recovery Challenges: 60% of small businesses that suffer a cyberattack go out of business within six months, primarily because they lack the financial reserves to recover.
These statistics paint a sobering picture, but they also highlight a crucial point: even modest security investments can dramatically improve your risk profile relative to competitors who invest nothing.
Small Business Budget Benchmarks
So how much should small businesses actually spend on cybersecurity? Let's examine the question from multiple angles:
Total Annual Investment
Research consistently shows that small businesses with fewer than 50 employees should budget $50,000-$150,000 annually for comprehensive cybersecurity protection. This range accounts for variations in:
- Industry risk profile (healthcare and finance need higher investment)
- Data sensitivity (customer financial or health data requires enhanced protection)
- Technology complexity (cloud-first businesses versus traditional on-premise operations)
- Compliance requirements (HIPAA, PCI-DSS, etc.)
- Current security maturity (starting from zero versus enhancing existing programs)
For very small businesses with 10 or fewer employees and minimal technology infrastructure, the floor can be lower—approximately $15,000-$25,000 annually for basic but adequate protection.
Percentage of IT Budget
Small businesses should allocate 10-15% of their IT budget to cybersecurity. This is higher than the 13.2% average across all organization sizes because small businesses can't achieve the same economies of scale as larger enterprises.
If your total IT spending (including hardware, software, services, and personnel) is $400,000 annually, you should budget $40,000-$60,000 for security initiatives.
Per-Employee Investment
The per-employee model provides perhaps the most practical guidance for small businesses: $2,500-$2,800 per full-time employee annually.
Here's how this breaks down by company size:
Micro businesses (1-10 employees): $2,800 per employee
- Example: 8-person company = $22,400 annual security budget
Small businesses (11-50 employees): $2,500 per employee
- Example: 25-person company = $62,500 annual security budget
Small-medium businesses (51-100 employees): $2,200 per employee
- Example: 75-person company = $165,000 annual security budget
Interestingly, research shows that organizations with 11-50 employees can sometimes achieve security spending as low as $640 per employee, but this typically represents basic rather than comprehensive protection. While you might get by with this minimal investment if you're in a low-risk industry with no compliance requirements, most small businesses need the more comprehensive $2,500-$2,800 per employee investment.
Where to Allocate Your Small Business Security Budget
With limited resources, prioritization is critical. Here's how to allocate your small business security budget for maximum impact:
Foundation Layer (35-40% of budget)
These are non-negotiable basics that every small business needs:
Endpoint Protection ($2,000-$5,000 annually):
- Next-generation antivirus or EDR (Endpoint Detection and Response)
- Managed across all computers, servers, and mobile devices
- Typical cost: $3-$8 per endpoint per month
Email Security ($1,500-$4,000 annually):
- Anti-phishing and anti-spam filtering
- Email encryption for sensitive communications
- Attachment scanning and URL rewriting
- Typical cost: $2-$6 per user per month
Backup and Disaster Recovery ($2,000-$8,000 annually):
- Automated daily backups
- Off-site or cloud storage
- Regular recovery testing
- Typical cost: $50-$200 per user annually
Firewall and Network Security ($2,000-$6,000 annually):
- Next-generation firewall with subscription services
- Can be hardware-based or cloud-delivered
- Typical cost: $2,000-$3,000 for hardware plus $1,000-$3,000 annual subscriptions
Multi-Factor Authentication ($500-$2,000 annually):
- Required for email, financial systems, and remote access
- Dramatically reduces account compromise risk
- Typical cost: $3-$8 per user per month
Detection and Response Layer (25-30% of budget)
Once foundations are in place, invest in capabilities to detect and respond to threats:
Security Monitoring ($5,000-$15,000 annually):
- Managed SIEM (Security Information and Event Management)
- 24/7 monitoring for suspicious activity
- Alert response and investigation
- Typical cost: $500-$1,500 per month for small business packages
Vulnerability Management ($2,000-$5,000 annually):
- Regular vulnerability scanning
- Patch management for systems and applications
- Typical cost: $200-$500 monthly for managed services
Incident Response Planning ($2,000-$5,000 initially, $1,000-$2,000 annually):
- Documented incident response procedures
- Retainer with incident response firm
- Regular tabletop exercises
People and Process Layer (20-25% of budget)
Technology alone won't protect your business—you need educated employees and documented processes:
Security Awareness Training ($1,500-$4,000 annually):
- Monthly or quarterly training modules
- Simulated phishing campaigns
- Culture-building initiatives
- Typical cost: $25-$60 per employee annually
Training delivers exceptional return on investment: organizations with mature security awareness programs prevent 92% of malware infections, with payback periods under 9 months.
Virtual CISO Services ($5,000-$18,000 annually):
- Part-time strategic security leadership
- Policy and procedure development
- Vendor management
- Board and management reporting
- Typical cost: $1,000-$3,000 per month for small business packages
Few small businesses can justify a full-time CISO, but fractional vCISO services provide strategic guidance at a fraction of the cost.
Policy and Compliance ($2,000-$8,000 annually):
- Security policy development
- Compliance gap assessments (if needed)
- Audit support
- Documentation maintenance
Risk Management Layer (15-20% of budget)
Additional protections that reduce overall risk:
Cyber Insurance ($1,000-$10,000 annually):
- Coverage for data breaches, ransomware, business interruption
- Premium depends on revenue, industry, and coverage limits
- Typical cost: $1,500-$3,500 annually for $1M coverage
Penetration Testing ($3,000-$10,000 annually):
- Annual external penetration test
- Identifies vulnerabilities before attackers do
- May be required for compliance
Security Assessments ($3,000-$8,000 annually):
- Annual security posture review
- Risk assessment updates
- Compliance audits (if applicable)
Sample Small Business Security Budgets
Let's examine realistic security budgets for different small business scenarios:
Scenario 1: Micro Business (8 employees, low risk)
Profile: Professional services firm, cloud-based operations, no compliance requirements
Annual IT Budget: $60,000 Security Budget: $22,400 (37% of IT budget, $2,800 per employee)
Allocation:
- Endpoint protection (8 devices): $1,200
- Email security (8 users): $800
- Cloud backups: $1,200
- Cloud firewall: $1,500
- Multi-factor authentication: $600
- Security awareness training: $800
- Vulnerability scanning: $2,400
- vCISO services (quarterly): $6,000
- Cyber insurance: $2,000
- Incident response retainer: $3,000
- Security policy development: $2,000
- Contingency: $900
Total: $22,400
Scenario 2: Small Business (30 employees, medium risk)
Profile: E-commerce company, processes credit cards (PCI-DSS compliance required), cloud and on-premise infrastructure
Annual IT Budget: $450,000 Security Budget: $75,000 (17% of IT budget, $2,500 per employee)
Allocation:
- Endpoint protection (45 devices): $6,500
- Email security (30 users): $2,400
- Backup and disaster recovery: $6,000
- Next-gen firewall: $5,000
- Multi-factor authentication: $1,800
- Managed SIEM/SOC: $18,000
- Vulnerability management: $4,800
- Security awareness training: $2,400
- vCISO services (monthly): $18,000
- Penetration testing: $5,000
- PCI-DSS compliance support: $8,000
- Cyber insurance: $3,500
- Incident response retainer: $2,000
- Contingency: $1,600
Total: $75,000
Scenario 3: Growing Business (50 employees, high risk)
Profile: Healthcare practice, HIPAA compliance required, handling sensitive patient data
Annual IT Budget: $600,000 Security Budget: $140,000 (23% of IT budget, $2,800 per employee)
Allocation:
- Endpoint protection (75 devices): $9,000
- Email security and encryption (50 users): $4,500
- Encrypted backup and DR: $12,000
- Network security infrastructure: $8,000
- Multi-factor authentication: $3,000
- Managed detection and response: $36,000
- Vulnerability management: $7,200
- Security awareness training: $3,500
- vCISO services (monthly): $24,000
- HIPAA security assessments: $8,000
- Penetration testing: $6,000
- Business associate management: $3,000
- Cyber insurance (healthcare): $7,500
- Incident response retainer: $3,000
- Security documentation and policies: $4,000
- Contingency: $1,300
Total: $140,000
The Cost of Not Investing in Security
While $50,000-$150,000 annually might seem substantial for a small business, consider the costs of inadequate security:
Direct Breach Costs: The average small business breach costs $120,000, including investigation, remediation, legal fees, and notification costs.
Regulatory Fines: HIPAA violations range from $100-$50,000 per violation per day. A single HIPAA breach could result in millions in fines. PCI-DSS non-compliance fees range from $5,000-$100,000 monthly until compliance is achieved.
Business Disruption: Ransomware attacks cause an average of 21 days of downtime. For a business generating $2 million annually, that's nearly $115,000 in lost revenue.
Reputation Damage: 60% of customers say they would stop doing business with a company after a data breach. Customer trust is hard to rebuild.
Legal Liability: Class action lawsuits from affected customers or partners can easily exceed $500,000 in legal fees and settlements.
Business Failure: Remember, 60% of small businesses that suffer a cyberattack close within six months.
Even at the high end of $150,000 annually, security spending represents insurance against potentially catastrophic losses that could destroy your business.
Getting Started with Limited Resources
What if your small business can't afford the recommended security investment right now? Here's a phased approach starting with absolute essentials:
Phase 1: Critical Foundation (Year 1, $15,000-$25,000)
Start with these non-negotiable basics:
- Basic endpoint protection on all devices ($1,500-$3,000)
- Email security and anti-phishing ($1,000-$2,000)
- Cloud backup solution ($1,500-$3,000)
- Multi-factor authentication ($500-$1,500)
- Basic security awareness training ($1,000-$2,000)
- Cyber insurance ($1,500-$3,000)
- Security policy templates ($500-$1,000)
- One-time security assessment ($3,000-$5,000)
- Incident response planning workshop ($2,000-$4,000)
- Contingency fund ($2,000-$3,000)
Phase 2: Detection and Response (Year 2, add $15,000-$30,000)
Once foundations are solid, add:
- Managed security monitoring or basic SIEM
- Vulnerability scanning and patch management
- Quarterly vCISO consultations
- Annual penetration testing
Phase 3: Maturity and Optimization (Year 3+, add $10,000-$20,000)
Expand to comprehensive protection:
- 24/7 managed detection and response
- Monthly vCISO services
- Advanced threat intelligence
- Compliance program management (if applicable)
This phased approach allows you to spread costs over time while ensuring critical protections are in place immediately.
Maximizing Your Small Business Security Budget
Small businesses need to extract maximum value from every security dollar. Here are proven strategies:
Leverage Managed Services
For most small businesses, managed security services deliver better outcomes at lower total cost than building internal capabilities:
- Managed EDR: $3-$8 per endpoint monthly versus hiring security analysts
- Managed SIEM/SOC: $500-$1,500 monthly versus $100,000+ for internal SOC
- vCISO services: $1,000-$3,000 monthly versus $150,000+ for full-time CISO
Prioritize Cloud Security
Cloud services often include security features that would be expensive to implement on-premise:
- Microsoft 365 and Google Workspace include anti-phishing, anti-malware, and DLP
- Cloud infrastructure providers offer native security monitoring and compliance tools
- Cloud-delivered firewalls eliminate hardware costs
Invest Heavily in Training
At just $25-$60 per employee annually, security awareness training delivers exceptional ROI by preventing 92% of malware infections. This is the highest-impact, lowest-cost investment you can make.
Choose Multi-Purpose Tools
Select security tools that address multiple needs:
- EDR platforms that include vulnerability scanning
- Email security that includes backup and archiving
- Firewalls that include VPN and content filtering
- GRC platforms that handle policy management and compliance
Negotiate Volume Discounts
Even small businesses can negotiate:
- Bundle multiple services with single vendors
- Pre-pay annually for 10-20% discounts
- Join business associations that offer group purchasing
Leverage Free Resources
Take advantage of no-cost security resources:
- CISA's free security assessments for small businesses
- Free security tools like Microsoft Security Baseline
- Industry-specific cybersecurity guidance and frameworks
- Free training resources from CISA, NIST, and industry groups
Common Small Business Security Budget Mistakes
Avoid these common pitfalls:
Mistake 1: No Budget at All Nearly half of small businesses have no security budget. Any budget is better than none—start with the minimum and grow from there.
Mistake 2: Technology-Only Focus Spending 100% of budget on tools while neglecting training and processes is ineffective. Follow the recommended allocation: 35-40% technology, 25-30% detection/response, 20-25% people/process.
Mistake 3: Reactive Spending Buying security products after incidents rather than maintaining preventive programs leads to higher long-term costs and repeated compromises.
Mistake 4: Ignoring Compliance If you're subject to HIPAA, PCI-DSS, or other regulations, factor compliance costs into your budget from day one. Retrofitting compliance is always more expensive than building it in initially.
Mistake 5: Underestimating Operational Costs Remember that security tools require ongoing management, monitoring, and optimization. Budget for managed services or internal staff time.
Mistake 6: Skipping Insurance Cyber insurance costs just $1,500-$3,500 annually for most small businesses but can save hundreds of thousands in breach response costs.
Presenting Security Budgets to Small Business Leadership
Getting security budgets approved can be challenging in small businesses where every dollar counts. Use these strategies:
Frame as Business Enablement: Show how security investments enable business initiatives like accepting online payments, storing customer data, or working remotely.
Quantify Risk: Present the $120,000 average breach cost versus your proposed security budget. Frame security spending as insurance, not cost.
Show Competitive Advantage: Explain how security certifications or strong security posture can differentiate you from competitors and win contracts.
Start Small and Grow: If leadership balks at comprehensive budgets, get approval for Phase 1 essentials and demonstrate value before requesting additional investment.
Leverage Insurance Requirements: Many cyber insurance policies require specific security controls. Frame security investments as necessary to obtain or maintain insurance coverage.
Use Customer Pressure: If customers are asking about your security practices or requiring security questionnaires, use this external pressure to justify internal investments.
Planning Your Small Business Security Budget
Small businesses face real cybersecurity risks that can threaten survival, but strategic security investments can dramatically reduce these risks without breaking the bank. The key is right-sizing your budget based on company size, risk profile, and compliance requirements, then prioritizing investments that deliver maximum risk reduction per dollar spent.
For small businesses with under 50 employees, target $50,000-$150,000 annually or $2,500-$2,800 per employee. If resources are constrained, start with a foundational $15,000-$25,000 investment in essentials and grow your program over time.
Ready to calculate the right cybersecurity budget for your small business? Our Cybersecurity Budget Calculator provides customized budget recommendations based on your specific company size, industry, and requirements. Get accurate estimates that account for your unique situation—and build a security program that protects your business without overspending.
