This article explains the concept of the Business Case in a practical way. After reading you will understand the basics of this powerful project management and investment tool.
Every business aims at a good cost / benefit ratio. A Business Case can be very useful in this. Using this well-structured document, a good and clear cost and benefit analysis can be produced, in which a business consideration is made to either start a project or not.
In a Business Case the costs are carefully balanced against the benefits. This project management tool can be used in a simple and in an extensive manner. In the extensive form a Business Case will focus on the starting points of the project, the various decision criteria, external factors, expected return, added value and possible risks. Furthermore, the financing of a project will also be considered carefully. The information received from the business case determines whether a project will be carried out or not.
In most cases the business case is not a static document, it changes continuously. During the course of the project information must be updated and adjusted in the Business Case. By carrying out reviews the project remains valid and recent changes can be applied. Each Business Case may have to deal with changes and revisions. It should be noted that such a revision can lead to a change or sometimes to a termination of the project.
How to write a Business Case
In every good business case the following components must be discussed:
Explanation about the background and origin of the project and its current status. The Business Case will be given a project name.
The company objectives and business opportunities are outlined, so that the expected results become clear.
Apart from a profit calculation, it also important to incorporate the profit planning and an extensive cost and benefit analysis and to elucidate the possible (financial) risks.
In addition to the profits, possible benefits are identified as well as the internal and external impact of the project.
An estimate will have to be made of the deployment of resources and the organization of staff availability.
It is important to draw up a business case at the earliest possible stage. Initially, this need not always be a detailed document. However, it is wise to make some considerations in advance.
Cost-saving or profit generating?
Where to put the emphasis? Is it about generating a profit or about austerity measures? If it is about of austerity measures, it is often difficult to make an estimate in advance. In case of a profit targets, the activities are related to increasing turnover.
Operational or strategic?
It is important to know in advance whether the Business Case will be integrated as an important part of the business strategy or whether this will be more department focused and whether this will be fulfilled by a team.
Quality or quantity?
Is the Business Case about an increase in turnover (quantity) or is it more aimed at better work processes and an (internal) added value for the organization as a whole (quality)?
In most organizations the (financial) managers are involved in drawing up and writing a Business Plan. Broadly speaking, there are three steps that can be taken:
Why is the Business Plan drawn up? What needs to be improved? By carrying out a SWOT Analysis or Strengths and Weaknesess Analysis, an understanding of the company’s strengths and weaknesses can be obtained as well as the external threats and challenges.
Cost and benefit analysis
By having a good understanding of the costs and benefits of the organization in advance, it will become clear what the business case could lead to.
It is important to have an insight into the finances. It is important to have a good understanding of the financing arrangements. How is the company doing in financial terms and what return does the organization anticipate after the business case has been implemented? Apart from making use of internal leaders, the expertise of external agencies can be involved for the drawing up.
It’s Your Turn
What do you think? What is your experience with setting up a Business Case? Do you recognize the practical explanation or do you have more additions? What are your success factors for the good set up?
Share your experience and knowledge in the comments box below.
- Epstein, M. J., & Roy, M. J. (2003). Making the business case for sustainability. Journal of Corporate Citizenship, 2003(9), 79-96.
- Leatherman, S., Berwick, D., Iles, D., Lewin, L. S., Davidoff, F., Nolan, T., & Bisognano, M. (2003). The business case for quality: case studies and an analysis. Health affairs, 22(2), 17-30.
- Robinson, G., & Dechant, K. (1997). Building a business case for diversity. The Academy of Management Executive, 11(3), 21-31.
- Sheen, R. (2015). HBR Guide to Building Your Business Case. Harvard Business Review (Kindle).
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