Want to Know the Real Cost of Your Company Downtime? Use This Simple Formula

If your company relies on technology to do more business, it is crucial to be aware of the real cost of your downtime. No matter if you are running an enterprise or a single one-person business, activities such as sales, calls, payments, marketing, communications via voice or email relies on technology. 

According to a 2019 survey by Statista, the average cost per hour of enterprise server downtime range between 10 K to 5 M dollars.

Probably IT expenses for small business owners are not that high, and it’s common among CEOs to believe downtime does not represent a considerable amount of money. Why? Because they think an outage on their internet or computers only represents an hour or two of some employees without work.

However, when they include the most critical variables in their equation, they can see where their money goes and how to minimize the impact on their company budget.

Let’s do your numbers with this simple formula:

Cost of Downtime (per hour) = Lost sales + Employees cost + Tech Support cost

Suppose you own a firm with one to four employees that have an average annual receipt of $387,000 (Data from SBA). Now divide that number by 12 to get your average income per month: $32,250. If your company has 20 business days, we could say that the average daily receipt is $1,612.5.

Number of employees: 4
Employee Cost per hour: 4 employees charging 15 USD per hour:$80.00
Daily sales: $1,612.5 USD.
Sales costs per hour: Daily Sales —> $1,612.5  / 8 hrs —> $201.56 /per hour
Repair costs per hour: $100.00 USD. 

Small businesses usually don’t count on a technician to solve tech issues right away. Getting someone available to visit your company to diagnose network issues at your company would cost you at least 100 USD per hour. If you don’t have any documentation about your network, a diagnostic would take at least 2 hours.

The total cost of 1-hour downtime: —> $201.56 (lost sales) + 80.00 (employees cost) + 100.00 (tech support cost) = 361.56 (22.42% from daily sales)

The total cost of 2-hours downtime: —> $361.56 x 2= 723.12 (44.84% from daily sales)

"BESIDES THE TANGIBLE COSTS OF DOWNTIMES, IT’S IMPORTANT TO THINK ABOUT THE REPUTATION OF YOUR COMPANY. HOW MUCH HAVE YOU INVESTED TO BUILD IT?"

Based on our example, we can say that 1 to 2 hours of downtime takes between 22% to 44% from daily total sales, which is a considerable chunk from any company income.

As you see, several factors are part of the total cost of downtime. To keep math simple, we did not include overhead expenses. 

Besides the tangible costs, it’s important to think about the reputation of your company. As a business owner, you know the construction of a brand requires creativity, hard work, tears, and in the end, everything represents time and money! How much have you invested to build it? This number is certainly higher than the total cost per hour we inferred from the formula. 

After doing this exercise, if you are a business owner facing tech outages, stop losing time and money and start this 2020 covering what you care the most: the technology in charge of the daily operations of your company!