Business continuity is hard to illustrate to business owners. Downtime sucks, but not every business has a true understanding of how it could potentially impact them. All they think is, “We’ve never been down for that long before.” They can’t understand the true value of a business service that they’ve never used before. From a business executive perspective, that conversation and that value typically comes in the form of sharing the real numbers.
In order to better calculate your disaster recovery and business continuity needs, you need to have a better understanding of productivity costs, profit loss and any potential penalties or recovery costs associated with that downtime.
We outlined RTO and RPO in another blog and broke down why your timeline matters so much, but we haven’t broken out productivity costs and bottom line impact quite as well. Here are a few bottom line considerations that support the case for business continuity:
- Lost Productivity.
The most common calculation completed with regard to lost productivity is direct productivity. That is, direct costs of employees per hour, with benefits. If you can break down your entire organization’s salaries into an hourly calculation, you can identify how much you’re losing in direct productivity when you go down. But there is also indirect productivity. If only a single department is down, you weigh the direct productivity of that department, but also the indirect productivity of departments that rely on them for at least a portion of their workload. Indirect productivity calculations are typically calculated at 50% of that employee’s salary.
- Lost Profits.
It can be pretty difficult to estimate loss profits, since revenue generation can vary day to day. If your organization is a small, transactional business, you should be able to calculate lost profits and deferred sales pretty easily based on average sales volume for the month, broken down to the day and then hour. Your management team should look at your numbers to determine how downtime could impact cash flow and profits.
- Recovery Costs.
If continuity is part of your business solution, additional recovery costs will not apply. However, if you’re operating on backup and recovery or have no backups, there are costs associated with this. This will vary widely depending on your proactive strategy. One of the costs that you’ll want to account for is data forensics (which can be extremely costly) that will need to be performed if you have no backup, your backup failed, or you don’t have viable backups. Another is the cost of labor to have teams work on your servers and restore your data from that backup.
Downtime is so much more than the direct productivity lost. Every second that you’re not up and running is potential lost sales and mounting recovery costs. In order to avoid this, you want to work closely with a provider that will create a continuity or backup solution that will work best for your needs and budget based on the RPO and RTO calculations that you’ve already done. (These tell you when you need to be up and running).
Don’t allow your perception of downtime to cloud the reality. No business can afford to be down for an extended period of time. Make sure that you have a plan in place.