When computer and data systems are down and employees are unable to perform their work functions, it is hard to quantify exactly how much is lost. Many businesses incorrectly assume they can afford to be down for long periods of time. However, think about how many employee functions are dependent on technology – from things such as being able to send and receive email to accessing electronic files and data. Or, consider employees that work from home or are often offsite and need to be able to access company servers. And downtime affects more than just employee productivity. It affects your company brand and reputation, and in the end, your entire way of doing business.
Fortunately, there is a way to calculate the cost of downtime. Find out how much downtime might cost your company in order to understand how it can impact your business.
Cost of Downtime (per hour) = Lost Revenue + Lost Productivity + Cost to recover + Cost of intangibles (i.e. reputation cost)
Let’s look at each of these elements in greater detail:
1) Lost Revenue
This one is fairly straight forward. To calculate lost revenue, follow these steps:
- Identify which areas of your business generate revenue.
- Calculate the amount of revenue per hour each of these areas generates (avg. revenue per week/40 hours, or avg. revenue per month/30 days).
- Estimate how much each revenue-generating area relies on uptime, and represent this number as a percentage. For example, if you run an eCommerce website, 100 percent of your business depends on uptime. If you run a floral shop, however, perhaps only 10 percent of your business is uptime-dependent, since people can still purchase goods from your store even if your website is down.
- Calculate the amount of revenue per hour that is lost during downtime for each business area. For example, say the eCommerce website generates $100/hour. If that website is offline for two hours, you will lose $200. However, let’s say the flower shop generates $100/hour in revenue. If the website is down for two hours, only 10 percent of your business is affected, so you only lose $20.
- Add the figures for these different revenue-generating areas to get the total cost of downtime per hour for your client’s business.
2) Lost Productivity
When email systems are down and files are unavailable, employee productivity is affected negatively. In some cases, employees are able to perform some of their jobs functions, but in many cases, productivity will be severely impacted. Employee salaries are fixed, so this element is also fairly simple to calculate.
- Calculate the amount each employee earns per hour.
- Determine what percentage of your employees’ productivity is reliant on uptime. This may vary across your team. If you have a dental office, the actual dentists may not be affected if a server goes down, but the receptionist may only be able to work at 50 percent capacity – answering the phones, but being unable to use the computer to access shared calendars and book appointments.
- Multiply each employee’s hourly salary by their utilization percentage. If the receptionist from the dentist’s office earns $10/hour and they can only work at 50 percent when systems are down, you lose $5/hour of downtime for that employee.
- Add the costs in #3 for all employees to calculate total hourly cost of lost productivity.
3) Cost to recover
The costs associated with recovering lost data are often overlooked. These are hard to calculate since it will depend on your exact situation, but these costs include things such as:
- Services needed to recover lost data
- Physical tools/devices that may need repairs or replacements
- Cost of lost data
- Ongoing costs as a result of the data loss
4) Intangible Costs
These costs include any damage to your brand or reputation. If your company is not able to answer customer requests in an appropriate amount of time, or if customer data is compromised, customers may be influenced to do business elsewhere. It can be difficult to approximate these costs, but it is important to think about the long term effects of a data outage on future sales and customer retention.
Finally, plug these numbers into the formula and calculate the cost of downtime for your company. Here’s a handy downtime calculator here as well.
Fortunately, MSPs can help with this issue. Not only can they help backup your data, but experienced technicians can also help mitigate the effects of downtime by getting you back up and running as quickly as possible. Working with a MSP can also help you budget. Going with the break-and-fix method (and waiting until something bad happens) is often expensive, and because it is typically used in the middle of crisis, many companies are willing to pay whatever it takes to get up and running again. With a MSP, you will pay a flat monthly fee that will give you all the support you need to get back on track. You will be able to set your IT budget and know you are protected no matter what happens.
Want to learn more about BDR (Backup and Disaster Recovery) for your business?
At no cost or obligation, we’ll send one of our security consultants and a senior, certified technician to your office to conduct a free Security and Backup Audit of your company’s overall network health to review and validate multiple different data-loss and security loopholes, including small-print weasel clauses used by all 3rd-party cloud vendors, giving them zero responsibility or liability for backing up and securing your data. We’ll also look for common places where security and backup get overlooked, such as mobile devices, laptops, tablets and home PCs. At the end of this free audit, you’ll know:
- Is your network really and truly secured against the most devious cybercriminals? And if not, what do you need to do (at a minimum) to protect yourself now?
- Is your data backup TRULY backing up ALL the important files and data you would never want to lose? We’ll also reveal exactly how long it would take to restore your files (most people are shocked to learn it will take much longer than they anticipated).
- Are your employees freely using the Internet to access gambling sites and porn, to look for other jobs and waste time shopping, or to check personal e-mail and social media sites? You know some of this is going on right now, but do you know to what extent?
- Are you accidentally violating any PCI, HIPAA or other data-privacy laws? New laws are being put in place frequently and it’s easy to violate one without even being aware; however, you’d still have to suffer the bad PR and fines.
- Is your firewall and antivirus properly configured and up-to-date?
- Are your employees storing confidential and important information on unprotected cloud apps like Dropbox that are OUTSIDE of your backup?
I know it’s natural to want to think, “We’ve got it covered.” Yet I can practically guarantee my team will find one or more ways your business is at serious risk for hacker attacks, data loss and extended downtime – I just see it all too often in the numerous businesses we’ve audited over the years.
Even if you have a trusted IT person or company who put your current network in place, it never hurts to get a 3rd party to validate that nothing was overlooked. I have no one to protect and no reason to conceal or gloss over anything we find. If you want the straight truth, I’ll report it to you.
You Are Under No Obligation to Do or Buy Anything
I also want to be very clear that there are no expectations on our part for you to do or buy anything when you take us up on our Free Security and Backup Audit. As a matter of fact, I will give you my personal guarantee that you won’t have to deal with a pushy, arrogant salesperson because I don’t appreciate heavy sales pressure any more than you do.
Whether or not we’re a right fit for you remains to be seen. If we are, we’ll welcome the opportunity. But if not, we’re still more than happy to give this free service to you.
You’ve spent a lifetime working hard to get where you are. You earned every penny and every client. Why risk losing it all? Get the facts and be certain your business, your reputation and your data are protected. Call us at 512-900-9478 or you can e-mail us at email@example.com.