Calculating the cost of downtime

Like most business disasters, unavailability of IT systems (down-time) is rarely take into account by those running the business until it’s too late. For many businesses, the reality is that down-time is a regular occurrence which is often dismissed as being a “fact of life” and even joked about! The fact is that down-time costs you money – real money! Few understand the true cost of IT down-time as it will manifest itself in different ways. Before we reveal our simple formula, consider the different ways that down-time cost can present itself.

  • A (potential) customer calls for a quote but the system is down. They will go elsewhere.
  • You cannot complete your design work for a client on time. They bargain a better price or, worse, go elsewhere.
  • You hire extra staff, or pay existing staff overtime or bonuses, to complete a backlog of work following a computer system outage.
  • Employees go on stress leave due to having to work long hours to catch up after an outage.
  • You can’t send out invoices or statements to clients due a computer outage, affecting cash flow. You need to borrow money in the meantime on which you pay interest.
  • The email system is down so you miss some orders coming in. Angry clients withhold payments or take their business elsewhere.

And there are many more ways that the real and opportunity costs of system down-time can present themselves.

So, how do you work it out?

There are literally hundreds of different formulas for calculating these costs (do a Google search – you will be amazed), some of which run to several pages of calculations and rely on information that many small business owners simply may not have access to. That’s why we came up with our super-simple formula which only relies on the most basic of business information and can be calculated by anyone in their head – no calculator required!
Bear in mind, though, that this is not a “magic number” of dollars that you will definitely lose each and every time your computer system goes down. It is simply a rough, but surprisingly accurate, estimate of the cost of down-time, the effects of which may be felt immediately or somewhat later, depending on your business. As they say, your mileage may vary!

So what is the formula?

Here is our formula for calculating the cost to your business (per hour) of computer system down-time.

Take your business revenue (not profit) for the previous 12 months, in thousands of dollars, and divide that number by 2.
That’s all there is to it!

An example

Say your revenue for the last 12 months was $1,500,000.00 (1.5 million dollars), the answer would be 1500 divided by 2, or 750, since 1,500,000 = 1500 x 1000. This is your hourly down-time cost ($750).

Again, we reiterate that this is not an actual amount that you will definitely lose per hour of downtime. It does, however, give you an estimate of the potential losses you could incur following computer system downtime.

To insure against this, it makes sense to engage in a support contract with an IT company specialising in business continuity. For a monthly fee working out at a fraction of your potential down-time cost per hour, UPBEAT Business Computing can monitor and maintain your business computer system for optimum performance and reliability.

We do this by building performance and reliability into every business computer system we look after and our many satisfied clients are more than happy to share their stories of how we keep their businesses running reliably and efficiently.

Call us today on 0800 872-328 before it’s too late!

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