Why this guide exists
Every business owner knows what their rent costs, what payroll costs, and what their biggest client is worth. Very few know what one hour of downtime costs. That’s strange, because it’s often the most expensive hour of the year.
This guide walks through the same Downtime Ledger we use with clients. It takes about 30 minutes, uses only numbers you already have, and ends with a single figure: what an hour of your business stopping actually costs you.
Why nobody measures it
Downtime doesn’t arrive as one invoice. It’s spread across people and it’s quiet. The attorney who couldn’t reach a matter doesn’t bill for the hour she lost. The estimator whose system froze doesn’t send you a report. The front desk works around it.
So the cost stays invisible until something big breaks. By then, the decisions that could have prevented it were made months ago, without the number.
The four lines of the Ledger
Line 1: Revenue per working hour. Annual revenue divided by the hours the business actually operates. For a single-shift business, roughly 2,000 to 2,500 hours a year. For two shifts, closer to 4,000.
Line 2: The share that stops. The percentage of that revenue that genuinely depends on your core systems. Be honest. Some work continues on paper or on the shop floor.
Line 3: People idled, at loaded cost. The number of people who stop working when email, files or your main application go down, multiplied by what an hour of their time costs you, including benefits and overhead.
Line 4: Recovery expense per hour. Overtime to catch up, outside help, rework, expedited shipping: what it costs to get back to where you were, per hour of outage.
The floor is Line 1 × Line 2, plus Line 3, plus Line 4.
The tail is everything that doesn’t fit on a line: a deadline you ask to move, a client credit, a regulator’s questions afterward, lost confidence. Write it down in words. Don’t add it to the number.
Worksheet
| Line | Your number | Notes |
|---|---|---|
| Annual revenue | $ | |
| Working hours per year | ||
| 1. Revenue per working hour | $ | Revenue ÷ hours |
| 2. Share that stops (%) | % | |
| 3a. People idled | ||
| 3b. Loaded cost per person-hour | $ | Salary + benefits + overhead ÷ hours |
| 3. People cost per hour | $ | 3a × 3b |
| 4. Recovery expense per hour | $ | |
| The floor: your hour | $ | (1 × 2) + 3 + 4 |
| The tail | Deadlines, credits, exposure, reputation |
Three worked examples
These are illustrative businesses with round numbers, to show the method. They are not client data.
| 30-attorney law firm | $1B RIA | $40M manufacturer | |
|---|---|---|---|
| Annual revenue | $15,000,000 | $8,000,000 | $40,000,000 |
| Working hours | 2,500 | 2,300 | 4,000 |
| 1. Revenue per hour | $6,000 | $3,478 | $10,000 |
| 2. Share that stops | 70% | 50% | 40% |
| 3. People idled × cost | 45 × $95 = $4,275 | 20 × $85 = $1,700 | 30 × $55 = $1,650 |
| 4. Recovery per hour | $600 | $400 | $1,500 |
| Floor per hour | $9,075 | $3,839 | $7,150 |
| The tail | Court deadlines, malpractice exposure | Client access, exam findings | Missed ship dates, lost bids |
Which systems your hour depends on
List the systems that, if they stopped, would stop the business. For most of our clients the list looks like this:
- Email and calendar
- Files and document management
- The line-of-business application: practice management, portfolio management, ERP, EHR
- Phones
- Internet and the network
- Identity: the accounts people sign in with
For each one, write down who owns it today, how you’d know it was down, and how long it would take to bring back. If you don’t know the last answer, that’s the first thing to find out.
What to do with the number
Compare your floor to what you spend protecting it. If an hour down costs you $9,000, a redundant internet line, a tested recovery plan or 24x7 remediation aren’t IT costs anymore. They’re insurance against a number you now know.
Then ask your IT provider three questions.
- When did you last test a full restore of our core system? Not “the backup ran.” A real restore, with a result you can see.
- Who answers at 2 a.m., and do they know our business? A queue is not an answer.
- Show me our continuity plan, in writing. If there isn’t one, you’ve found your first priority.
The next step
If you’d rather work through the Ledger with an engineer, we run the full version in a 60-minute session. We add the dependency map and the three questions, and you get a four-page report with your number, your top three risks and one recommended next step. You keep it whether or not we ever work together.
Book a Downtime Ledger at circlesquareconsulting.com, or call 866-303-7222.