The Effects of a Power Outage on a Business
A 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 that may be difficult to recover from. Making sure your business has a plan to eliminate downtime in the event of a power outage will help you mitigate the potential losses that can occur because of an outage.
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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:
- Brownout: The voltage drops and causes dim lights. Brownouts can cause electrical equipment to malfunction or become inoperable with lowered voltage.
- Blackout: Complete loss of power in an area for a few minutes or an indefinite amount of time. These are the most severe types of outages that affect a large area, and are usually caused by structural damage to electrical facilities.
- Permanent Fault: Large loss of power due to a fault on a power line. Once the fault is removed from the powerline, power is immediately restored. These outages are typically quick and straightforward to fix.
You should be prepared for anything, no matter what type of commercial power outage your business may experience. 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, such as when maintenance and upgrades need to occur. However, at other times, your business may experience an unplanned outage. The following reasons 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.
- 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. They’ll sharpen their teeth on utility lines or be otherwise destructive. Birds and rats can also cause outages when they contact a high-voltage power line. These outages can last for a few hours.
- Vehicles: Vehicle accidents can damage poles and power lines, causing power outages. The outage can last for a few hours or longer, depending on the extent of the damage.
- Equipment Failure: Sometimes, power equipment can malfunction due to age or various 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. Equipment that isn’t properly maintained can also cause failures and can be expensive to replace.
- Spikes: Electrical overloads cause power surges that increase the electrical supply voltage, leading to power outages. These power surges cause spikes, which are often a result of lightning strikes or short circuits.
Effects of Power Outages on Businesses
Large companies cannot function long without using 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, resulting 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, and they may leave reviews or share their perspective with their friends or family. 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 time. If you experience downtime due to an outage, the speed at which you sell your inventory will decrease. If customers cannot make purchases, your unturned inventory will increase. You’ll have to find ways to handle the excess inventory and adjust your incoming shipments. If you sell perishable goods, you may have to throw them out.
- Supply Chain Ripples: Businesses rely on each other to create a powerful supply chain. Business-to-business (B2B) transaction relies on other companies to maintain their operations. If a business’s power is out, they can’t provide another business with their requested inventory. Logistics companies can’t use tracking software to get their deliveries to their customers. Power disruptions can cause a dramatic effect through the supply chain.
- Decreased Employee Productivity: Downtime due to 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 business’s 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, and lost or damaged files can create additional challenges in business operation, such as inventory management. 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 most significant 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.
- Increased Operating Expenses: Depending on how you operate your business and what you need to function correctly, a power outage can be costly. Generator costs and maintenance can be a significant portion of your budget, especially if you live in an area with frequent storms that have the potential to cause outages. However, maintaining business operations during an outage is essential to maintaining a loyal customer base.
- Customer Service Difficulties: Power outages make communicating with customers or offering reliable customer service challenging. You also won’t be able to communicate with your customers to let them know why they can’t get in contact with you. The inability to offer customer service can turn consumers to other businesses and competitors who have power.
Effects of Power Outages on Society
If an area is experiencing an extended power outage, it could affect that community. Some effects of a power outage can be:
- Disrupted Communication: Power outages can affect one’s ability to communicate with those not immediately around them. This could cause phone lines to go down and making calls not possible.
- Water Contamination: If a power outage occurs due to a hurricane or flooding, the public water supply can be contaminated. In this case, only use bottled, boiled or treated water until your water supply is tested and approved to be safe to use.
- Closed Businesses: If a store has no power, they cannot keep their lights on or check out products that customers are looking to purchase. Such businesses that may close could be grocery stores, gas stations, banks and more.
- Food Spoilage: Refrigerators and freezers require power to keep your food cold. If the power in your home is out for an extended time and this food cannot stay cold, it could lead to food spoilage. Keeping refrigerators and freezers closed during a power outage is recommended to prevent food spoilage.
- Prevent Use of Medical Devices: Many medical devices also require power to run properly and efficiently. If this device keeps you or a family member alive, seek emergency services immediately.
To ensure your power stays on in your home, consider purchasing an outdoor backup generator. It is also essential not to use gas stoves to heat your home.
Monetary Loss During a Power Outage
Downtime due to 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 impacted. ITIC reported that 98 percent of organizations say one hour of downtime costs over $150,000.
Ensure 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.
You should also determine how much time you need to restore power to key operating systems. If you can afford application interruptions for multiple days without a monetary loss to your business, you can take your time setting up the appropriate measures to restore operations. If you need your operations restored within hours, or even minutes, you’ll need to invest in technologies that can bring you back online quickly during an outage.
Understanding the monetary loss your business could face because of a power outage is a crucial first step in preparing your business to face the challenges that come from outages.
Industries That Are Impacted by Power Outages
In today’s world, even a short-term loss of power can lead to a significant loss in various industries. During 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.
These unplanned power outages from natural disasters and other events significantly affect 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 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 from facilities to operate 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 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 in the financial industry.
- Military Operations: Energy is used to operate military bases where government officials work to support and maintain the 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. A few minutes of downtime can lead to tens of thousands of dollars in lost revenue for larger retail companies. 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.
- Food Service: Power outages significantly impact the food industry. When the power goes out, refrigeration equipment can fail, creating a large amount of food waste. Restaurants will need to throw the food out, which will need to be replaced to meet customers’ needs. This creates additional costs that can put a strain on a business. An outage would also halt operations, and inventory becomes challenging to track.
- Entertainment Venues: Entertainment is a massive industry and relies on sustainable power for its success. When the power goes out, entertainment venues may have to cancel shows or postpone events. Revenue is lost, which can severely impact businesses, especially small businesses that rely on consistent income to maintain operations.
How You Can Prevent the Negative Effects of Power Outages
Even with advanced technology and hardware, events can occur that 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. Create Business Continuity Plans
Developing a business plan for power outages prepares your company if 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 arise 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 creating your business continuity plan, you should ensure that all of your procedures work by testing and practicing them. All employees should be aware of these procedures and know what to do in the event of an outage. Don’t forget to continuously check and review the process to ensure everything is up-to-date and working as expected.
2. Develop 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 evaluate the ability of your employees to complete their job assignments in the event of an emergency.
These drills can help your recover quickly from an outage and prevent extensive losses. The right emergency response program will be tailored to your business’s needs.
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. They’ll also protect your business from losing important data that keeps it operating efficiently.
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. Maintain 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 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 if 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.
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*Last Updated 02/08/2022