How Much Should NZ Small Businesses Spend on Software? (2025 Budget Guide)
Software subscriptions add up fast. Accounting, payroll, CRM, project management, communications—before you know it, you're spending thousands per month. But what's reasonable? This comprehensive guide shows you exactly how much NZ small businesses should budget for software in 2025, based on business size, industry, and growth stage.
Key Finding: NZ Software Spending Benchmarks
Typical NZ small businesses (5-50 employees) spend 2-5% of revenue on software. Lower end (2%) for established, simple businesses. Higher end (5%) for tech-heavy, rapidly growing businesses. This guide helps you determine your right percentage.
Software Spending Benchmarks by Business Size
How much do NZ businesses actually spend on software? Here are 2025 benchmarks based on employee count:
| Business Size | Monthly Software Spend | Annual Software Spend | % of Revenue (Typical) |
|---|---|---|---|
| Sole Trader | $50-$150 | $600-$1,800 | 1-3% |
| 2-5 Employees | $200-$500 | $2,400-$6,000 | 2-4% |
| 6-10 Employees | $500-$1,200 | $6,000-$14,400 | 2-5% |
| 11-20 Employees | $1,200-$2,500 | $14,400-$30,000 | 2-5% |
| 21-50 Employees | $2,500-$6,000 | $30,000-$72,000 | 2-5% |
| 51-100 Employees | $6,000-$15,000 | $72,000-$180,000 | 2-6% |
Note: Ranges are wide because software needs vary dramatically by industry. Tech companies spend 4-8% of revenue on software. Traditional businesses (trades, retail) spend 1-3%. Use industry-specific benchmarks below for more accuracy.
Essential vs Nice-to-Have Software
Not all software is equal priority. Categorize your software stack into three tiers:
Tier 1: Essential (Business Can't Operate Without)
Core Business Systems:
- Accounting Software (Xero, MYOB): $25-$95/month
- Payroll Software (PaySauce, SmartPayroll): $8-12 per employee/month
- POS System (retail/hospitality): $60-$400/month
- Email & Communication (Microsoft 365, Google Workspace): $10-15 per user/month
Compliance & Operations:
- Cloud Storage (Dropbox, Google Drive): $10-20 per user/month
- Cyber Insurance (data backup/security): $100-400/month
- Industry-Specific Software (practice management for lawyers, booking system for salons): varies
Budget Allocation: 60-70% of total software budget. These are non-negotiable for business operations and compliance.
Tier 2: High ROI (Significant Productivity/Revenue Impact)
Sales & Marketing:
- CRM Software (HubSpot, Pipedrive): $0-50 per user/month
- Email Marketing (Mailchimp, ActiveCampaign): $20-150/month
- Social Media Tools (Hootsuite, Buffer): $30-100/month
Productivity & Collaboration:
- Project Management (Asana, Monday): $10-25 per user/month
- Team Communication (Slack, Microsoft Teams): $7-12 per user/month
- Document Collaboration (Notion, Confluence): $8-15 per user/month
Budget Allocation: 20-30% of total software budget. Clear ROI through time savings, increased sales, or improved customer retention.
Tier 3: Nice-to-Have (Convenience, Not Essential)
Optimization Tools:
- Advanced Analytics (Tableau, Power BI): $15-70 per user/month
- Design Tools (Canva Pro, Adobe CC): $15-80 per user/month
- Password Managers (1Password, LastPass): $5-8 per user/month
Specialized Tools:
- Scheduling (Calendly): $10-15 per user/month
- Video Editing (Descript): $15-30/month
- Survey Tools (Typeform): $25-70/month
Budget Allocation: 5-15% of total software budget. Defer these until Tier 1 & 2 are covered and budget allows. First to cut when reducing costs.
Software Budgets by Employee Count (Detailed Breakdown)
Here's what a typical NZ business should spend on software at each size:
Sole Trader (Just You)
Annual Revenue: $50,000-$150,000
Recommended Software Budget: $600-$1,800/year ($50-$150/month)
Essential Software Stack:
- • Accounting: Xero Starter ($25/month) = $300/year
- • Email: Google Workspace ($12/month) = $144/year
- • Cloud Storage: Included in Google Workspace = $0
- • Invoice/Payments: Included in Xero = $0
- Total Essential: $444/year
Add if Budget Allows:
- • CRM: HubSpot Free or Pipedrive ($15/month) = $0-$180/year
- • Email Marketing: Mailchimp Free up to 500 contacts = $0
- • Scheduling: Calendly Free or Paid ($10/month) = $0-$120/year
2-5 Employees
Annual Revenue: $200,000-$800,000
Recommended Software Budget: $2,400-$6,000/year ($200-$500/month)
Essential Software Stack (5 employees):
- • Accounting: Xero Standard ($70/month) = $840/year
- • Payroll: PaySauce ($10 × 5 = $50/month) = $600/year
- • Email & Office: Google Workspace ($12 × 5 = $60/month) = $720/year
- • Cloud Storage: Included in Google Workspace = $0
- • Team Communication: Slack Free = $0
- Total Essential: $2,160/year
High ROI Add-Ons:
- • CRM: Pipedrive ($15 × 2 sales staff = $30/month) = $360/year
- • Project Management: Asana ($13 × 5 = $65/month) = $780/year
- • Email Marketing: Mailchimp ($20/month) = $240/year
- Total with Add-Ons: $3,540/year
10 Employees
Annual Revenue: $800,000-$2,000,000
Recommended Software Budget: $6,000-$14,400/year ($500-$1,200/month)
Essential Software Stack:
- • Accounting: Xero Standard ($70/month) = $840/year
- • Payroll: SmartPayroll ($8 × 10 = $80/month) = $960/year
- • Email & Office: Microsoft 365 ($15 × 10 = $150/month) = $1,800/year
- • HR Software: Employment Hero ($7 × 10 = $70/month) = $840/year
- • Cloud Storage: Dropbox Business ($15 × 10 = $150/month) = $1,800/year
- Total Essential: $6,240/year
High ROI Add-Ons:
- • CRM: HubSpot Starter ($20 × 3 users = $60/month) = $720/year
- • Project Management: Monday.com ($12 × 10 = $120/month) = $1,440/year
- • Team Communication: Slack Standard ($8 × 10 = $80/month) = $960/year
- • Email Marketing: ActiveCampaign ($49/month) = $588/year
- Total with Add-Ons: $9,948/year
25 Employees
Annual Revenue: $2,000,000-$5,000,000
Recommended Software Budget: $20,000-$50,000/year ($1,667-$4,167/month)
Comprehensive Software Stack:
- • Accounting: Xero Premium ($95/month) = $1,140/year
- • Payroll: SmartPayroll ($8 × 25 = $200/month) = $2,400/year
- • Email & Office: Microsoft 365 ($15 × 25 = $375/month) = $4,500/year
- • HR Software: Employment Hero ($7 × 25 = $175/month) = $2,100/year
- • CRM: HubSpot Professional ($800/month for company) = $9,600/year
- • Project Management: Monday.com ($12 × 25 = $300/month) = $3,600/year
- • Communication: Slack Business+ ($12 × 25 = $300/month) = $3,600/year
- • Cloud Storage: Dropbox Business ($15 × 25 = $375/month) = $4,500/year
- • Marketing Automation: ActiveCampaign ($149/month) = $1,788/year
- • Analytics: Google Analytics 360 (optional, $150k/year for enterprise)
- Total: $33,228/year (mid-range)
50 Employees
Annual Revenue: $5,000,000-$15,000,000
Recommended Software Budget: $50,000-$150,000/year ($4,167-$12,500/month)
At 50+ employees, software needs become more sophisticated with enterprise tools, integrations, and potentially custom development. Budget 3-5% of revenue for software, including:
- • Core business systems (accounting, payroll, HR, CRM): $30,000-$50,000/year
- • Productivity & collaboration tools: $15,000-$30,000/year
- • Industry-specific software: $10,000-$40,000/year
- • IT infrastructure & security: $10,000-$30,000/year
- • Integration & custom development: $5,000-$20,000/year
Software Budgets by Industry
Industry significantly impacts software spending. Here are typical budgets for 10-employee NZ businesses in different sectors:
Professional Services (Consulting, Accounting, Legal, Architecture)
Software Budget: $12,000-$20,000/year (3-5% of revenue)
- • Higher spend due to specialized practice management software ($200-$500/month)
- • Document management and version control critical
- • Time tracking and project billing essential
- • Client portals and collaboration tools
Retail (Physical Stores)
Software Budget: $8,000-$15,000/year (2-4% of revenue)
- • POS system is major expense ($150-$400/month)
- • Inventory management software
- • E-commerce platform if selling online ($30-$300/month)
- • Customer loyalty program software
Hospitality (Cafes, Restaurants, Bars)
Software Budget: $10,000-$18,000/year (2-4% of revenue)
- • Hospitality POS with kitchen display ($200-$500/month)
- • Reservation/booking system ($50-$200/month)
- • Staff rostering software ($50-$150/month)
- • Recipe costing and inventory management
Trades (Plumbing, Electrical, Building)
Software Budget: $6,000-$12,000/year (1.5-3% of revenue)
- • Job management software (Tradify, AroFlo) ($100-$250/month)
- • Quoting and invoicing (often included in job management)
- • Time tracking and GPS for mobile teams
- • Lower overall spend than office-based businesses
E-commerce/Online Business
Software Budget: $15,000-$30,000/year (4-8% of revenue)
- • E-commerce platform (Shopify, WooCommerce) ($50-$300/month)
- • Marketing automation and email marketing ($100-$500/month)
- • CRM and customer service software ($50-$200/month)
- • Analytics and conversion optimization tools ($100-$300/month)
- • Highest software spend as % of revenue
Tech/SaaS Companies
Software Budget: $20,000-$40,000/year (5-10% of revenue)
- • Development tools (GitHub, Jira, cloud hosting) ($500-$2,000/month)
- • Customer support software (Intercom, Zendesk) ($100-$500/month)
- • Product analytics (Mixpanel, Amplitude) ($100-$500/month)
- • Highest absolute spend on software
Calculating Software ROI (Return on Investment)
How do you know if software is worth the cost? Calculate ROI using this framework:
ROI Formula for Software
ROI = [(Value Gained - Software Cost) / Software Cost] × 100%
Value Gained = Time Saved + Revenue Increase + Cost Reduction + Error Prevention
Target: Minimum 200% ROI (return $3 for every $1 spent) within 12 months. Exceptional software delivers 500-1000% ROI.
Example 1: Accounting Software ROI
Software Cost: Xero Standard = $840/year
Value Gained:
- • Time saved (10 hours/month × $50/hour × 12 months) = $6,000
- • Reduced accountant fees (5 hours saved/year × $180/hour) = $900
- • Error prevention (avoid 1 GST error, potential penalty $2,000) = $2,000
- Total Value = $8,900
ROI = [($8,900 - $840) / $840] × 100% = 960% ROI
Excellent investment. Return nearly $10 for every $1 spent.
Example 2: CRM Software ROI
Software Cost: HubSpot Starter = $720/year
Value Gained:
- • Increased sales conversion (2% improvement on $500k pipeline) = $10,000
- • Reduced time on admin (5 hours/week × $60/hour × 52 weeks) = $15,600
- • Better customer retention (5 extra clients × $2,000 annual value) = $10,000
- Total Value = $35,600
ROI = [($35,600 - $720) / $720] × 100% = 4,844% ROI
Exceptional ROI for sales-focused businesses.
Example 3: Project Management Software ROI
Software Cost: Asana Business (10 users) = $1,560/year
Value Gained:
- • Reduced meeting time (2 hours/week saved × 10 staff × $50/hour × 52 weeks) = $52,000
- • Faster project delivery (20% time reduction on $200k projects) = $40,000
- • Fewer missed deadlines (prevent 3 late penalties @ $5,000 each) = $15,000
- Total Value = $107,000
ROI = [($107,000 - $1,560) / $1,560] × 100% = 6,759% ROI
Massive ROI through team efficiency gains.
When Software ISN'T Worth It:
- • Under 100% ROI: Software costs more than value delivered. Cancel or replace.
- • Low utilization: Paying for 10 licenses but only 3 people use it. Downgrade or switch.
- • Duplicate functionality: Paying for same features in multiple tools. Consolidate.
- • No measurable impact: Can't identify specific time saved or revenue gained. Probably unnecessary.
How to Reduce Software Costs (Without Sacrificing Quality)
Software budgets creep up over time. Here's how to optimize without hurting productivity:
1. Conduct Annual Software Audit
Review every subscription quarterly. Ask: Do we still use this? What value does it provide? Could free/cheaper alternative work? Cancel subscriptions for software used by fewer than 30% of intended users.
2. Consolidate Tools with Overlapping Features
Example: Using Asana for projects + Slack for communication + Notion for docs = 3 tools, $50/month.
Consolidate to: Monday.com (includes project management, communication, docs) = $25/month.
Savings: $300/year. Bonus: Fewer tools = easier training, better adoption.
3. Negotiate Annual vs Monthly Pricing
Most SaaS offers 15-20% discount for annual payment. If you're committed to software for 12+ months, pay annually. Example: $70/month monthly = $840/year. Annual rate $600/year (saves $240).
4. Right-Size Your Plan (Don't Overpay for Features)
Using Xero Premium ($95/month) but only need Standard features ($70/month)? Downgrade and save $300/year. Review plan tier against actual usage monthly.
5. Use Free Tiers for Low-Volume Needs
Many tools offer generous free tiers:
- • CRM: HubSpot Free (unlimited contacts, basic features)
- • Email Marketing: Mailchimp Free (2,000 contacts)
- • Scheduling: Calendly Free (1 calendar connection)
- • Team Communication: Slack Free (10,000 message history)
Start with free tiers. Upgrade only when you hit limits or need advanced features.
6. Share Licenses Strategically
For software not used daily by all staff, share licenses. Example: Design tool (Canva Pro) used by 2 marketing staff = 1 license ($15/month) instead of 2 ($30/month). Save $180/year.
7. Bundle Services (Microsoft 365 vs Individual Apps)
Microsoft 365 ($15/user) includes: Email, OneDrive storage, Office apps, Teams, SharePoint. Buying separately would cost $30-40/user/month. Bundles often cheaper than à la carte.
8. Cancel Unused Trial Subscriptions
Free trials auto-convert to paid. Set calendar reminder 2 days before trial ends. Cancel if not using. NZ businesses waste $500-2,000/year on forgotten trial subscriptions.
Realistic Savings: Most NZ businesses can reduce software spending by 20-30% through these optimizations without losing functionality. A business spending $10,000/year could save $2,000-$3,000 annually.
Software Budgets by Growth Stage
Your software needs (and budget) evolve as you grow. Here's how to scale software spending:
Stage 1: Startup/Launch (0-2 employees, Year 1)
Software Budget: $500-$1,500/year (keep lean)
Philosophy: Free tiers and minimal paid tools. Bootstrap mentality.
- • Accounting: Xero Starter ($25/month) = $300/year
- • Email: Gmail free or Google Workspace ($12/month) = $0-$144/year
- • CRM: HubSpot Free = $0
- • Project Management: Trello Free or Asana Free = $0
- • Cloud Storage: Google Drive free tier (15GB) = $0
Stage 2: Validation (2-5 employees, Years 2-3)
Software Budget: $3,000-$7,000/year (invest in productivity)
Philosophy: Proven product-market fit. Invest in tools that accelerate growth.
- • Upgrade accounting to Standard plan: $840/year
- • Add payroll software: $600/year
- • Paid CRM (Pipedrive): $360/year
- • Project management (Asana): $780/year
- • Email marketing (Mailchimp): $240/year
- • Communication (Slack Standard): $480/year
Stage 3: Growth (10-25 employees, Years 4-6)
Software Budget: $15,000-$40,000/year (scale systems)
Philosophy: Standardize on professional-grade tools. Focus on team efficiency.
- • Full accounting + payroll + HR stack: $8,000-$12,000/year
- • Professional CRM (HubSpot Pro): $9,600/year
- • Team collaboration suite: $5,000-$10,000/year
- • Marketing automation: $2,000-$5,000/year
- • Industry-specific tools: $5,000-$15,000/year
Stage 4: Scale (50+ employees, Year 7+)
Software Budget: $75,000-$250,000/year (enterprise systems)
Philosophy: Enterprise-grade solutions, custom integrations, dedicated IT.
- • Enterprise accounting/ERP: $20,000-$50,000/year
- • Advanced CRM/sales automation: $25,000-$75,000/year
- • Comprehensive HR/talent management: $15,000-$40,000/year
- • Business intelligence/analytics: $10,000-$30,000/year
- • Custom integrations and development: $15,000-$50,000/year
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