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What does downtime cost your business?

We’ve all heard the horror stories.  Fires, hurricanes, tornadoes, floods, servers crashing; it’s all disastrous and it’s difficult to imagine it could happen to your company.  But today, data loss isn’t a luxury.  Data loss and downtime can kill a business in a matter of days.

A disaster recovery plan is an essential piece to the survival of your business and the first piece of a disaster recovery plan is discovering just how much it costs your company to be down.  How long could your company afford to be down?

Step one is to calculate how much downtime costs for your business. This is the direct loss of revenue calculation.  There are a number of different methods that can be used to calculate these costs:

  • Method A:
    The simplest formula says to breakdown your annual revenue to cost per hour.  Annual revenue/annual work hours = simple downtime cost.
  • Method B:
    For the retail and service industries, you may choose to calculate your downtime with a more complex formula.  Average hourly bill rate x average billable percentage/number of personnel = downtime cost.

The tricky part about these methods is the fact that they don’t account for the intangibles such as loss of reputation or buying cycles.  If you are a retail business and your systems go down on Black Friday, it’s going to be more painful than if they went down during a slow time.

Step two is to determine how long your company can afford to be down.  The universal desired goal here is almost always zero but, the goals change depending upon your business requirements.  Calculating how long your business can afford to be down is business specific.  There is no special formula to determine how much loss you can tolerate.

The IT industry refers to these beginning steps as Recovery Point Objective (RPO) and Recovery Time Objective (RTO).  The challenge in meeting zero downtime requirements is that the solutions are cost prohibitive.

If you have questions or concerns about your disaster recovery plan, contact the experts at Bennett by commenting below, emailing Dean at dbouta@bennettoffice.com, or give us a call at 320-235-6425.

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