Downtime is one of those things you do not take seriously until it smacks you in the face on a random Tuesday.
A system goes down. A POS freezes. Your website checkout stops working. Phones still ring, Slack still pings, people still sit at their desks. But revenue stops moving. And the annoying part is… you still pay for almost everything as if nothing happened.
Most businesses underestimate downtime because the cost is not always sitting in one neat number. It shows up scattered. A few missed orders. A few wasted staff hours. A few customers who simply leave and do not come back.
So let’s keep this simple and practical.
This article is about putting a clear, easy dollar amount on one hour of downtime. Not a complex model, not a 40 tab spreadsheet. Just enough math to make the pain visible, and to help you justify fixes, backups, better hosting, redundancy, IT support, or whatever you need.
What counts as “downtime” anyway?
For this purpose, downtime is any period where a core system is unavailable or unusable enough that you cannot operate normally.
Examples:
- Your online store is up, but checkout is broken.
- Your POS is down so you cannot process payments.
- Your booking system is offline so customers cannot schedule.
- Your internal system is down so staff cannot access orders, inventory, or client data.
- Your internet is out and the whole place slows to a crawl.
And yes, “partial” downtime counts. If customers cannot complete the action that makes you money, it is downtime.
The simple formula you can actually use
Here is the straightforward way to calculate the cost of one hour of downtime.
Formula (keep it simple)
Downtime Cost per Hour = $ Lost Sales + $ Staff Wages
That’s it.
No fancy assumptions. No “brand equity multipliers”. Just two numbers that most businesses can estimate in 10 minutes.
Now let’s break down how to calculate each piece without making your head hurt.
Step 1: Calculate $ Lost Sales (per hour)
Lost sales is the revenue you would have made if everything was working normally.
The easiest way is to estimate your average sales per hour.
Option A: Quick method (daily sales ÷ hours open)
- Take your average daily sales (or revenue).
- Divide by the number of hours you are open (or actively selling).
Example:
- Average daily sales: $8,000
- Hours open: 8 hours
$ Lost Sales per Hour = $8,000 ÷ 8 = $1,000 per hour
So if you are down for one hour during normal operating time, you can start with $1,000 lost sales.
Simple.
Option B: Slightly better method (use the same hour from past data)
If you have data by hour (POS reports, Shopify analytics, call volume, bookings), use it.
Because losing 1 hour at 2 PM might be very different than losing 1 hour at 2 AM.
But if you do not have that breakdown, do not freeze. Use Option A and move on. The goal is not perfect. It is useful.
One small reality check
Not every “lost sale” is truly lost forever.
Some customers will come back later. Some will retry. Some will call. But plenty will not. Especially online.
If you want to be conservative, you can apply a simple “recapture” assumption.
For example, if you think you recover about 30% of those sales later, then you only count 70% as lost.
But since you asked for simple math, I would start with the full number first. You can always refine later.
Step 2: Calculate $ Staff Wages (per hour)
This is the part people ignore and it is weird, because it is usually guaranteed money out the door.
If systems are down and staff cannot do their work properly, you are still paying them.
So the wage cost of downtime is:
- How many staff are affected.
- Their hourly wage (or average hourly loaded cost).
- How many hours the downtime lasts.
Keep it simple: use hourly wage × number of staff
Example:
- 6 staff cannot work normally during downtime
- Average hourly wage: $20/hour
$ Staff Wages per Hour = 6 × $20 = $120 per hour
That is it.
Important note (but still simple)
If you want a more realistic number, you can use “loaded wage” instead of base wage. That means you add payroll taxes, benefits, etc. But if you do not know it, do not guess wildly.
A basic shortcut some businesses use is:
- Loaded wage ≈ base wage × 1.2 to 1.35
But again, optional. You can also just use the base wage and still get a useful estimate.
Put it together (full easy example)
Let’s do the whole thing with clean numbers.
Example business
- Average daily sales: $8,000
- Open: 8 hours
- Staff impacted: 6
- Avg hourly wage: $20
Step 1: Lost Sales per hour
$8,000 ÷ 8 = $1,000
Step 2: Staff wages per hour
6 × $20 = $120
Total downtime cost per hour
Downtime Cost per Hour = $ Lost Sales + $ Staff Wages
= $1,000 + $120
= $1,120 per hour
So one hour of downtime costs you about $1,120 in this simple model.
And now it gets real.
Because if that happens twice a month, that is 24 hours a year.
24 × $1,120 = $26,880 per year
That is before we even talk about refunds, chargebacks, reputation damage, customer churn, or the time spent putting out fires.
A few quick scenarios (so you can see yourself in it)
Scenario 1: Small service business (booking system down)
- Average daily revenue: $2,400
- Open: 8 hours
- 2 staff affected
- $25/hour wage
Lost sales per hour: $2,400 ÷ 8 = $300
Staff wages per hour: 2 × $25 = $50
Total per hour: $300 + $50 = $350/hour
Even for a small operation, downtime adds up fast.
Scenario 2: Ecommerce store (checkout down)
- Average daily revenue: $15,000
- “Selling hours” you care about: 12
- 3 staff affected (support, ops)
- $22/hour wage
Lost sales per hour: $15,000 ÷ 12 = $1,250
Staff wages per hour: 3 × $22 = $66
Total per hour: $1,250 + $66 = $1,316/hour
And ecommerce is brutal because customers are impatient. They do not wait. They bounce.
Scenario 3: Retail store (POS down)
- Average daily revenue: $6,000
- Open: 10 hours
- 5 staff affected
- $18/hour wage
Lost sales per hour: $6,000 ÷ 10 = $600
Staff wages per hour: 5 × $18 = $90
Total per hour: $600 + $90 = $690/hour
POS downtime is the kind that feels “temporary” until you look at the receipts you never printed.
What this formula does not include (on purpose)
This model is intentionally basic, but you should know what is missing so you do not underestimate things long term.
Here are common extra costs that often show up after downtime:
- Overtime later to catch up on backlog
- Rush shipping or manual processing costs
- Refunds and discounts you give to calm people down
- Customer support load spikes (phones, emails, angry chats)
- Lost customers who never come back
- Reputation hit (reviews, social posts, word of mouth)
- Technical recovery cost (IT emergency rates, consultants)
If you want, you can add those later as extra line items. But you do not need them to get started. The simple formula already makes the point.
The fastest way to calculate your number right now
If you want the quickest version, do this:
- Look up your average daily sales for the last 30 to 90 days.
- Divide by your hours open (or hours you actively sell).
- Count how many staff are basically stuck during downtime.
- Multiply by average hourly wage.
- Add them together.
Copy and paste version
Downtime Cost per Hour = (Average Daily Sales ÷ Hours Open) + (Number of Staff Affected × Avg Hourly Wage)
No more than two lines of math. Clean. Defensible. Easy to explain to anyone.
Final thought
Most downtime conversations stay vague. “It was bad.” “We should fix it.” “It cost us a lot.”
But when you can say, “One hour costs us about $1,120,” things change. Suddenly a $300/month monitoring tool makes sense. Suddenly better hosting is not “extra”. Suddenly redundancy is not overkill. It is just math.
And the best part is, you do not need a perfect number.
You just need a number you trust enough to act on.
FAQs (Frequently Asked Questions)
What exactly counts as ‘downtime’ in a business context?
Downtime refers to any period when a core system is unavailable or unusable enough that normal operations cannot continue. This includes situations like a broken online checkout, a POS system failure, offline booking systems, inaccessible internal data, or internet outages that slow down operations. Even partial downtime counts if it prevents customers from completing revenue-generating actions.
How can I calculate the cost of one hour of downtime simply and effectively?
Use the straightforward formula: Downtime Cost per Hour = $ Lost Sales + $ Staff Wages. Estimate your average lost sales per hour (e.g., daily sales divided by hours open) and add the wages of staff affected during that hour. This simple approach helps make the financial impact visible without complex models.
What methods are recommended for estimating lost sales during downtime?
Two options exist: Option A is quick—divide your average daily sales by the number of hours you’re open to get average sales per hour. Option B is better if you have hourly data from POS reports or analytics to reflect variations throughout the day. If unsure, start with Option A for simplicity and usefulness.
Should I consider recapturing some lost sales when calculating downtime costs?
Yes, it’s realistic that some customers may return or retry later. For a conservative estimate, you might apply a recapture rate (e.g., 30%) and count only 70% of lost sales as truly lost. However, starting with the full amount is simpler and still provides a useful baseline.
How do I factor in staff wages when calculating downtime costs?
Calculate staff wage cost by multiplying the number of affected employees by their average hourly wage during the downtime period. You can use base wages or a ‘loaded wage’ that includes payroll taxes and benefits (typically base wage × 1.2 to 1.35). Including staff wages highlights guaranteed expenses during downtime often overlooked.
Why is understanding the cost of downtime important for businesses?
Recognizing downtime costs makes the financial impact tangible—lost revenue plus ongoing staff wages—and helps justify investments in fixes like backups, better hosting, redundancy, or IT support. Quantifying this cost supports proactive measures to minimize interruptions and protect revenue streams.
