What is the True Cost of an Hour of Downtime for Your Business?

Contrary to what many perceive, up to 80% of startup businesses make it past their first year. But a few years after that, keeping the company afloat becomes an uphill task. According to Forbes, only 45.5% of the remaining businesses survive. 

The number one culprit to blame for the catastrophic deaths of most businesses is downtime. As a business owner or a stakeholder, how well do you address this? What can you do to make sure that your company celebrates years of success for generations?

Here is a closer look at the cost of an hour of downtime for your business.

Causes of Downtime at the Workplace

Some of the top causes of downtime in business include the following:

Using Outdated Hardware and Software

In a bid to cut costs, some companies postpone scheduled software updates and fail to purchase modern hardware. This could lead to network failures that take hours or even days to go back to normal. As a result, operations in the business come to a standstill until the problematic software or hardware is fixed.

Harsh Weather

Harsh weather is to blame for power outages and hazardous conditions that could threaten the safety of the employees. In the event hurricanes and floods occur, businesses are forced to close down until the situation is back under control. This form of downtime can cause significant losses that force some firms out of business entirely.

Human Error

Lack of training, fatigue, or poor work ethic, promote human error, which leads to loss of revenue. Workers who are poorly trained or fatigued are not only unproductive, but they can also make mistakes that will cost your business. Similarly, unethical workers may waste precious time using social media or engaging in office banter when they should be working.

What is the True Cost of Downtime?

Assuming the cause for downtime is due to IT problems, to find out the total amount of money lost during one hour of downtime, you must factor in aspects such as lost productivity, intangible costs, lost revenue, and recovery costs.

Lost Productivity

When your servers malfunction, you lose money, yet the employees’ salaries remain constant. Therefore,

Lost Productivity = Employee Salary Per Hour x Number of Employees x Utilization in Percentage

Utilization can be calculated by getting a rough figure on how productive an employee is, depending on uptime.

Intangible Costs

Intangible cost is defined as the amount of money lost as a result of downtime. These costs are the hardest to recover; their consequences are long term.

Lost Revenue

How much money does your business make per hour? An easy formula entails calculating revenue per week, multiplied by downtime, multiplied by uptime in percentage.

  1. Revenue Per Hour = Total revenue made in one week divide by 40 hours (assuming you work 8 hours a day).
  2. Downtime = Number of hours, you are unable to work due to an IT issue or because of one or more of the culprits mentioned above.
  3. Uptime = How much, in percentage, you are dependent on the internet to make sales. If, for example, your shop is online-only, then you’re 100% dependent on uptime to make money.

Therefore, you calculate lost revenue as follows: 

Lost Revenue=Revenue Per Hour x Downtime Per Hour x Uptime in Percentage

For example, if your revenue per hour is $2,000 and your network was down for 2 hours, and your uptime percentage is 50%, then your lost revenue equals $2000 per hour!

Recovery Costs

The amount of money it costs you to repair and replace hardware, pay for data recovery, among other losses. Once you’ve got everything in perspective, you can tally every separate cost to find out the total cost of downtime.

Reduce Downtime with Our Trusted Solutions

Bourn Technology is a renowned IT organization that helps institutions put up the necessary infrastructure needed to minimize downtime. Our expertise in all matters technology is unparalleled. Our track record speaks for itself. We are ready to partner with you to ensure you realize skyrocketing growth despite all the variables featured above.

Downtime is a risk all businesses should prepare for before it happens. Contact us now for credible advice and guidance on how we can use IT solutions to help you work smarter, be more productive, and minimize losses.

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