Downtime. It’s something a business owner can’t quite appreciate until they’ve experienced data loss or an outage. So, like many business owners, it’s not a priority until sh*t hits the metaphorical fan and outright IT crises is in full effect.
Often, the deciding factor in any business decision, including the decision to purchase a data backup service, extends to how downtime can affect the businesses bottom line, universally known as money. Ultimately this places you, the MSP (Managed Service Provider) or an IT department employee, in between a rock and a hard place. Regardless, you’re responsible for minimizing service disruptions and unplanned downtime.
It’s Math Time
Because money is the name of the game, speaking in lost profitability terms is your key to successfully introducing a data loss and backup recovery plan. In other words, you need to do some math.
There are four questions you should be able to answer off hand. These are:
1. What is the gross income of the business?
Several factors can contribute to calculating downtime. To come up with this figure, you need to understand your company uptime.
With the help of a few accounting members from the A/R department, you can determine the annual gross income of the business and work backward from there. Annual gross income divided by the total hours in a year (8760) will give you the lost revenue information to use in the formula below.
Lost Revenue = Annual gross income/Total hours in a year
2. How productive are the employees during an outage?
To determine lost productivity, you need to have the company’s fixed costs on hand. Because the formula below relates to employee productivity, the fixed costs you need to be aware of are employee salaries. During downtime, most employees are working at 50 percent capacity. Therefore, you can assume that the total employee salary divided in half is the lost productivity amount.
Lost Productivity = Combined Employee Salaries / 50%
3. What are the costs associated with restoring your system?
To get the business back to operating normal again, adding up the cost of the services and tools required to keep it running will provide you with the recovery cost estimation.
Recovery Costs = Labor + Restoration Services
4. What are your businesses intangible costs?
Intangibles can be tricky. To forecast this amount you can refer to an estimated number of sales lost due to damage. To get this number, you take your annual revenue divided by the number of sales per year and multiply that by the opportunity loss. Here’s a quick formula for help:
Cost of intangibles = (Annual revenue/annual sales) x estimated number of sales lost
Once you have all of the numbers in place, the formula below will help you calculate the final cost of downtime.
Cost of Downtime (per hour) = Lost Revenue + Lost Productivity + Cost to recover + Cost of intangibles
Through The Looking Glass
Today, on average, an hour of downtime for a small business averages around $8,000 – $10,000. But that’s just taking a microscope to a small businesses loss. For a medium to large corporation, the numbers dramatically increase into the six-figure mark.
To protect your business from data loss and downtime, map out a business disaster recovery plan then select the most appropriate backup solution that fulfills your needs and the needs of your customers.