Building the Business Case

What is a Business Case?

A business case is a way for organizations to assess the merits of an investment. In every organization at any given time, there are differing amounts of the three limiting factors: time, money, and labor. How these are allocated is a difficult decision for line, middle and executive managers. To assess the relative value and importance of a myriad of activities, managers often rely on Business Cases to make allocation decisions.

When are Business Cases required?

Different organizations have varying answers to this question. Sometimes the limits are set based on required resource units, capital expenditure, or business impact. In my personal experience, I have found that almost every captital expenditure or significant resource allocation should be based on a business case.

How specifically does a Business Case assist in decision making?

Before a project begins, an employee or manager typically needs to “sell” their project. Having a business case ready when decision makers begin asking questions is a perfect way to get your project noticed. Talking about a solution, new product, or upgrade will only take you so far. Actually documenting the costs and benefits is a way to solidify your case. In my experience, successful employees will identify a need, improvement or revenue opportunity, document it and then sell the idea to the manager or organization with business case. Once the project is accepted and budgets are approved having a business case can move the project forward rapidly.

First, supporting documentation can all be derived from a single source. This will include a project plan (if one was not developed as a part of the business case), Request for Proposals, budgets,
financial forecasts, etc.

Second, your business case already contains all of the fundamental thinking behind the project. This will allow you to quickly provide the, “why are we doing this” answers to internal resources, third parties, and internal review groups.

At the end of the project, it is extremely useful to review the original business case and compare it to the outcome. Whether this is a requirement of your organization or not, it is a very effective way for the initiator to learn how to improve future projects. From a personal standpoint, I am almost always on budget with projects for money, but I tend to underestimate on “soft” resources such as human resource hours. Without reviewing projects at completion it is difficult to learn about ways to improve.

What is in a Business Case?

A business case for any organization can be as simple as a brief written explanation of the project and likely benefits to an extremely complex and detailed life cycle document, requiring the application of project development methodologies and inputs from mulitple business disciplines. The determination of the format of the business case is determined by:

  • Requirements of the organization
  • Complexities of the project
  • Project timetable
  • Cost

Executive Summary

This is the most important part of your business case! Believe it or not, 99% of your readership will not move past the Executive Summary. The Executive Summary needs to detail the important aspects of the Business Case in as few words as possible. The Executive Summary needs to contain the following:

  • Short description of the business case
  • Benefits of the project (financial, intangible, etc.)
  • Costs of the project
  • Timelines for project completion
  • Supporting Documentation

The rest of your Business Case is documentation to support the points outlined in your Executive Summary. When reviewing Business Cases, I make note of every item of substance in the Executive Summary and check the supporting documents to make sure that there is sufficient evidence to support the ascertion.

An example of this would be timeframe for delivery. If a project is fairly complex, I like to see a project plan as supporting evidence. If the Business Case is for a new product that is based on service revenues, I like to see 3 year financial forecast.

The supporting documentation does not need to be overly specific. Often there are items that are unknown or are estimates. For example, you dont have to specify a specific vendor and price quote, instead you would list the vendors that will recieve an RFP with the decision being based on the responses.

Results of the Business Case Decision

In many cases, creating a Business Case is a long and time consuming effort. For many people the process becomes personal. Acceptance is an affirmation of the work that you do, the role within the company and the value that you provide. If your case is rejected or deferred, push for an explanation. In my experience, Business Cases are rejected not due to the merits of the case, but due to issues outside the control of the author. Most commonly I find that the direction of the organization is not in line with the Business Case. For example, a Business Case that is a cost saving measure will get a low priority in times of business expansion. In these cases, it is wise to simple put the case in the drawer and wait for a better opportunity to submit again. One thing that you can guarantee in business, is that cicumstances will change and today’s rejection may be tomorrows success!

For additional information, check out Wikipedia’s article on the elements of a Business Case.

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