Unplanned outages and breakdowns are inevitable, but the true cost can be devastating to your business. Beyond the initial downtime that can disrupt your immediate business, there is a domino effect of additional costs that can affect your entire operation.
From lost productivity and disrupted supply chains to regulatory penalties and damaged customer relationships, a breakdown can create serious consequences for your business.
Downtime will cost you revenue
There’s no denying that for every minute your business is down, you’re going to lose revenue. Whether the disruption immediately affects the front end or back end, lost revenue is a certainty. The breakdown can be as simple as losing power, but the impact will continue to ripple into other areas of your business.
For example, a transformer failure in a commercial setting will halt operations, and even if you have a backup generator, it’s not going to resolve the issue. For manufacturing plants, the cost of running backup generators will be staggering, and there will be production losses. The monetary value of those losses can be counted by the minute. For instance, in manufacturing, downtime can cost more than $5 million per hour.
On top of that, it costs a lot of money to ship out a new transformer, not to mention the cost of the unit and installation. For any business relying on the “Just-in-Time” model, one blown transformer can be devastating. It can even cost you contracts with vendors who realize they can’t rely on you to help serve their customers.
Downtime will drive customers away
Another example of downtime that impacts smaller businesses is when a crucial piece of equipment fails and isn’t replaced immediately. On the surface, the impact might just look like a few days or weeks of turning customers away and losing daily sales, but the larger impact is much worse. Many of the customers who get turned away may never return.
Most people are willing to tolerate a breakdown or inconvenience for a short time, but not when it’s prolonged. For example, if a business that sells smoothies is down by two blenders, it will take longer for customers to get their orders. After a few days of this, regular customers who need to get to work on time will start skipping their daily visits and either find another smoothie shop or make breakfast at home. The cost in this case consists of entire customers, not just a few days’ sales.
For corporations in the technology space, downtime can lead to canceled contracts and subscriptions for services, a higher refund request rate, and even chargebacks if the breakdown makes you unable to deliver on your promises.
Idle time for employees
When a business experiences downtime, employees will have idle time. If they can’t be put on other tasks, you’ll either have to send them home (if they’re hourly) or pay them their full salary regardless.
Employee overtime
If a breakdown happens to be something you can fix with the help of your team, you can expect to pay overtime and/or premium pay to make it happen. It’s probably easier to hire an outside company to fix the issue, but some circumstances may warrant using your existing team. However, employees won’t necessarily be happy about this, and they may not be legally required to work outside of their existing scope of employment. Making them feel like they need to help you out can backfire and cause them to become bitter and resentful.
Recovery expenses
When you’re ready to tackle the problem and fix it, you’ll face a host of recovery expenses. For example, if the breakdown is an IT issue, you’ll pay a premium for emergency IT support, whether it’s in person or over the phone. On top of that, you’ll have to pay for hardware and/or software repairs, and potentially data recovery services.
For example, if your company got hit by some malware, you’ll need to hire a professional cybersecurity expert to clean your devices and set you up with a more secure system that includes performing regular backups. You’ll need to invest in software, hardware, and employee training. However, you may never recover from losing customer trust after a cybersecurity incident.
Preventive measures are essential
Downtime costs more than just the day’s sales. To prevent extended damage, you need to implement preventive measures, redundancy, and disaster recovery planning. Whether you’re running a manufacturing plant or a company that sells exclusively online, planning is the best way to protect your reputation and bottom line.
