Inputs
Example Data Table
| Scenario | Outages/Year | Avg Hours | Cost/Hour | Upfront Cost | Outage Reduction | Duration Reduction |
|---|---|---|---|---|---|---|
| Small office | 4 | 1.0 | $1,200 | $8,000 | 35% | 25% |
| Retail site | 8 | 1.5 | $3,500 | $22,000 | 40% | 30% |
| Light manufacturing | 10 | 2.0 | $9,000 | $55,000 | 50% | 35% |
Formula Used
DurationHours × CostPerHour + Labor + Damage + Churn + Other
OutagesPerYear × BaselineCostPerOutage
1 − (1 − OutageReduction) × (1 − DurationReduction)
BaselineAnnualCost × CombinedReduction
AvoidedAnnualCost − AnnualOperatingCost
N years:
NPV = −UpfrontCost + Σ(NetAnnualBenefit / (1 + DiscountRate)^year)
UpfrontCost / NetAnnualBenefit
How to Use This Calculator
- Enter how many outages you experience each year and the typical duration.
- Add your estimated cost per hour of downtime, plus any per-outage costs.
- Input the mitigation upfront cost and any annual operating expense.
- Estimate how much mitigation reduces outage frequency and duration.
- Press Calculate to view avoided cost, payback, and NPV above.
Professional Notes
Operational outage profile
Track outages by counting events that materially disrupt revenue, safety, or service. Use a full year where possible to smooth seasonality. Separate brief voltage dips from sustained interruptions. A realistic baseline makes avoided-cost estimates credible and comparable across sites. For multi-site portfolios, keep units consistent and document data sources.
Translating time into financial loss
The hourly downtime value should reflect more than labor. Include lost production, delayed shipments, contract penalties, spoilage, and customer refunds. If revenue loss is nonlinear, use a blended rate that matches typical peak and off‑peak exposure. Add per‑outage items such as overtime response, equipment stress, and churn. When estimating churn, use historical cancellations or a proxy percentage of monthly recurring revenue.
Mitigation impact assumptions
Reliability upgrades usually reduce both the number of incidents and the time to recovery. This calculator combines frequency and duration improvements so partial gains still matter. Enter conservative percentages first, then run a sensitivity check by increasing reductions in small steps. This highlights which levers drive the largest savings. If mitigation includes backup power, account for startup lag and critical load priority.
Investment performance indicators
Avoided annual cost becomes net benefit after subtracting ongoing operating expense. Simple payback shows how fast the upfront investment is recovered. NPV discounts future net benefits using your chosen rate, which helps compare projects with different lifetimes or risk. Discounted ROI summarizes value creation relative to upfront cost. A higher discount rate makes long payback projects look less attractive, so align it with internal capital guidelines and risk.
Using results for decision support
Use the baseline, avoided, and remaining bars to communicate the operational narrative. The cumulative value line shows when the project crosses breakeven in present-value terms. If payback is long but NPV is strong, consider strategic drivers such as compliance, resilience, or reputation. Document assumptions and update inputs as reliability data improves. Consider pairing this output with an outage log to validate modeled reductions quarterly. Recheck inputs after major changes.
FAQs
What costs should be included in downtime cost per hour?
Include lost production or sales, idle labor, penalties, expedited shipping, and recovery inefficiency. If impacts vary by time, use a weighted average that reflects typical outage timing and exposure.
How do I estimate customer churn cost per outage?
Use historical cancellations, refunds, or reduced renewal rates following disruptions. If direct data is limited, estimate churn as a small percentage of monthly recurring revenue tied to affected services.
Why does the calculator combine outage and duration reductions?
Mitigation can prevent incidents and shorten recovery. Combining both avoids double counting while capturing partial improvements. The method assumes independent effects, which is a reasonable planning approximation.
What discount rate should I use for NPV?
Use your organization’s hurdle rate or weighted average cost of capital, adjusted for project risk. Higher rates reduce the present value of long-term benefits and favor faster payback.
Why might payback be 'Not achieved'?
If avoided cost minus annual operating expense is not positive, the project does not recover its upfront cost under the provided assumptions. Recheck reductions, downtime cost, and operating expense.
How can I validate the results after implementation?
Track outage frequency and duration before and after deployment, then compare realized avoided incidents and recovery time. Update inputs quarterly to reflect actual performance and changing operating conditions.