There are a lot of words that a business owner doesn’t like to hear. One of the worst has to be downtime as it signifies waste. This month, we’ll examine the effects of downtime and how to calculate the financial impact of a downtime event.
It is important that we review the various situations that downtime can have on a business. These, let's call them problems, can be felt in your customer relationships, via:
- Customer dissatisfaction and displeasure
- Decreased loyalty to your business and brand
There are also impacts your business will experience directly:
- Lost revenue
- Cost of recovering, repairing, and/or replacing crucial technology
- Lost or wasted materials
- Regulatory non-compliance
- 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
Let’s examine this last factor a little more closely, as calculating losses of productivity may be a little difficult to calculate. It will require you to estimate each employee’s technology utilization percentage, which is effectively how much of their work requires the technology in question to complete. You will then multiply that number by each employee’s salary per hour. If you have multiple employees with the same salary and utilization percentage, you can then multiply this number by the number of employees affected by the downtime to find your total lost productivity per hour.
This gives us the following equation:
(Salary per Hour x Utilization Percentage) Number of Affected Employees = Lost Productivity
Combining all of the costs detailed above, you can then calculate the total hourly cost of a downtime incident:
Downtime per Hour = Lost Revenue + Recovery Costs + Lost Productivity + Intangibles
This number might be a little shocking to you, but it should also reinforce just how wasteful downtime truly is. There’s just no getting around that fact. As a result, it is extremely important for your business’ sustainability that you prevent as much downtime as possible.
Our professional technicians can help with that. Our monitoring and management service uses cutting-edge technology to catch potential causes of downtime and resolve them before they have an effect on your business’ operational effectiveness. If you would like to learn more about how we can help reduce your business downtime, give us a call today at 604-679-2223.