The Effects of a Power Outage on a Business

February 08, 2018

Business Power OutagesA business depends on power each day to run its operations — that’s no secret. But when the power goes out, unplanned downtime can occur — and that can cost your business thousands or even millions of dollars. Unexpected outages can lead to situations from which it may be difficult to recover. Making sure your business has a plan to eliminate downtime in the event of a power outage will help your business mitigate the potential losses that can occur because of an outage.

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Types of Power Outages

What Causes a Power Outage?

Monetary Loss

Effects of Power Outages on a Business

Industries That Are Impacted

How to Prevent the Negative Effects of a Power Outage

 

What Is a Power Outage?

Power outages can include short-term or long-term loss of electric power to a specific area. Outages can affect homes, businesses or entire cities. There are a few types of power outages that your business may experience:

1. Brownout: The voltage drops and causes dim lights. Brownouts can cause electrical equipment to malfunction.

2. Blackout: Complete loss of power in an area for a few minutes or an indefinite amount of time.

3. Permanent Fault: Large loss of power due to a fault on a power line.

No matter what type of power outage your business may experience, you should be prepared for anything. Inside Energy reported that in 2014 in the United States, the five-year annual average of outages doubled every five years from 2000 to 2014. With power outages on the rise, they are of significant concern for businesses.

What Causes a Power Outage?

Some power outages are planned, as when maintenance and upgrades need to occur. However, at other times, your business may experience an unplanned outage. The following factors can all lead to a power outage:

  • Weather: Weather is one of the most common reasons power outages occur. In a study by Climate Central, they found that weather caused 80 percent of all outages between 2003 and 2012. Weather that causes power outages can include storms, cold weather, hurricanes, floods, tornadoes, and wildfires. Natural disasters are a particularly keen source of worry — they can come on unexpectedly and cause power outages for long periods of time.
  • Animals: Animals can come in contact with fuses and transformers and cause them to shut down. Squirrels are infamous for climbing electrical equipment and causing outages.
  • Vehicles: Vehicle accidents can damage poles and power lines, causing power outages.
  • Equipment Failure: Sometimes power equipment can malfunction due to age or a variety of other factors. Over time, salty and humid air or dust can impact the performance of machines. Weather and natural disasters can increase the risk of equipment failure.
  • Spikes: Increases in the electrical supply voltage can lead to power outages. Spikes are often a result of lightning strikes or short circuits.

Monetary Loss During a Power Outage

Downtime as a result of power outages can cost your business a significant amount of money. Power outages can impact your bottom line and affect ongoing business operations. Monetary losses due to downtime can vary based on the industry, length of the outage, time of day, and the number of people. ITIC reported that 98 percent of organizations say one hour of downtime costs over $100,000.

data center damage from power outage

Make sure you know how much a power outage would cost your business each hour. To calculate the cost of downtime per hour, add labor costs each hour to the revenue lost each hour. Your labor costs per hour will take into account factors such as revenue, number of employees, number of hours worked per week, average annual employee benefits, and the percentage of the workforce affected by the outage. The revenue lost per downtime hour will factor in your daily revenue and the percentage of your revenue affected by the outage.

Understanding the monetary loss your business could face because of a power outage is an important first step in preparing your business to face the challenges that come from outages.

Effects of Power Outages on Businesses

Large companies cannot function long without the use of items such as computers, manufacturing equipment, and lights. Companies that rely on networks and web-based technologies may experience setbacks in the event of an outage. Power outages can affect your business in a variety of ways. Each way can have an impact on the bottom line of your business and your productivity:

  • Lost Customers and Revenue: When power outages occur, sites may go down and result in lost customers and lost revenue. When customers can’t access your website, they may have no way to purchase products. This one-time power outage could impact how they perceive your company. A damaged reputation can have long-term effects on your revenue. Gaining these customers back might require significant marketing efforts, which can be costly.
  • Unturned Inventory: Inventory turnover refers to the number of times a company’s inventory is sold or replaced during a specific period of time. If you experience downtime due to an outage, the speed at which you sell your inventory will decrease. If customers aren’t able to make purchases, your unturned inventory will increase.
  • Decreased Employee Productivity: Downtime as a result of power outages has an impact on employee productivity. Employees may not be able to complete their tasks when key equipment is down. Also, IT employees may need to work overtime to resolve problems or professionals may need to be hired to help recover lost data and get systems running again. Depending on the duration of the power outage, lower employee productivity can have a huge effect on your businesses bottom line.
  • Stored Computer Data Lost: Power outages are one of the top reasons data loss occurs. Because computers and operating systems are complex, they need to shut down properly. An outage causes computers to shut down unexpectedly. Any files you were working on could be lost or become corrupted. If power outages occur frequently, they can damage your hard drive and reduce its lifespan.
  • Damaged Equipment: Power outages can cause long-term damage to your equipment. The greatest cause of equipment damage from power outages is the electrical surges that occur when the power is restored. Not having a proper backup power supply or not implementing protection from surges can cause your equipment to become damaged when the power comes back online. Also, the cost to repair equipment is an unanticipated expense that could set you back.

Industries That Are Impacted by Power Outages

In today’s world, even a short-term loss of power can lead to significant loss in a variety of industries. During recent natural disasters like Hurricane Irma, we saw the effects of power outages on businesses. Nearly two-thirds of Florida’s electricity customers lost power during Hurricane Irma. A significant number of businesses were still without power for days after the hurricane hit.

Power Loss from Hurricane Irma

These unplanned power outages from natural disasters and other events have a significant impact on businesses operating in the areas impacted. Power outages can occur at any time, and if businesses in the following industries are not prepared, they may experience significant downtime and loss of revenue:

  • Data Centers: Data centers are facilities that contain an organization’s IT operations and equipment. These centers store, organize, manage and process a company’s data. When a data center goes down due to a power outage, the loss of mission-critical data can occur. Since companies rely heavily on data stored in their data centers, losing this crucial information could affect everyday operations long-term.
  • Medical Facilities: Patients’ lives depend on crucial medical equipment operating properly even after a power outage occurs. Typically, hospitals have backup generators to make sure everything continues to run. These generators require continuous maintenance and testing to ensure they will work in the event of a power outage. Patient data and lives are all on the line when the power goes out. And without working telephone lines, people will not be able to call emergency services for help.
  • Financial Corporations: Companies involved in the stock market can lose out on millions of dollars in a fraction of a second if a power outage occurs. Because transactions happen every second, even a short-term outage can have a drastic impact on businesses.
  • Military Operations: Energy is used to operate military bases where government officials work to support and maintain deployment of weapons and oversee combat forces. Outages can cause valuable weaponry and equipment to become useless in the event of an attack. With non-functioning equipment, military personnel could be left defenseless.
  • Retail and Wholesale: Companies in the retail industry suffer lost sales revenue with unplanned outages. For larger retail companies, a few minutes of downtime can lead to tens of thousands of dollars in lost revenue. To understand the possible impact, we can look at Amazon. In 2016, Amazon’s website was unavailable for 13 to 15 minutes. They estimated that this short lapse lost the retailer $2,646,501 in revenue. Although Amazon’s site did not go down due to a power outage, they serve as a perfect example of how downtime can affect a business.

business profit loss from power outage

How You Can Prevent the Negative Effects of Power Outages

Even with advanced technology and hardware, events can occur which cause unplanned power outages. Make sure you prepare your business for a short-term or long-term power outage. By ensuring your company takes the following precautions to prepare for an outage, you will help prevent the long-term negative impacts a power outage can have:

1. Business Continuity Plans

Developing a business plan for power outages prepares your company in case a disaster occurs. A continuity plan helps outline how to continue to deliver products and services to your customers regardless of any internal operational problems that may occur because of outages. Having a plan will help ensure that personnel and assets are protected and can still function properly.

To develop a plan, you should create a committee and work together to identify potential risks you might experience and how those risks will impact your operations. The next part of your plan should include implementing procedures to help mitigate those risks.

After you have created your business continuity plan, you should ensure that all of your procedures work by testing and practicing them. Don’t forget to continuously check and review the process to ensure everything is up-to-date and working as expected.

2. Emergency Response Training

An important step after creating your plan is to educate your employees and test their emergency response with drills. Having drills will help you be able to evaluate the ability of your employees to complete their job assignments in the event of an emergency.

3. Install a UPS Device

One way to help prevent your company’s computers from being damaged or losing data stored in RAM is to use an uninterruptible power supply (UPS) device. UPS devices help equipment to stay on temporarily when a power outage occurs. These devices allow equipment time to shut down properly. Many UPS devices also have surge protection to help mitigate damage to computers from spikes.

4. Have a Backup Generator

Backup power sources are essential for many industries. Having a backup generator is a simple way to prevent unplanned downtime from power outages. To determine the proper generator size your company will need, take inventory of the equipment the generator will need to power. Skilled technicians can help you determine the proper backup generator for your business needs and install it correctly.

You have the option to purchase a portable or standby generator. Portable generators tend to be lower in cost and wattage and run on gasoline. For larger businesses, standby generators are the ideal solution. Standby generators are more expensive and run on diesel, natural gas, or propane. They automatically turn on when the power goes out to help your operations continue during power outages.

5. Emergency Backup Fuel

Ensuring that your company has a backup generator may not be enough. You will need to maintain and test your fuel to ensure that you have high-quality fuel to operate your generator in case of an emergency power outage. Scheduling regular tank maintenance can help confirm that your generators are working properly and will be ready for a critical situation. Using fuel additives and fuel polishing can also increase your fuel efficiency and quality.

Luckily, if you are out of fuel during an outage or the fuel you have has become unusable, there are emergency fuel delivery services that can help you out. Finding a fuel delivery service can enable you to get your business back up and running so you won’t lose out on additional revenue during a longer-than-anticipated power outage.

Prepare Your Business for a Power Outage

Power outages can occur at unexpected times and for a variety of reasons. They can cause your business to come to a halt. Don’t let your business lose out on revenue or productivity. Make sure your business is ready in the event that your organization faces an unplanned power outage. Start preparing today by creating a business continuity plan for power outages, getting an appropriately sized backup generator and ensuring you have high-quality fuel to continue operating your generator.

Emergency Fuel Response Process Infographic

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What Our Customers Think
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