By now, you probably know that hackers intentionally target small and medium-sized businesses—SMBs are three times more likely to be targeted compared to larger companies. But did you know that the average cost of an attack for a small business is a whopping $3 million? Put another way, the average cost per breached record is about $164. It’s a cost that no small business can afford. While the direct financial cost of a cybersecurity breach is significant, there are additional hidden costs that can be even more damaging for your business. This includes everything from reputational damage to the theft of your intellectual property.

In this post, we explain these often-overlooked hidden costs of a cybersecurity incident for your small business. And we share tips to help your business mitigate these risks and avoid these hidden costs altogether.

Direct Costs of Cybersecurity Breach

In some instances, hackers may seize or steal money from your business. Or they may access sensitive information that could be sold to other entities. But there are other financial costs to consider, such as the immediate cost to identify and resolve the breach. This could be exorbitant fees to hire an external cybersecurity consultant to assist with recovery; overtime costs for your in-house technology team; or the purchase price of point solutions for incident response and containment.  

Then there’s the cost of your public response. You might need to provide free credit monitoring to affected customers, or discounted products and services for those who were part of the breach. You also might need to pay overtime and hire personnel to handle calls from understandably upset customers. Additionally, you might face costly legal fees and regulatory fines and the need to hire a lawyer, accountant, or public relations professional. 

Note: Often, we hear about the direct cost of paying the ransom following a ransomware attack. However, it is not advised that you pay this ransom, for multiple reasons. For more, please see this previous post Ransomware: We Answer Your FAQs.

The Hidden Costs of Cybersecurity Breach

Here’s a startling statistic: After a cyberattack, 60% of small business close within six months! This can be due to the direct financial costs of the attack, as mentioned above, but other hidden costs can contribute or exacerbate the situation, including the following. 

• Reputational Damage: Your small business worked hard to establish a positive reputation. A single cybersecurity incident can immediately and irreparably tarnish this reputation. This can result in distrust, negative publicity, and a hindered brand image. It can also result in immediate loss of customers, as well lingering effects on customer loyalty and retention. On top of this, reputational damage can result in loss of private or public investment in your business. A tarnished image can also cause qualified job applicants to seek employment elsewhere, including with your competitors. 

• Operational Disruption: Another hidden cost of a breach is downtime and loss of productivity—both during and following the incident. It costs time and money to retrieve your data and restore your systems. In fact, the average cost of downtime for a small business can be about $425 per minute or more than $25,000 per hour! On top of this, operational disruptions can impact employee morale and productivity—often, your team must pause their everyday duties to triage the situation and deal with upset customers, and that can be tough. 

• Regulatory and Compliance Costs: Suffering a breach is a challenge unto itself. But you may also incur post-incident regulatory and compliance costs, including the potential for increased cybersecurity insurance premiums for your small business. You may also be required to complete a post-breach audit and face increased scrutiny from industry regulators. Lastly, you may have ongoing internal costs (including time and resources) to meet any new or stricter compliance requirements, post-breach.

• Customer Attrition and Revenue Loss: Perhaps you’ve heard the adage, it’s more expensive to acquire a new customer than it is to retain an existing one? It could be incredibly difficult to do both following a breach! Even after you’ve restored your operations, the incident can result in long-term revenue decline and impede your business growth. Finally, given the many direct and hidden costs of a breach, you may end up passing these expenses on to your customers; one report suggests that 60% of businesses that experience a breach raise prices following the incident. And that can result in further loss of customers.

• Intellectual Property Theft: The last hidden cost to be aware of is the theft of your intellectual property or IP—the backbone of many small businesses. This includes your proprietary ideas, your valuable innovations, your trade secrets, your “secret sauce”. Unlike your customer information, if a hacker steals your intellectual property, it belongs to you and your business. Stolen IP can put you at a competitive disadvantage and you might incur high legal fees to recover or protect this proprietary data. 

How To Mitigate the Hidden Costs of Cybersecurity Breach

There’s no getting around it: A breach of your small business carries significant financial and hidden costs. The best way to reduce these costs is to mitigate the threat with robust and proactive cybersecurity measures. At a minimum, your business should invest in the following measures:

• Perform regular risk assessments and vulnerability testing: This will help you identify your vulnerabilities and prioritize areas for improvement. Learn more: How to Conduct a Cyber Risk Assessment for your Small Business 

• Implement strong encryption and data protection practices: Establish secure password practices (or use a password manager), regularly update your antivirus software and applications, and secure your endpoints.

• Train your employees on how to recognize the latest threats: An informed team can act as your first line of defense. Learn more: Five Cybersecurity Training Tips your Employees Should Know

• Encourage a proactive approach to cybersecurity: Cybersecurity is everyone’s job, especially at a small business like yours. 

• Develop a detailed incident response plan: This should include a robust data backup and recovery strategy to minimize downtime and ensure business continuity in the face of any disaster. And be sure to regularly test and update your response plan to ensure it’s effective against the latest threats.

We care about your small business, and we don’t want you to suffer the costs of a breach. We’re here to help. At N8 Solutions, we offer a free Network Security Assessment and Audit. We organize a discovery session with your team to review your technology environment, assess your network security, review your software and configurations, and provide a customized audit report with recommendations. It’s all free with no commitment required—the perfect starting place for a small, security-minded business on a budget.