What Every Small Business Needs to Know About Disaster Recovery – Part 2

Last week we began our discussion on disaster recovery with a look at RPO (Recovery Point Objective), RTO (Recovery Time Objective), and MTO (Maximum Time Objective). This week we’re going to give you a little insight in how IT companies set these parameters. Of course, there is no magic bullet or yellow brick road to instantaneously give us answers, but if you start with some good information, you are probably going to get good solutions. A large part of your calculation will consider how much the cost will be if your business is effectively shut down for any length of time.

The Cost of Loss

How much do most businesses lose because of IT problems? A study by Coleman Parks Research not too long ago estimated that small businesses lose an average of $55,000 a year due to downtime, data loss, and the cost of recovery. Mid-sized businesses are losing an average of $91,000. And these losses are before any major disaster. You may be asking, why aren’t I seeing this loss? How can it actually exist if I am not seeing it? IT companies know the answer is that it occurs in almost unnoticeable dribs and drabs. It’s the customer complaint that isn’t answered properly because accurate records couldn’t be found. Or business lost because the phone system was down for ten minutes. Or, even worse, angry customers because of a data breach. Yes, small companies suffer data breaches. You don’t hear about them because the media isn’t interested in the losses of a small company.

3 Step Business Impact Analysis

Your first step in understanding your potential loss should be the creation of a Business Impact Analysis. Many IT companies will have a version of this to help you implement. The primary steps include:

1: Create a list of your business’s core functions and the data required to keep these functions running. This includes processes critical to generating revenue: sales, accounting, etc. You should be including customer/client contacts, purchase orders and contract items, accounting and your other corporate records, as well as any other documents that will prove important to your business continuity.

2: Supporting infrastructure: what will you need if you have to replace damaged or destroyed equipment and/or software in the event of fire, flood, storm, or theft? It’s important to know what you will need to get your business up and running again. AND you need to know where and how you will obtain everything. Every day you are not operating, you are losing money.

3: Calculate your potential losses. Work with your accountant or in-house financial officer to figure out how much your company will suffer financially if unplanned business interruptions occur. Money that may be recovered from business interruption insurance is part of this. Calculate your losses from each part of your business to include loss from sales, loss of goodwill, aging and loss of value of inventory, etc. Now, here is the critical part: your potential loss will be a major factor in deciding how much you should spend on disaster prevention.

Next week we will continue this discussion by looking into the effect “time” will have on your disaster prevention decisions. In the meantime, we would love to start a conversation with you about disaster prevention and disaster recovery. If this is a concern of yours, and it is truly something every business executive should be thinking about, give us a call at 770.629.9615. We’ve been helping businesses just like yours as one of the top IT companies in metro Atlanta since 1992.