IT Consulting Running Costs
Expect the core monthly running costs for IT Consulting in 2026 to start around $71,300, before factoring in revenue-driven variable expenses This high fixed cost base is dominated by payroll ($51,458/month) and office overhead ($15,700/month) Variable costs, including subcontractor support and project software licenses, add another 130% to your cost of goods sold (COGS), plus 140% for sales commissions and travel You must maintain a strong cash buffer the model shows you hit break-even only after 18 months, in June 2027, requiring careful managment of working capital until then This guide breaks down the seven essential recurring expenses
7 Operational Expenses to Run IT Consulting
| # | Operating Expense | Expense Category | Description | Min Monthly Amount | Max Monthly Amount |
|---|---|---|---|---|---|
| 1 | Staff Wages | Fixed Labor | Payroll totals $51,458 monthly for 50 FTEs, including the CEO at $180,000 annually. | $51,458 | $51,458 |
| 2 | Office/Utilities | Fixed Overhead | Physical office rent ($8,000) plus utilities and internet total $9,200 monthly in fixed overhead. | $9,200 | $9,200 |
| 3 | Project Software | COGS | These are Cost of Goods Sold expenses covering required licenses, estimated at 80% of total revenue. | $0 | $0 |
| 4 | Subcontractors | Variable Labor | Costs for specialized or overflow project support, acting as a variable expense set at 50% of revenue. | $0 | $0 |
| 5 | Sales Commissions | Variable Labor | Sales compensation is a variable expense set at 100% of revenue to incentivize client acquisition. | $0 | $0 |
| 6 | Internal Tools | Fixed Overhead | Fixed monthly costs for internal systems like CRM and Project Management software total $2,200. | $2,200 | $2,200 |
| 7 | Marketing Budget | Fixed Overhead | The dedicated annual marketing budget is $50,000, averaging $4,167 per month. | $4,167 | $4,167 |
| Total | All Operating Expenses | $67,025 | $67,025 |
IT Consulting Financial Model
- 5-Year Financial Projections
- 100% Editable
- Investor-Approved Valuation Models
- MAC/PC Compatible, Fully Unlocked
- No Accounting Or Financial Knowledge
What is the minimum sustainable monthly revenue needed to cover all fixed running costs?
The minimum sustainable revenue for your IT Consulting operation hinges on covering the $71,325 fixed overhead, but the 270% variable cost rate presents an immediate, severe margin hurdle that must be fixed before calculating consultant utilization; determining the required client retention rate to justify the $2,500 Customer Acquisition Cost (CAC) in 2026 is key to understanding What Is The Most Important Indicator To Measure The Success Of Your IT Consulting Business?
Fixed Costs and Margin Reality
- Fixed overhead of $71,325 must be covered monthly by gross profit alone.
- A 270% variable cost rate means your margin is negative 170% before overhead hits.
- This cost structure makes break-even impossible; variable costs must drop below 100% immediately.
- If you hit $100,000 in revenue, you lose $170,000 on service delivery costs before fixed costs.
CAC Payback Requirements
- The target $2,500 CAC for 2026 assumes a profitable Lifetime Value (LTV).
- To maintain a standard 3:1 LTV:CAC, your LTV needs to reach at least $7,500.
- This requires establishing the average monthly revenue per client to set a retention goal.
- If the average client spends $3,000 monthly, you need them to stay for at least 2.5 months to cover CAC.
How much working capital (cash buffer) is required to cover the negative cash flow until break-even?
The IT Consulting business requires you to secure enough funding to cover operating losses until June 2027, hitting a minimum cash balance of $287,000, which is separate from the $50,000 needed immediately for physical setup.
Calculate Your Cash Trough
- The lowest point for cash is projected at $287,000 in June 2027.
- Your initial funding must cover all monthly fixed costs until that date.
- To know your runway, divide that $287k by your average monthly operating burn rate.
- Understanding this full capital requirement is key; for a deeper dive on initial expenditures, review How Much Does It Cost To Open And Launch Your IT Consulting Business?
Separate CapEx From Runway
- You need $50,000 upfront for office setup, which is Capital Expenditure (CapEx).
- This $50k is spent before operations begin; it doesn't count toward your working capital buffer.
- Your runway calculation only starts after that initial outlay is made.
- You must defintely track these two buckets of cash separately for board reporting.
Which running cost categories offer the greatest opportunity for immediate cost reduction without damaging service quality?
Immediate cost reduction for your IT Consulting business centers on eliminating the $8,000 monthly office rent, optimizing the 100% sales commission model, and auditing the $1,500 internal software spend. These structural overheads offer the fastest path to improved contribution margin before scaling client acquisition, a process you can explore further in How Much Does It Cost To Open And Launch Your IT Consulting Business?
Office Rent: First 12 Months
- Reassess the $8,000 rent; remote operations save $96,000 annually.
- Use client sites for necessary in-person meetings instead.
- Cash preservation is critical when building initial client pipelines.
- Delaying physical footprint reduces fixed burn rate significantly.
Commission and Software Spend
- Review the 100% sales commission structure; it offers zero margin until recouped.
- Consider a base salary plus tiered commission to manage acquisition costs.
- Audit the $1,500 monthly internal software spend; defintely look for bundled or cheaper alternatives.
- If software isn't directly billable or mission-critical, cut it now.
How will we cover running costs if billable utilization rates fall 20% below forecast in the first year?
If billable utilization for your IT Consulting firm drops 20% below forecast, you must immediately implement spending controls and model the cash benefit of delaying planned investments, which ties directly into What Is The Most Important Indicator To Measure The Success Of Your IT Consulting Business?. Honestly, defining clear expense reduction triggers before resorting to personnel adjustments is your first defense.
Set Spending Reduction Triggers
- Immediately cut all discretionary spending, like the planned $1,000 professional development budget for Q1.
- Establish a hard trigger: If utilization stays below the revised forecast for four consecutive weeks, enact salary freezes.
- If the gap persists past 60 days, model a reduction of one FTE or implement a 10% salary reduction across the board.
- We need to defintely know the exact cash impact of these cuts.
Model Cash Runway Extension
- Model the cash runway extension achieved by delaying the $50,000 annual marketing budget until Q3.
- This delay immediately adds $50,000 back to your cash position today, buying critical time.
- If your current monthly burn rate (fixed costs minus minimum revenue) is $25,000, delaying this spend buys you two extra months of operation.
- This tactic preserves capital needed for essential client delivery work.
IT Consulting Business Plan
- 30+ Business Plan Pages
- Investor/Bank Ready
- Pre-Written Business Plan
- Customizable in Minutes
- Immediate Access
Key Takeaways
- The core fixed monthly running cost for the IT Consulting firm is established at approximately $71,325, with staff payroll ($51,458) representing the single largest expense category.
- Variable expenses are exceptionally high, as subcontractor support and project software licenses add 130% to COGS, further compounded by a 140% commission structure on sales.
- The projected timeline for achieving profitability is lengthy, indicating the business will not reach its break-even point until June 2027, requiring 18 months of sustained operation.
- To survive the initial negative cash flow period, the firm must secure a minimum working capital buffer of $287,000 to cover overhead until positive cash flow is established.
Running Cost 1 : Staff Wages and Benefits
Payroll Dominance
Staff payroll is your primary drain, hitting $51,458 monthly by 2026. This covers 50 full-time employees (FTEs), including specialized technical talent and the CEO earning $180,000 annually. Managing this fixed cost defintely dictates profitability for your IT consulting firm.
Staff Cost Inputs
This monthly payroll estimate requires knowing your headcount plan and compensation structure for 2026. The total covers 50 FTEs, where the CEO salary is fixed at $180,000 per year. You must factor in the blended average cost per technical staff member to reach the $51,458 total.
- Headcount target: 50 FTEs in 2026.
- CEO salary: $180k annually.
- Includes technical staff wages.
Managing Fixed Labor
Fixed labor is costly; avoid over-hiring technical staff too early. Since subcontractor costs are 50% of revenue, scale internal hiring only when utilization justifies the fixed overhead. Don't let unused FTEs erode your contribution margin.
- Keep internal FTE count lean.
- Use subcontractors for overflow work.
- Monitor utilization rates closely.
Payroll Risk Link
Because payroll is your largest expense, its efficiency directly impacts your ability to cover high variable costs like subcontractor support (50% of revenue) and sales commissions (100% of revenue). High fixed payroll means revenue growth must outpace these variable labor expenses quickly.
Running Cost 2 : Office Rent and Utilities
Fixed Space Cost
Your required physical office space locks in $9,200 monthly as non-negotiable fixed overhead. This baseline cost must be covered before any revenue hits the bank account.
Cost Inputs
This $9,200 total is calculated from $8,000 in rent plus $1,200 for utilities and internet access. As fixed overhead, it sits alongside $1,500 for internal software. If you hired fewer people, this cost wouldn't change, which is why it’s a risk when revenue is low. Honestly, this is a defintely fixed cost.
- Rent: $8,000 per month
- Utilities/Internet: $1,200 per month
- Total Fixed: $9,200 monthly
Remote Savings
For strategic IT consulting, physical space is often the first place to cut fat. Moving to a fully remote model eliminates this $9,200 monthly drain immediately. Compare this against the $50,000 annual marketing budget; that office cost is nearly 22% of your yearly marketing spend.
- Test fully remote for 6 months
- Use hot desks only for client meetings
- Avoid multi-year lease commitments
Fixed Pressure
Because this cost is fixed, it increases the minimum revenue needed just to keep the lights on. Every dollar of revenue must first cover this $9,200 before contributing to variable costs like subcontractor support or sales incentives.
Running Cost 3 : Third-Party Project Software
COGS Software Hit
These software licenses are direct Cost of Goods Sold (COGS), not overhead. Expect them to consume 80% of revenue in 2026. This high percentage means profitability hinges entirely on your billable rate efficiency and utilization. If revenue projections slip, this cost scales down immediately, but it demands tight tracking.
Software Cost Inputs
This 80% COGS figure covers essential per-user or per-project licenses needed to actually deliver consulting work to clients. To model this accurately, you need the total number of concurrent consultants needing access multiplied by the specific license cost, projected against expected 2026 revenue. It’s a direct variable cost, honestly.
- Concurrent user count.
- Per-seat license price.
- Projected 2026 revenue.
Taming Software Spend
Since this is tied directly to service delivery, cutting it means reducing service scope or finding cheaper tools. Negotiate annual commitments instead of monthly billing for better discounts. Avoid over-provisioning seats for staff who aren't billable that month. A 5% reduction here flows straight to the bottom line.
- Negotiate vendor volume tiers.
- Audit licenses quarterly.
- Use internal tools first.
Profitability Lever
Because software licenses are 80% of revenue, your gross margin will be razor-thin at 20% before accounting for subcontractor labor (which is another 50% of revenue). Founders must price services assuming this high COGS load is fixed, or they’ll quickly run out of cash.
Running Cost 4 : Subcontractor Support
Subcontractor Cost Impact
Subcontractor costs are a major variable expense, pegged at 50% of 2026 revenue to handle specialized or overflow IT project needs. This cost structure means profitability scales directly with efficient utilization of this external capacity.
Inputs for Variable Labor
This 50% cost covers specialized IT skills or temporary capacity surges when internal FTEs (Full-Time Equivalents) are maxed out. To model this, track subcontractor hours against billable project hours. If revenue hits $1M in 2026, expect $500,000 in subcontractor spend. This is a direct Cost of Goods Sold (COGS) componant, unlike fixed wages.
- Cost is directly tied to project volume.
- Requires tight SOW (Statement of Work) tracking.
- Acts as scaling labor, not overhead.
Managing Overflow Spend
Managing this high variable cost demands strict scope control and aggressive vendor rate negotiation. Avoid using subcontractors for repeatable tasks that should justify a new FTE hire. If you pay subs $150/hour but only bill $200/hour, the margin is too thin to cover other overhead. Keep subcontractor utilization above 85% on assigned projects.
- Benchmark subcontractor rates monthly.
- Standardize onboarding documentation.
- Limit overflow usage to 20% of total hours.
Margin Sensitivity
Because subcontractors are 50% of revenue, they are a direct lever on gross margin. Considering Third-Party Project Software costs 80% of revenue, your gross margin is already thin. Any slippage in subcontractor efficiency directly erodes the small margin buffer before fixed costs hit.
Running Cost 5 : Sales Commissions and Bonuses
Sales Cost Structure
This structure ties sales compensation directly to top-line results. In 2026, sales commissions and bonuses are budgeted at 100% of revenue. This model aggressively rewards client acquisition, but it means the sales team costs exactly match every dollar earned before factoring in other COGS or overhead. It’s a high-risk, high-reward setup.
Estimating Sales Spend
Estimating this cost is straightforward: it scales dollar-for-dollar with revenue. If the IT Consulting firm generates $100,000 in recognized revenue, the commission expense is $100,000. This cost covers the incentive payouts to the sales force for securing new SMB clients. You need projected revenue figures to model this expense accurately.
- Cost equals 100% of realized revenue.
- Variable labor expense tied to sales success.
- No fixed sales payroll assumed here.
Managing 100% Variable Pay
A 100% variable rate is unsustainable long-term as it leaves no margin for other costs. Review the structure after initial growth. Ensure the $2,500 Customer Acquisition Cost (CAC) target is met by high lifetime value (LTV) clients. If LTV doesn't significantly exceed CAC plus other costs, this defintely needs adjustment.
- Tie bonuses to profitability, not just top line.
- Model a reduced rate post-Year 1.
- Verify client retention metrics.
Action on Commission Rate
This 100% commission budget must be treated as a temporary growth lever, not a baseline operating cost. Until you achieve scale where fixed costs are absorbed, you must rigorously track gross margin per sale. If sales commissions are 100% of revenue, your gross margin is zero pre-other COGS, which is extremely tight.
Running Cost 6 : Internal Software and Tools
Fixed Tool Overhead
Your baseline fixed cost for essential internal software, covering CRM and project management, plus marketing subscriptions, hits $2,200 monthly. This is necessary overhead before client work starts. Honestly, this amount is small compared to the $51,458 payroll burden, but it needs careful tracking.
Cost Inputs
This $2,200 covers core operational software like the Customer Relationship Management (CRM) system and project tracking tools, plus $700 dedicated to marketing subscriptions. These are fixed costs, unlike the variable labor costs (subcontractors at 50% of revenue). If you budget $26,400 annually for these tools, you maintain operational readiness.
Manage Subscriptions
Managing this spend means auditing subscription tiers every quarter. Many firms overpay for unused seats in project management software. You should defintely review if you need premium CRM features immediately or if a scaled-down version suffices until revenue scales up.
Break-Even Impact
Since this $2,200 is fixed, it directly impacts your break-even point, regardless of sales volume. Compare this against the $9,200 office rent; managing the software stack is easier but crucial for margin protection.
Running Cost 7 : Marketing and Client Acquisition
Marketing Investment
Your 2026 marketing plan allocates $50,000 annually to acquire new IT consulting clients. This budget directly supports a target Customer Acquisition Cost (CAC) of $2,500 per client. Hitting this goal means you need to close exactly 20 new clients next year just to cover this specific spend. That's the baseline requirement for marketing efficiency.
Budget Allocation
This $50,000 annual marketing spend is a fixed operational cost for 2026, separate from variable sales commissions. It covers direct advertising, lead generation tools, and initial outreach efforts required to hit the 20-client target. You must track this spend against actual closed deals to confirm the $2,500 CAC is real.
- Budget covers lead generation tools.
- Exclude sales commissions from this figure.
- Target is 20 clients total.
Managing Acquisition Cost
Given that sales commissions are set at 100% of revenue, managing the $2,500 CAC is critical. If your average contract value (ACV) is low, this acquisition cost will crush profitability fast. You defintely need tight tracking on funnel conversion rates.
- Focus on increasing ACV immediately.
- Avoid wasting spend on poor leads.
- Benchmark CAC against industry peers.
Hurdle Rate Check
Remember, this $50,000 marketing budget is only one piece. Subcontractor costs are projected at 50% of revenue, meaning every client acquired must generate enough gross margin to cover the CAC, the subcontractor burden, and the 100% sales commission. That's a high hurdle.
IT Consulting Investment Pitch Deck
- Professional, Consistent Formatting
- 100% Editable
- Investor-Approved Valuation Models
- Ready to Impress Investors
- Instant Download
Related Blogs
- IT Consulting Startup Costs: Budgeting Initial CAPEX and Cash Flow
- How to Launch an IT Consulting Firm: A 7-Step Financial Guide
- How to Write an IT Consulting Business Plan in 7 Actionable Steps
- 7 Essential KPIs to Measure IT Consulting Success
- How Much Do IT Consulting Owners Typically Make?
- 7 Strategies to Increase IT Consulting Profitability and Margin
Frequently Asked Questions
Core monthly running costs are approximately $71,325, covering $51,458 in payroll and $15,700 in fixed operating expenses, before accounting for variable costs like the 270% revenue share for COGS and commissions