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Calculating the actual Cost of Downtime for your Business

Calculating the actual cost of downtime for your business

In fast-paced competitive businesses, the required data and systems are always readily available. There are times when there can be a disruption, these disruptions can be due to network failures or some natural disasters. At times like this, not only does the work get affected but also the cost of your business.

Downtime is the time during which a machine stops functioning accurately. However, this problem can be solved by implementing the required strategies and evaluating it from time-to-time. Adopting effective measures in time will help your business to reduce the loss due to downtime errors. 

The Primary factors affected during downtime

Cost of Downtime

Time Regular monitoring of daily activities is very crucial. It helps in identifying the problem on Day 1 rather than on Day 30. Thus, the costs can be reduced effectively, and the disastrous effects can be controlled in time. 

Productivity Due to the lag caused during downtime, productivity gets majorly affected. People may have a lot of leisure time in such situations. However, when the feedbacks and responses start flooding in, they tend to stress out. Eventually, many mistakes are made in the process, and the result is not as expected. So, smartness is in identifying the problems at an earlier stage.

Cost of Downtime

Downtime can be a result of delayed day-to-day activities in the long run. It can be a result of any human or technical error. Solving a problem of which you are not aware becomes difficult. 

Your business alone does not pay the cost of down-time; people or workers start feeling inefficient and get frustrated in the entire process. So, it’s a two-way loss. Hence, measuring the costs of downtime becomes essential. There are a variety of tools available online, which can be of help in measuring the downtime costs.

Calculating cost of Downtime

Cost of Downtime

While the cash flow is constant, other costs keep piling up. Figuring out the expenses considering all the aspects can be complicated at times. Everyone calculates downtime differently. One of the standard methods of calculation is by subtracting the actual operating time from the planned running time. Here is one formula which you can use to calculate the cost of Downtime for your business:

1] The first step is to determine the average hourly wage of the impacted employees. This information can be easily obtained from Human Resources or a Senior Manager in the Operations Department.

2] Once you have the value, decide on the Productivity Impact factor. This figure depends on the type of outage and the nature of the work of the impacted employees. The number can be as low as 10% or even as high as 100% depending on the factors mentioned above. 

For instance, the senior-most operations managers will create an impact of 30% to 50%, to say the least. 

3] After this, you can calculate the Productivity Cost Impact or Cost of Downtime. To calculate the CoD, you have to use the following formula:

Cost of Downtime = (Impacted Employees) x (Productivity Factor %) x (Average hourly wage)

For example, if 1,000 employees are impacted by the downtime and $20 is the average hourly rate with a 50% productivity impact, the final CoD will be calculated as below:

(1,000 impacted employees) X (£20 average hourly rate) X (50% productivity impact factor) = £10,000 per hour of productivity cost impact.

However, the costs will keep on fluctuating depending on the nature of your business. 

Effects of downtime on costs

On the System System failures can create a lot of chaos and disturb the regular workflow. Your productivity can drop, transfer of critical data may halt, communication within and outside the company can be disrupted. The collective impact of all these things can be very high. All of this may lead the company to sustain more additional costs than initially planned. 

On Departments – The workforce in a company is divided into multiple departments. The costs spent on a department may fluctuate due to the inefficiency of the employees at various levels. Their incompetence can be a result of the lag in the time taken to complete multiple tasks. Hence, the increase in the cost of maintenance of one department may affect other departments as well. If you start analysing a department and expand the necessary expenses, you will be able to get a better insight.

On Employees Employees tend to get inefficient during downtime periods and feedback from them may get delayed. On such occasions, there can be a lack of communication and errors may increase too. The employees may find ways to fill their time spent at work. Later, they may even get frustrated and maybe disinterested in completing the designated task. In the end, actions will be pending, but the costs will keep on hiking. However, encouraging the employees to learn new skills related to their industry is a win-win in such situations.

The downtime costs cannot be fully eliminated but can be gradually decreased. To reduce its impact, you should start utilising the best available solutions. Once you get to know the root of the problem, the costs can be controlled efficiently. By taking the required measures in time, you can prevent the breakdown even before it occurs. 

With over two decades of experience in the industry, Open Minds H.A.S has been providing efficient High Availability, Disaster Recovery and Business Continuity solutions to businesses across the world. Our solutions have been the top choice for some of the biggest global brands. Open Minds H.A.S can help you reduce your downtime drastically by implementing our highly advanced and efficient High Availability solutions. 

To know more about how you can safeguard your business data with the help of our solutions, get in touch with us today by clicking here

by Admin



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