Business owners try to avoid downtime like the plague, but it’s often a challenge to do so. The impact of downtime can be devastating for even the most well-to-do business, and this is even more so the case when you bring profits and bottom lines into view. We’ll take a look at how you can calculate the cost of a downtime event.
It’s critical to keep in mind that downtime can have various influences on your business, all of which are exclusively bad for your organization. In terms of customer relationships, these are some of the effects you might feel:
- Customer dissatisfaction and displeasure
- Decreased loyalty to your business and brand
Your business will also experience the following directly rather than through your customer base:
- Lost revenue
- Cost of recovering, repairing, and/or replacing IT solutions
- Lost or wasted materials
- Compliance and regulatory issues
- Repercussions to your supply chain
- Overtime costs to make up for lost time so deadlines can be met
- Decreased employee morale and increased stress
- Lost internal productivity and the costs of still reimbursing your employees
Calculating downtime can be a bit tricky, as it requires you to estimate the utilization percentage of each employee and their technology, which is a fancy way of saying how much work they do that requires technology to accomplish. You then need to multiply this number by each of the employees’ salaries per hour. Multiple employees with the same salary grade and utilization percentage can then be used by multiplying this by the number of employees affected by downtime. This gives you your total lost productivity per hour.
This gives us the following equation:
(Salary per Hour x Utilization Percentage) Number of Affected Employees = Lost Productivity
Thankfully, calculating recovery costs and intangible costs (or the costs associated with damage to your reputation) is much more simple. All it takes is some simple addition. If you combine all of the costs detailed above, you can calculate the total hourly cost of the incident.
This might seem shocking, but it should reinforce any thoughts you have about the amount of lost revenue and opportunity that results from downtime. You can’t get around this fact, no matter how hard you try. Therefore, you need to be intentional about how to keep your business successful while avoiding downtime.
ActiveCo Technology Management can help your business monitor and maintain services that keep downtime from becoming an issue in the first place. You won’t even know you’re having problems because they’ll be resolved before they can make a noticeable difference–it’ll be that convenient. To learn more, reach out to us at 604-425-3433.