If you run an SMB in the UK, you already know how essential Microsoft 365 is. It’s the cornerstone of your workday: powering email, collaboration, and security. But here’s the thing: while the licence fee is transparent enough, the real cost is anything but. Too many businesses either overspend on licences they don’t need — or cut corners and end up paying more elsewhere.
As Babble’s Modern Work Product Director, I’ve helped many businesses just like yours make sense of Microsoft 365 costs. I can tell you that the question: “How much does it really cost?” comes up almost daily. The truth is, the licence fee is just the starting point. How you configure, manage, and optimise Microsoft 365 makes all the difference.
In this article, I’ll break down the most common mistakes I see, the hidden areas where spend creeps in, and the practical steps you can take to make sure Microsoft 365 is delivering a return on investment for your business.
The sticker price is one thing, but the real cost depends on how you manage those licences, configure security, and plan ahead. This is something that many SMBs don’t take into consideration because they tend to buy licenses with a one-size-fits-all approach.
I get it, if you’ve got 100 users, it’s tempting to just buy Business Premium or even E3/E5 for everyone. It feels safe, you know everyone’s covered, and no-one feels left out. However, not every role needs the same functionality – and therefore, the same license.
While your team in the office, for example, might benefit from Premium, because they need desktop apps, security, and collaboration tools. Your field workers might just need to access email on a mobile device. In that case, you can save money by combining an Exchange Online licence with the right security add-ons, rather than paying for a full Premium licence.
On the other side of the coin are businesses that prioritise saving money to the point where they under-license their organisation. They’ll go for Business Standard because it looks cheaper, but then they buy third-party antivirus or security tools on top to make up for the features they need but aren’t covered in their current plan.
What they’ve missed is that Business Premium includes Microsoft Defender – which is an enterprise-grade antivirus solution designed for SMBs – so spending slightly more on the licence can actually cut overall costs. This is why it’s crucial to ensure that the licence meets your role-specific needs, instead of focusing on the upfront cost. Cheapest on paper doesn’t always mean cheapest in practice.
The good news is that small businesses actually have an advantage over large enterprises when it comes to controlling Microsoft 365 costs: agility. They can adopt new features quickly and see the benefits faster. But that also introduces a risk of moving too quickly: adopting things you might not fully understand can rack up unnecessary costs down the line.
This is where having a partner matters. It makes all the difference to have an advisor who can say: “This new tool is worth it, this one isn’t”, or “Let’s plan ahead according to your goals and move at the right speed”.
Given that there are other costs to consider beyond the license fee, you might be wondering if there are any that may catch you by surprise. The short answer is no: Microsoft 365 doesn’t really have “hidden costs” in the traditional sense. You won’t suddenly get hit with a usage-based bill the way you might with telecoms.
However, what does tend to happen is licence sprawl: acquiring licenses that aren’t required, or at a level no longer needed. For example, a business may buy add-ons for short-term projects and forget to remove them. Or when employees leave, but their licences stay active.
While that isn’t a hidden cost per se, it’s wasted spend that you should be aware of because unused licences add up quicker than you think.
Most Microsoft 365 licences come at a fixed price, but as I mentioned at the beginning of this article, there are indirect costs in how you set up Microsoft 365. Switching a licence on doesn’t mean all the functionality is configured. Security policies, device restrictions, and compliance settings all take time and expertise to set up properly.
In other words, turning on a licence doesn’t mean all the security benefits are automatically working. Setting up policies — like restricting access to UK-only or securing data to work devices on Microsoft Intune — takes time and expertise. If you don’t have an in-house IT team, you’ll either need staff time or a partner to configure them for you. Similarly, training employees and avoiding downtime are additional costs that you may need to consider.
Speaking of additional costs, Microsoft Copilot has taken the industry by storm, but the upfront fee is a bit pricey. Although Copilot is an extra expense, it’s about ROI. If it makes your team more productive, it pays for itself. If not, don’t buy it.
For what it’s worth, I see Copilot as the modern equivalent of spreadsheets. Twenty years ago, doing accounts on paper was unthinkable once Excel existed. That’s what Copilot is becoming: a tool that boosts productivity enough to cover its own cost.
Check out this blog for a deeper dive into how Copilot can save money for your business.
There’s no single price tag for Microsoft 365 because no business is the same. Nonetheless, the cost is something that you can control. When you right-size your licences, keep a handle on sprawl, factor in setup and training, and plan ahead for add-ons like Copilot, Microsoft 365 stops being a drain on your budget and becomes a platform that powers growth.
Remember, the challenge most SMBs face isn’t the licence fee itself: it’s overspending on features they don’t use, or underestimating the indirect costs of poor setup and management. I’ve seen this play out across so many businesses, but with the right approach, you don’t have to guess or overspend.
If you’re not sure where to begin, let us do a quick SmartCheck license audit for you. It’s the fastest way to uncover wasted spend, optimise your setup, and make sure every Pound you invest in Microsoft 365 is paying you back.