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Calculating The Cost of Downtime

Shimon Sorga Jul 7, 2023 2:53:40 PM
Man frustrated by internet going down on his laptop.

Downtime refers to a period when operations are stopped due to various factors.

Common causes of downtime include software or hardware failures, power and network outages, maintenance, or human errors.  

In this blog, we’ll look at the various cost factors associated with downtime and measures you can take to minimise damage to your bottom line.

Why Calculate Downtime Costs?

Business Impact 

Downtime can result in a loss of revenue and cause damage to a brand’s reputation. Calculating downtime costs can help businesses understand the amount of damage and develop strategies to reduce its impact.

Productivity

Downtime can have a significant impact on the productivity of the workforce. By calculating downtime costs, organisations can identify areas where they can improve their processes and minimise future downtimes.

Optimisation

Downtime costs can provide valuable insights into areas that need optimisation, such as equipment maintenance, workforce training, and IT systems management.

How to Calculate Downtime 

If you’re curious about how much your company’s downtime costs are, there are a few ways to estimate the costs.

Downtime Cost = Minutes of Downtime x Cost per Minute

The cost per minute for small businesses lands around $427 (£335), whereas, for larger firms, it’ll be closer to $9,000 (£7,070).

The problem with this is that countries like the US have a much higher average cost of downtime. Meaning UK-based companies aren’t as accurately reflected.

For UK businesses, it’s best to use our calculator. It’ll help you work out money lost through lost productivity and revenue per day.

Work out the cost of downtime for  your business with our calculator

Understanding the true cost of downtime

When you consider the expenses related to downtime, you’re likely focused on the loss of revenue or a combination of revenue and employee productivity. However, it is important to recognise that the costs of downtime extend far beyond these aspects.

As per Ponemon, an independent research firm specialising in data protection and security, the biggest chunk of downtime costs stems from business disruption. This category encompasses reputational damage and customer churn. Following closely behind is revenue loss, as identified by the firm’s research. Finally, end-user productivity is the third significant financial setback associated with downtime incidents.

Another commonality is lost internal productivity. Your IT team will need to resolve the incident, while other teams like PR, social media managers, and customer service reps will be involved in incident management. Not to mention the remaining employees who will be affected by the outage.

In addition, it is important to consider the potential financial burdens that can come from government fines, GDPR penalties, and legal actions, particularly in the event of a data breach. And for companies dealing in physical products, depleted inventory and delayed shipment is a significant risk. It is also worth considering the costs of hiring contractors and replacing equipment.

You may also experience employee retention problems. After all, incidents cause stress. Stress creates unhappy workers. And unhappy workers leave. Experts estimate that replacing an employee costs 33% of their annual salary.  

How to minimise downtime costs

Figures like those above make it clear that minimising downtime should be a priority for companies of any size and across all industries. So, how do we mitigate our downtime risks and minimise costs? Here are five tried-and-true ways:

1. Create a detailed disaster recovery plan

When faced with downtime, it’s crucial to have a plan in place. If you’re unsure what to do, you’ll waste valuable time figuring it out.

A strong incident response plan is key to quickly and effectively handling incidents. That’s why the first step in implementing an incident management program should always involve thorough process and planning.

Prepare for the worst with our Backup and Disaster Recovery Checklist!

2. Communicate clearly and often

With business disruption accounting for a whopping 35% of downtime costs, prioritising incident communication and customer service during and after incidents is more important than ever.

3. Eliminate single points of failure

Eliminating single points of failure from your current infrastructure and processes is one of the most effective methods to decrease downtime and minimise costs. This entails distributing the workload across servers, adhering to proper backup procedures, and incorporating peer review and technical fail-safes into your deployments.

4. Prioritise prevention

There’s no 100% fool-proof way to avoid incidents. But that doesn’t mean you can’t minimise them. 

In fact, the high cost of downtime is a good motivator for leadership to prioritise replacing outdated systems and security features and fixing issues before they balloon into full-blown incidents.

5. Don’t skip the postmortem

When downtime strikes (and it inevitably does in our complex, technical world), establishing a robust postmortem practice becomes crucial in preventing future outages.

An incident postmortem brings teams together to discuss the details of an incident: why it happened, its impact, what actions were taken to mitigate and resolve it, and—importantly—what should be done to prevent it from happening again.

At Netitude, our baseline Managed IT packages include a comprehensive business security stack as standard. The service covers everything your business needs to operate in today's cyber risk environment, from mitigation to detection and response. We'll also explore the root-cause 

Gain security peace of mind for your business; book a no-obligation call with one of our experts today.