What is a Business Case?
A business case is a document where a proposed action is presented and coherently supported with detailed reasoning and expected net benefits for the business. This term commonly applies to arguments and results that accompany an intended decision or project.
A business case is the most important document you will ever need to write for a project. It explains why your organisation will invest time and resources into a project. Without a rock-solid business case your project is unlikely to get a return on investment.
Business cases are created to help decision-makers ensure that:
- the proposed initiative will have value and relative priority compared to alternative initiatives based on the objectives and expected benefits laid out in the business case.
- the performance indicators found in the business case are identified to be used for proactive realization of the business and behavioral change.
What Does Business Case Mean?
A business case has the intention of convincing a decision maker about the convenience of a particular course of action. The document created to present the business case can be short and simple or long and complex, depending on the relevance for the business as well as the amount of resources and changes involved. Despite the length, a solid business case should clearly articulate the proposed path, costs and risks associated and expected financial results.
It is useful to convert all anticipated benefits into particular elements of financial statements but sometimes this is a very ambitious task. The business case should present not only the proposed project but also the impact of not undertaking such project. It can be useful to analyze other feasible options and compare them with the proposal as a way to be prepared when questions and counterarguments arise.
Questions that a business case answers:
- Why should we carry out the project? What happens if we don’t?
- What economic benefits could we achieve for the organization?
- What are the risks?
- How high is the potential cost?
- How long will the project take?
What is the Purpose of the Business Case?
The purpose of the business case is to document the justification for the undertaking of a project usually based on the estimated cost of development and implementation against the risks and the anticipated business benefits and savings to be gained. The total business change must be considered, which may be much wider than just the project development costs. The concept of the business case may exist under other names, e.g. project brief, project charter, high level project plan. Irrespective of the name the purpose is to present justification for project start up and initiation.
Personal business case
You may also use a business case to justify an investment you make in your personal life. For example, when you’re thinking of moving home to another area. You and your spouse will need to understand the costs of moving, the timescales and risks involved, and weigh these up against the benefits to be gained e.g. saving time traveling to your office, or your children able to go to a better school.
Why have a business case?
Projects should not just start on a whim or because of vanity – although a lot of money has been wasted over the years on such projects.
For business organisations, justification for a project usually takes a commercial form i.e. evaluating how much money could be made from the investment. For example, investing money in developing a new software app to bring first to market, might be deemed to bring certain monetary benefits (in terms of sales) which exceeds the costs of investment.
For government organisations, justification is probably not a commercial one, but could be based upon giving value for money to achieve certain benefits. For example, a public health campaign extolling the benefits of flu-vaccinations for elderly people, might be judged as giving greater value for money than having no campaign, and instead relying on treating patients in hospital once they have contracted the virus.
With so many competing claims being made on scarce funds, organisations need the assurance that the decision they are taking is the right one. After all, there will not be enough funds to pay for all the ideas for projects which are floating around the organisation.
Who uses a business case?
Business cases can be used by many different levels of management within an organisation. Typically, they are used by a portfolio management office to help it decide which projects will contribute to the organisation’s strategic goals. That way, they can filter out the bad ideas for projects, and only fund projects which will contribute to strategic goals.
A business case is also often used by a project sponsor or project executive to help it decide if they should invest in a specific project.
In all cases, the business case must be written and approved prior to any major commitment of resources.
What form does a business case take?
Business cases can take many forms – digital or analogue. The tools you use to create one are also many and varied. Common business tools such as Microsoft Office might be used. Rather than being a document or slide deck however, it could equally be in the form of an email.
Equally, a business case could be written by hand on a whiteboard or flipchart, or on the back of a cigarette packet!
What you should always remember is that a business case does not have to be a huge long document. In fact, it should be as short as possible, and only include the most important information. That way it cuts out the noise and provides decision-makers with just the right information to enable them to take sensible decisions.
Five Elements of a Business Case
A common way of thinking about a business case is using these five elements:
- Strategic context: The compelling case for change.
- Economic analysis: Return on investment based on investment appraisal of options.
- Commercial approach: Derived from the sourcing strategy and procurement strategy.
- Financial case: Affordability to the organisation in the time frame.
- Management approach: Roles, governance structure, life cycle choice, etc.
The business case is reviewed and revised at decision gates as more mature estimates and information become available. The approved business case provides a record of the decisions made by governance about how to achieve the required return on investment from the work. It documents the options considered and it is normal practice to include the ‘do-nothing’ option as a reference. Through this approach, the business case becomes a record of the recommended option with rationale and evidence to support the decision.
The presentation of the business case, if approved, results in the formal startup of the project, programme or portfolio. The sponsor owns the business case.
It brings together the investment appraisal with evidence of how the investment is intended to lead to realisation of the intended benefits. All projects must have a business case that demonstrates the value of the work and it is outlined during the concept phase of the life cycle.
The Structure of the Business Case
A business case needs to lead the reader through the problem, to consider various solutions, and finally decide on which option is best. It therefore needs a clear structure, with plenty of headings and sub-headings to guide the reader.
Sections that are usually required in a business case are:
1. Executive Summary
The executive summary summarises the business case, including your recommendation. It is often best written last, when you’re clear about your recommended course of action, and why. Remember that some decision-makers may only read the executive summary, so you need to make sure that you have included everything relevant.
2. Introduction
This section introduces the business case and briefly sets out what it is about.
3. Statement of the problem
This should be a brief paragraph stating the problem. It should relate back to the organisation’s strategy or vision to demonstrate how solving the problem is important to the organisation.
4. Analysis
This section provides a more detailed account of the problem and why it is important to address it. It should include any analysis you or others have carried out to identify the impact of, or the reasons for, the problem. Hard evidence is always helpful: the number of people affected, or the cost to the company or to its customers. At this point, it is appropriate to mention anyone who has been involved in the work within or outside the organisation.
5. Discussion of Possible Options
You should identify and discuss all possible options for addressing the problem, including doing nothing. For each one, you need to discuss:
- The benefits: why it would be a good idea to do it, including how far it addresses the problem;
- The costs, including resource requirements. It’s often helpful to include figures and graphs here;
- The likely time-scale for the project, and to see a return on the investment, with reasons; and
- The risks, both of doing it, and that might prevent successful implementation.
As far as possible, these should be realistic, and preferably supported by solid data. Where you have estimated, this should be based on a reasonable source, which you should cite if possible.
6. Recommendation
Finally, you should make a recommendation for which option is best, weighing up the costs and benefits.
7. Details of your Chosen Option
Depending on your organisation’s preferences, the nature of the business case, and how you feel about it, you may at this stage wish to include a more detailed consideration of your chosen option. Alternatively, you could include a more detailed analysis in an appendix, including all the supporting data, or provide a later report with all the project details.
If you are including more details, this is a good opportunity to include an outline project plan (see our pages on Project Management and Project Planning for more) and a more thorough and complete risk analysis (see our page on Risk Management for more).
These will demonstrate that you have thought through the project in some detail, and have a reasonable idea of how long it will take, what resources will be necessary, and how to mitigate the risks. This should help you assess whether the organisation is currently capable of carrying out the work, or whether additional resources will be needed.
You should also make some proposals for project governance, including a group to oversee the project and any critical decision points.
Your organisation may require a detailed financial appraisal, including opportunity costs of the project, and some discounting if the payback period is several years. If so, there will almost certainly be detailed guidelines somewhere, including a discounting factor, which you will need to follow.
It is also helpful to include information about outcomes and success criteria: how will you know that your project has been successful?
8. Conclusion
You should conclude the business case with a reminder of why it is important to address the problem and the action that you wish the reader to take as a result of reading, for example, agree a course of action or approve further work. Make sure that you have made clear why your proposal is the best way of addressing the problem.
Development and Approval Process
The business case process should be designed to be:
- Adaptable – tailored to the size and risk of the proposal
- Consistent – the same basic business issues are addressed by every project
- Business oriented – concerned with the business capabilities and impact, rather than having a technical focus
- Comprehensive – includes all factors relevant to a complete evaluation
- Understandable – the contents are clearly relevant, logical and, although demanding, are simple to complete and evaluate
- Measurable – all key aspects can be quantified so their achievement can be tracked and measured
- Transparent – key elements can be justified directly
- Accountable – accountability and commitments for the delivery of benefits and management of costs are clear.
The Four Steps to Writing a Successful Business Case
The business case traditionally is a document that defines the core business benefit of a project in order to justify the expenditure of the initiative. It often details how the project aligns with strategic goals in the org, and as such is a crucial yet often overlooked responsibility for managers, who assume that senior leadership is responsible for this, or who simply get quickly subsumed by the day-to-day responsibilities of delivering the project.
Whether you’re starting a new project or mid-way through one, take time to write up a business case to justify the project expenditure by identifying the business benefits your project will deliver and that your stakeholders are most interested in reaping from the work. The following four steps will show you how to write a business case:
Step 1: Identify the Business Problem
Projects aren’t created for projects’ sake. They have a goal. Usually, they’re initiated to solve a specific business problem or create a business opportunity.
You should “Lead with the need.” Your first job is to figure out what that problem or opportunity is, describe it, find out where it comes from and then address the time-frame needed to deal with it.
This can be a simple statement, but is best articulated with some research into the economic climate and the competitive landscape to justify the timing of the project.
Step 2: Identify the Alternative Solutions
How do you know whether the project you’re undertaking is the best possible solution to the problem defined above? Naturally, choosing the right solution is hard, and the path to success is not paved with unfounded assumptions.
One way to narrow down the focus to make the right solution clear is to follow these six steps (after the relevant research, of course):
- Note the alternative solutions.
- For each solution, quantify its benefits.
- Also, forecast the costs involved in each solution.
- Then figure out its feasibility.
- Discern the risks and issues associated with each solution.
- Finally, document all this in your business case.
Step 3: Recommend a Preferred Solution
You’ll next need to rank the solutions, but before doing that it’s best to set up a criteria, maybe have a scoring mechanism to help you prioritize the solutions to best choose the right one.
Some methodologies you can apply include:
- Depending on the solutions cost and benefit, give it a score of 1-10.
- Base your score on what’s important to you.
- Add more complexity to your ranking to cover all bases.
Regardless of your approach, once you’ve added up your numbers, the best solution to your problem will become evident. Again, you’ll want to have this process also documented in your business case.
Step 4: Describe the Implementation Approach
So, you’ve identified your business problem or opportunity and how to reach it, now you have to convince your stakeholders that you’re right and have the best way to implement a process to achieve your goals. That’s why documentation is so important; it offers a practical path to solve the core problem you identified.
Now, it’s not just an exercise to appease senior leadership. Who knows what you might uncover in the research you put into exploring the underlying problem and determining alternative solutions? You might save the organization millions with an alternate solution than the one initially proposed. When you put in the work on a strong business case, you’re able to get your sponsors or organizational leadership on board with you and have a clear vision as to how to ensure delivery of the business benefits they expect.