How Much Does Downtime Really Cost Your Business?
Technology exists to help us leverage our resources and do more with less. In fact, one of the best things about technology is how it helps us handle more business in less time (that thing that we can’t get back and always need more of). At first, new technology means a greater time commitment because there’s a learning curve.
But what happens when our technology breaks? When small businesses run into unplanned downtime, they can experience irrevocable damage. According to Dunn & Bradstreet, 59% of Fortune 500 companies experience a minimum of 1.6 hours of downtime per week. This means that if you take the average Fortune 500 company (at least 10,000 employees) paid an average of $56 per hour, including benefits ($40 per hour salary + $16 per hour in benefits). The labor part of downtime costs for an organization this size would be $896,000 weekly, translating into more than $46 million per year. Speaking of small business (defined as less than $50 million in revenue per year, and less than 500 employees), unplanned downtime can cost up to $9,000 an hour. The same companies report that the unplanned downtime they experience every year tends to last roughly seven hours each. This reveals that the average small business can expect to lose $150,000 worth of revenue in unplanned downtime every year.
Now, how can you calculate the downtime loss for your business? While calculating losses due to downtime can be complex, there is a widely accepted basic formula that should help you start to understand just how much your business might be impacted.
LOST REVENUE = (GR/TH) x I x H
GR = gross yearly revenue
TH = total yearly business hours
I = percentage impact (a high percentage would mean you can’t complete any transactions, will lose clients and have a PR nightmare)
H = number of hours of outage
Finally, to calculate the expected annual cost, multiply this number by the number of expected annual hours of outage.
In this blog, we’d like to discuss some of the ways that businesses lose money when they experience downtime.
Downtime Leads to Unhappy/Unproductive Employees
Even the happiest of employees get frustrated when they can’t perform basic day-to-day job functions or properly service customers or clients, especially your IT guy or tech crew. They can’t necessarily sit back and twiddle their thumbs when downtime occurs because they’re typically taking the heat of the storm. They will ultimately grow tired of the daily routine of having to put out fires and having neither the additional manpower nor resources to change things for the better.
These things lead to high attrition rate of employees which comes with the expenses that come with training and re-training a revolving door of employees.
Overtime, Repair and Recovery, Compensatory costs
In the above case, imagine the overtime wages the business would have to incur if they were to make up for the work loss they faced owing to downtime. In addition, there’s always the cost of repair—the money the business would have to shell out to fix the issue that caused the downtime and get the server up and running again. In some cases, businesses would have to incur additional costs to make customers happy. These could include giving away the product for free or at a discount, or using priority shipping to make up for a delayed order.
Prospect/ Client’s Loss
Today’s buyer lacks patience; They are used to getting everything at the click of a mouse, at the tap of a finger. Suppose they are looking for the kind of products/services that you offer and your site doesn’t load or is unavailable—even if temporarily– you are likely to lose them to a competitor—permanently. Customers and clients grow weary whenever critical components of your operations – or the services they either expect or pay for – cannot be accessed.
Damage to Brand Reputation
One of the most commonly overlooked consequences of downtime is the hit your company’s reputation takes online. In this age of social media, one person’s bad experience is broadcast to dozens or even hundreds of followers. Bad news spreads faster than ever and has lasting repercussions. Accurately stated by Warren Buffet – “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
If your business is e-Commerce, banking, insurance, or any other industry required to be available to the general public in order to make money, then application downtime is your worst nightmare. While most e-Commerce solutions are hosted off-site nowadays, that does not guarantee zero downtime. A survey from 2013 shows that 76% of data centers experienced outages that year. In short, if your customer-facing application is hosted in a data center, then there is a large chance that a data center outage will lead to unplanned downtime.
Marketing Efforts Rendered Useless
Consider a pay-per-click advertisement that shows up for the right keywords on Google, or an extensive e-mail campaign that your business engages in. However, when the prospect clicks on the link, all they see is an error message – Isn’t that a waste of your marketing budget?
Protect Your Bottom Line
The challenge for small businesses has always been how to minimize single-point-of-failure downtime using their limited IT resources. This is why downtime kills so many small businesses. They can’t prevent it and they can’t react quickly enough. Thankfully, there are end-to-end business continuity solutions available today that integrate Remote Monitoring and Management (RMM) software, 24/7 access to a Network Operations Center (NOC), and advanced backup and disaster recovery solutions to alleviate this issue. Not only do these methods minimize downtime and get businesses back up and running quickly, but they can reduce the cost of technology infrastructure maintenance by as much as 80 percent.
The bottom line—one natural disaster, one technical snag or just one power outage has the power to put you out of business – both virtually and in reality. It’s probably time to think about how you can mitigate the threat of a possible downtime and whether your MSP can act as an effective and efficient ally in this battle for you.