The current “Snowmageddon” that has gripped Washington and most of the North East is a perfect example of what we try to impart to our clients. It doesn’t take a major event such as hurricane, flood, earthquake, etc. to cause a significant impact to your bottom line. Let’s take a quick look.
So what is the Return on Investment (ROI) of Business Continuity (BC)? Unfortunately, it is very much like insurance (car, life, house, etc.); it doesn’t do you any good until you need it! For the most part BC is a money loser. In other words, you aren’t making money from Recovery Planning. But for those days when you need guidance on what to do when Snowmageddon (for example), it will save you tons of money.
So if BC planning doesn’t save you money until an incident occurs, how do you get a budget for the planning before an incident occurs?
This question goes back to our previous post “I can’t get budget for my planning…” and in there we recommended the use of our ROI tool. If you haven’t used the tool, I would really recommend giving it a try. It takes seconds to scare years off your life!
Let’s take a look at what I mean:
It’s a very simple process. Take the annual gross income for your company and divide it by the work hours in a year. We’ll use 1770 annual work hours (as per Wikipedia). This calculation will give you a cost of dollars revenue lost per hour of downtime. For example: A company with a gross income of $20 million dollars value works out to:
Lost Revenue = $20,000,000 / 1770 hours = $11,299.43 per hour.
So that means for every hour Snowmageddon slows your ability to get to work, you’re looking at losing almost $12,000 an hour! Obviously, this is a very simple calculation, but it gets the idea across.
If this number doesn’t get you some budget, add in the cost of the not working employees! Say the same company has 75 employees with an average annual income of $80,000 each. What is their cost per hour?
We know the lost revenue is $11,299.43 per hour
Their cost per hour is the number of employees multiplied by their average income divided by the number of work hours. So…
Employee Cost = (75 employees x $80,000) / 1770 hours = $3,389.83 per hour.
Getting back to Snowmageddon, each hour your company is delayed due to snow, power failure, delayed transit… what is the cost of not being open? Add the Employee Cost (because you don’t stop paying them due to snow) and the Lost Revenue, your small $20 million company is now losing $14,689.26 per hour!!
If your company matches these stats bang on you don’t have to get to the ROI tool, but if your company is larger (or smaller), run your numbers through the tool and find out how much each hour is costing you!
If these numbers don’t get you budget to do your planning, you might want to polish your resume. Not because you are leaving right now, but when the next incident occurs and there is no plan, you will need you resume!!
KingsBridgeBCP offers businesses of all sizes BCP Software Solutions and industry know how based on best practices. We help build, exercise, and maintain Business Continuity Plans. Our services and software packages are customized to meet the wide range of our customers’ needs, ensuring we deliver the best value in every project. To learn more click here or check out our Services.