How to Use This Tool
Follow these steps to generate an accurate business interruption loss estimate:
- Enter your average monthly revenue in US dollars. Use recent 3-month average for best accuracy.
- Input your total monthly fixed operating costs (rent, salaries, subscriptions, utilities, etc.)
- Add your variable cost percentage: the share of revenue spent on costs tied to sales (COGS, shipping, payment fees).
- Enter your downtime duration and select the correct unit (days, weeks, months).
- Click Calculate Loss to view the full breakdown, or Reset to clear all fields.
- Use the Copy Results button to save the breakdown for insurance claims or records.
Formula and Logic
This calculator uses standard small business interruption loss methodology used by insurers and CPAs:
- Total Downtime (Days) = Input Downtime × Conversion Factor (7 for weeks, 30 for months, 1 for days)
- Average Daily Revenue = Average Monthly Revenue ÷ 30 (standard 30-day month for business calculations)
- Total Revenue Loss = Average Daily Revenue × Total Downtime (Days)
- Total Fixed Cost Loss = (Monthly Fixed Costs ÷ 30) × Total Downtime (Days)
- Variable Cost Savings = Total Revenue Loss × (Variable Cost Percentage ÷ 100) — these costs are not incurred when no sales occur
- Net Loss = Total Revenue Loss + Total Fixed Cost Loss - Variable Cost Savings
The progress bar shows what percentage of your average monthly revenue is lost during the downtime period.
Practical Notes
Adjust these inputs to match your business type for more accurate results:
- E-commerce sellers: Include payment processing fees, shipping costs, and inventory holding costs in variable costs. Fixed costs include platform subscriptions (Shopify, Amazon) and warehouse rent.
- Service businesses: Variable costs may include contractor fees or billable labor costs. Fixed costs include office rent and software subscriptions.
- Retailers: Variable costs include COGS and credit card processing fees. Fixed costs include store rent and employee salaries.
- Use 3-month average revenue instead of a single month to account for seasonal fluctuations.
- Exclude one-time expenses from fixed costs: only include recurring monthly costs you pay regardless of operation.
Why This Tool Is Useful
Unexpected downtime from supply chain issues, natural disasters, or system outages can cripple small businesses. This tool helps:
- Prepare accurate insurance claims for business interruption coverage
- Build contingency funds by understanding potential loss exposure
- Prioritize downtime reduction strategies by quantifying loss per day
- Negotiate with lenders or investors by showing quantified operational risk
- Set pricing thresholds to cover fixed costs during slow periods
Frequently Asked Questions
What counts as a fixed operating cost?
Fixed costs are recurring expenses you pay even when your business is not operating. Common examples include rent, full-time salaries, software subscriptions, insurance premiums, and utility bills. Do not include variable costs like raw materials or shipping.
How do I calculate variable cost percentage?
Variable cost percentage is (Total Monthly Variable Costs ÷ Total Monthly Revenue) × 100. For example, if you spend $20,000 on variable costs and earn $50,000 in revenue, your variable cost percentage is 40%.
Is this calculation accepted for insurance claims?
This tool uses standard methodology, but always check with your insurance provider for their specific calculation requirements. Most insurers require documentation of revenue and costs, which this breakdown can support.
Additional Guidance
Review these tips to get the most out of your loss estimate:
- Update your inputs quarterly as your revenue and cost structure changes.
- For partial downtime (e.g., 4 hours), enter 0.17 days (4 ÷ 24) as downtime duration.
- If you have multiple business locations, calculate each location separately for accurate results.
- Keep records of all input values to support insurance claims or tax deductions for losses.
- Compare your net loss to your emergency fund to identify coverage gaps.