BusinessThe Cost Of Downtime: An Analysis

The Cost Of Downtime: An Analysis

You might be curious about the cost of downtime if you are a business owner. Although companies constantly work to improve the reliability of their infrastructures, downtime can still occur, sometimes lasting for days. Businesses can suffer significant losses during prolonged downtime. But how does one quantify the actual cost of this downtime for a company?

According to research, a minute of downtime can cost $100 to $17,000 or more, based on the company’s output. However, the research firm emphasizes that these numbers are only an estimate. A company’s size and industry vertical usually determine the downtime cost. Therefore, the downtime cost is typically higher for a large company than for a smaller one.

What is the Cost of Downtime?

Unplanned downtime occurs primarily due to human error, whether it is a result of negligence or an accident. An employee unintentionally deleting data, unplugging wires by mistake, or failing to follow protocol may result in downtime.

There is no way to avoid human error. Still, minimizing it by training regularly and documenting business policies is possible. Research indicates downtime can cost anywhere from $100 to $17,000 per minute, based on enterprise size. 

Nevertheless, the researchers point out that these are only estimates. Downtime costs typically vary by company sector and size. A large company will incur a higher price of downtime than a smaller company. 

Some companies can even go out of business as a result of downtime. You should have a thorough business recovery and continuity plan to minimize the consequences of downtime.

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How to Calculate the Financial Impact of Downtime on Your Business?

Calculating the cost of downtime is problematic because it involves calculating percentages and intangible expenses. Here is a formula for calculating your business’s downtime costs, considering your company’s size and the duration of the downtime.

The cost of downtime = downtime duration x per-minute cost.

You can use around $400 as a cost-per-minute figure for small enterprises. In the case of large and medium businesses, use $10,000. Many people only associate downtime costs with lost revenue. 

Downtime, however, has much broader implications. Ponemon estimates that business disruption accounts for the majority of downtime costs. 

According to the firm’s research, revenue loss came in second. Lastly, end-user productivity was the third most costly financial impact caused by the incident.

Conclusion

Certainly, downtime can be a financial burden for a business. However, many large corporations remain concerned about downtime despite attempts to prevent it at all costs. 

Organizations of all sizes are vulnerable to downtime due to their unpredictable nature. During downtime, your business may suffer significant losses if you are not ready. 

As downtime increases, so does our ability to prevent and mitigate it. For competitive advantage, it helps to have an up-to-date solution in case of unexpected disasters, such as downtime. With the above information, you will have learned how to determine the cost of downtime.

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