Can Your Small Business Afford the Average Cost of a Data Breach in 2023?

Data breaches are expensive. And not just for mega-corporations like Facebook or Equifax. Data breaches are a BIG deal, even for small businesses like yours and mine. You may have an idea of the average cost of a data breach in 2023, but it’s probably a lot more than you think. It’s a staggering figure in the millions of dollars no business owner wants to face. But why are these costs so high? What are the hidden expenses beyond the immediate financial impact? And most importantly, what can you do to prevent such a breach from happening to your business?

As a business owner, it’s essential to understand that a data breach can lead to significant losses, both financially and in terms of your company’s reputation. But don’t worry. We are here to guide you through this complex landscape, offering expert advice and solutions tailored to your specific needs. Stick with us as we delve into this crucial topic, and don’t hesitate to schedule a consultation with our experts to discuss how we can help secure your business.

How Much Does a Data Breach Cost?

According to a recent survey, 40% of small business owners expect a cyber attack to cost less than $1,000, and 60% believe they will recover fully within 3 months.

The reality is a lot scarier. According to the well-known IBM Cost of a Data Breach Report, the total average cost of a data breach for small businesses is a whopping $2.98 million. This figure represents the culmination of various business costs associated with a breach, including incident response, system repair, customer notification, legal fees, and potential fines for compliance failures.

And it takes an average of 277 days to identify and contain a breach. That means if a breach occurred on January 1, it would take until October 4 to recover fully.

Unfortunately, the financial impact doesn’t stop there. Lost business costs, a subset of the overall cost, have risen significantly. Businesses often lose revenue due to customers leaving their business, diminished trust, and reputational damage following a breach. It’s a harsh reality that underscores the critical importance of robust data security measures for businesses of all sizes.

Why Are the Costs of Data Breach Incidents So High?

A stack of $100 bills burning in a pyramid shape

Now you might be thinking $3M sounds unrealistically high… until you realize that a data breach is a lot more than just “getting hacked.”

Separate studies from Hiscox and Nationwide, two large insurance providers suggested that the cost of a cyber attack averaged around $19,000, and $15-$25,000, respectively. That’s still scary but sounds a lot more reasonable.

But it’s not the whole story.

First, those figures are for a cyber attack only, which may or may not have caused a significant data breach, and don’t include things like server crashes or natural disasters.

Second, they’re based off cyber insurance claims, which often don’t cover the indirect expenses of a data breach like lost customers or even downtime.

There are also a variety of other factors you must consider. First, breaches often go undetected for a significant period, especially if the data breach is caused by ransomware. This culprit of a security breach cost extends the data breach lifecycle by 49 days. This extended detection and response time can lead to more extensive data loss and higher recovery costs.

Moreover, the nature of the data involved can also drive up costs. Confidential information, customer data, and intellectual property are often targeted in these breaches, leading to substantial financial and reputational damage. Additionally, businesses might face penalties for compliance failures if they’re operating within highly regulated industries, further elevating data breach costs.

When you add up the costs of loss of business, detecting and fixing the actual breach, restoring all the data, notifying customers, AND any legal fees and fines, suddenly, $3M doesn’t sound so far-fetched.

What Are Some Common Reasons for a Data Breach?

Data breaches can occur due to a variety of reasons. Stolen or compromised credentials, phishing attacks, and cloud misconfigurations are among the most common attack vectors. Surprisingly, 88% of data breaches are caused by human error, such as accidental data loss, business email compromise, or falling for a phishing attack.

Ransomware attacks are also prevalent, with 19% of respondents reporting such an attack and two-thirds paying the ransom. It’s also worth noting that the shift to remote work has opened new avenues for cybercriminals to exploit, making businesses more vulnerable to breaches.

What Are Other Non-Financial Costs of a Data Breach?

The non-financial costs of a data breach can be just as devastating as the monetary losses. These can include reputational damage, loss of customer trust, and potential regulatory penalties. Businesses may also lose competitive advantage due to intellectual property theft and suffer reduced productivity during recovery.

Moreover, data breaches can psychologically impact employees, leading to stress, decreased morale, and potential turnover. They can also lead to strained business relationships if the breach impacts partners, employees, or customers.

Plus, most small businesses aren’t prepared for the average data breach cost. After all, do you have $3 million laying around for a potential data breach? This lack of preparedness about data breach costs can cause small business owners to lose everything.

What Can You Do to Prevent Paying the Cost of a Security Breach?

Data breaches are not merely an expensive inconvenience. They’re a devastating and potentially business-ruining threat.

So what can you do to protect your business?

A laptop screen with cybersecurity icons and someone’s index finger pointing at the screen.
  1. Invest in Cybersecurity – modern protections like multi-factor authentication, zero trust security, and password monitoring, can help you identify and prevent breaches, which can save you big in the long run
  2. Back Up Your Data – Make sure you have regular, secure backups for all your data, and that you can restore it quickly in an emergency
  3. Have Someone Reliable Managing Your Network – Most businesses don’t have the staffing to adequately manage their cybersecurity. Consider partnering with an IT company like us that will keep your data and your network safe.

Preventing a data breach requires a proactive approach to data security. Investing in cybersecurity measures such as firewalls, encryption, and antivirus software is crucial. Regularly backing up data can also mitigate the risks of significant data loss.

Implementing a zero-trust security model, which assumes every access request is potentially a threat, can prevent unauthorized access to sensitive data. Lastly, educating employees about the risks and signs of phishing attacks and other cyber threats can significantly reduce the chance of a breach caused by human error.

Take the Next Step to Avoid a Data Breach Today!

Understanding the average cost of a data breach in 2023 is the first step toward protecting your business from these costly incidents. However, financial implications are only part of the picture. The reputational damage and loss of customer trust can have long-term impacts that are harder to quantify but equally damaging.

We believe that prevention is better than cure. By being proactive about your cybersecurity, you can avoid the high costs associated with a data breach and ensure that your business is safe and secure. Don’t leave your business vulnerable to cyber threats. Schedule a consultation with our experts today, and let us help you navigate the complexities of data security in 2023.