How to Budget for Cybersecurity: A Practical Guide for Small Teams and Contractors
- Cybersecurity Consultant Brent Gallo
- Sep 23
- 4 min read
Updated: Sep 24
Budgeting for cybersecurity is the foundation of a secure and competitive organization. Without a clear budget, small teams and contractors risk overspending on shiny tools while neglecting compliance, governance, or training. A cybersecurity budget should align with your compliance obligations (CMMC, HIPAA, FERPA, CIS), the sensitivity of the data you handle (CUI, PHI, student records), and your operational maturity.
A sound budget spreads resources across four buckets: compliance documentation, technical tools, people and expertise, and continuous monitoring. There are multiple models that show percentage of IT spend, risk-based allocation, or maturity-based roadmaps that give leadership a defensible way to allocate resources.
Most importantly, cybersecurity budgeting happens before you choose a provider. When procurement officers or auditors review your bid, they’re looking for a posture that is realistic, funded, and documented. This guide provides detailed examples, budget models, pitfalls to avoid, and a checklist to get started.
Why Budgeting First Matters
Most organizations rush into vendor selection, buying an EDR tool, hiring a consultant, or signing a managed services contract before deciding how much they should spend. This creates imbalance: too much money on tools, too little on compliance evidence or training, and an unconvincing story for auditors and contracting officers.
Budgeting first has several benefits:
Leadership alignment: A budget signals that leadership understands cybersecurity risk and allocates resources accordingly.
Procurement readiness: Contracts with the Department of Defense (DoD), universities, or healthcare systems require documented compliance. Budgeting ensures you can back up claims with funded evidence.
Risk reduction: A structured budget ensures essential controls (e.g., MFA, backup, policies) aren’t overlooked.
Competitive advantage: A funded plan strengthens your RFP responses and makes you less risky to primes or government evaluators.
Core Budget Buckets
1. Baseline Compliance (Governance & Documentation)
What it covers: policies, System Security Plan (SSP), Plan of Action & Milestones (POA&M), evidence packs, and required assessments.
Why it matters: Compliance isn’t optional. DoD contractors need CMMC/NIST 800-171 alignment; universities handle FERPA; healthcare providers must show HIPAA Security Rule safeguards.
Typical costs: $10k–$50k for initial policy packs and assessments (varies by organization size).
2. Tools & Technology (Security Controls)
What it covers: Endpoint Detection & Response (EDR), Multi-Factor Authentication (MFA), firewalls, backup/disaster recovery, vulnerability scanning, and penetration testing.
Why it matters: Tools operationalize compliance requirements (e.g., NIST SC-7 boundary protection, CIS Control 5 account security).
Typical costs: $5k–$100k annually depending on licenses, scale, and whether managed services are included.
3. People & Expertise (Human Capital)
What it covers: vCISO or fractional security leadership, internal IT/cybersecurity staff, managed security service providers, and employee awareness training.
Why it matters: People interpret alerts, update policies, and respond to incidents—tools alone don’t deliver compliance.
Typical costs:
Yearly salary can cost between 60k-150k per person or more depending on the role and skillset. Executive positions such as IT Director or Chief Information Security Officer can range well over 150k per year.
vCISO: $4k–$10k per month.
Training: $20–$50 per user per year.
MSP/MSSP retainers vary widely, often from $30k to $150k annually.
4. Continuous Monitoring & Audits
What it covers: SIEM or log management, MDR services, recurring penetration testing, annual compliance audits, tabletop exercises.
Why it matters: Frameworks require ongoing monitoring (NIST IR, AU families; CIS Control 8). Static compliance fails audits.
Typical costs: $10k–$100k annually.
Sample Budget Models
Model | Approach | Example Allocation | Strengths | Risks |
% of IT Spend | Allocate 7–12% of IT budget to cybersecurity | IT budget $1M → Cyber budget $70k–$120k | Easy benchmark, common in higher ed & healthcare | May not reflect actual compliance obligations |
Risk-Based | Tie spend to likelihood/impact of threats | 40% tools, 30% people, 20% compliance, 10% monitoring | Flexible, aligns to risk register | Requires mature risk analysis |
Maturity-Based Roadmap | Build stepwise: start with compliance, scale into monitoring | Year 1: policies + MFA; Year 2: EDR + training; Year 3: SIEM + audits | Practical for small teams; grows with business | Delayed full coverage in early years |
Contract-Driven | Budget based on required CMMC/DFARS clauses | Level 1 (FCI): $10k–$20k; Level 2 (CUI): $50k–$150k+ | Direct alignment with bids | Can spike unexpectedly if contract scope shifts |
Common Pitfalls to Avoid
Overspending on tools: Buying EDR, SIEM, and vulnerability scanners without staff to run them.
Neglecting governance: Policies and SSPs often ignored until right before an audit.
Skipping training: People remain the #1 attack vector (phishing, credential theft).
Static budgets: Cyber risks evolve—budgets must flex annually or even quarterly.
Underestimating evidence needs: Auditors want proof (artifacts, logs, and training records), not just tools.
Checklist for Budget Owners
Identify your required compliance frameworks (CMMC, HIPAA, CIS, FERPA, Insurance Requirements).
Define the sensitivity of your data (CUI, PHI, student records).
Allocate spend across compliance, tools, people, and monitoring.
Choose a budgeting model (% IT, risk-based, maturity, contract-driven).
Document budget assumptions and secure leadership approval.
Schedule quarterly reviews with updated risk assessments.
Prepare a lightweight budget narrative for RFPs/procurement responses.
Neutral Standards & Resources
NIST Cybersecurity Framework (CSF): guides budgeting by function (Identify, Protect, Detect, Respond, Recover).
CIS Controls v8: prioritized technical controls mapped to maturity.
NIST SP 800-171 & CMMC Assessment Guides: contractor compliance costs.
EDUCAUSE Budgeting Guidance: higher education-specific IT and cyber planning.
HHS HIPAA Security Rule: healthcare compliance obligations.
Conclusion
Cybersecurity budgeting is not about “how much you can afford”, it’s about how much risk you are willing to carry and which compliance obligations you must meet. Small teams and contractors can’t do everything at once, but they can build a defensible, prioritized budget that shows auditors, primes, and contracting officers that they take security seriously.
Reach out to Hire A Cyber Pro to help your team build a cybersecurity program with our vCISO services. Already have a cybersecurity program, but want to reduce your spending? Reach out and ask about our Executive Tooling and Cost Analysis Service that will help maximize your current toolset and reduce spending.
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