What is a business case and why do I need one?

Business case

Business case sounds very formal and maybe something that only large companies need to do for sizeable projects. In reality, it’s really not as scary as it sounds as it is simply the justification for the project.

So, you might be thinking that you know exactly what the justification for your project is as it’s really obvious. That’s fair enough. However, it can be a good idea to note down a few key things to make sure you’ve covered off all the angles. You might also want to make sure you’ve got it in a format you can use to explain to other people (some people use word documents, but I like to put it in a Powerpoint as it’s easier to present).

If there are other people with a vested interest in your project (Stakeholders), or someone else paying for it (Project Sponsor) then it is really important to be able to justify why the project should go ahead. You could see it as the sales pitch for the project. If you are the project sponsor, stakeholder and project manager all rolled into one it might be that the sales pitch is only for you. In this case it will help validate that you have made the right decision.

Example

We’ve come up with an example for illustration purposes and then given you our top 6 things to consider when writing a simple business case.

We need to convince the Financial Director of our organisation that we need a new diary management system.

We have:

  • sales reps on the road who visit customers
  • an old system that we use to book appointments with sales reps
  • the old system is running on software that is unsupported, sometimes appointments don’t update properly and get missed
  • the old system doesn’t do things like send text confirmations to the customers or automatically synchronise with the diaries on the sales reps smartphones

We’ve researched the market and found a system that will do the job and seems to be priced competitively. The FD really needs some convincing as they absolutely do not like spending money unnecessarily!

#1 What is the business opportunity?

This explains the motivation for the project, which is usually that the business will benefit from the project. In our case, the motivation is to increase sales, customer satisfaction and therefore customer retention. A new diary management system would do this by ensuring that appointments won’t be missed by reps (whose calendars haven’t updated) and customers will get text reminders.

#2 What are the options?

Even though we’ve decided on a new system, it’s good to come up with a few options as this will validate our decision. If you’re not sure what options you’ve got you can break it down into:

  • No action option
  • Minimum action option
  • Maximum action option

You can even think about getting quotes for more than one system with the same functionality.

It may be that ‘no action’ is not an acceptable option, however if we go ahead and outline it, it will help highlight the risk we have today and add weight to the argument to go ahead with the project.

You can then outline a couple of other options. Generally between 3 and 5 is good.

#3 Costs, benefits, risks and timescales

For each of the options there are four things you should try to think about when writing a business case:

  • How much they will cost
  • How much benefit they will bring. It’s useful if you can make benefits into a monetary amount.
  • What risks there are
  • What the timescales to deliver are

For our diary management system:

  • Cost = cost of the system + the people we need to manage the project and carry out the work to implement it. We should also add some contingency in here.
  • Benefits = our sales revenue and customer satisfaction will improve. We can make an assumption that we will increase sales revenue by 10% each year and retain 10% more customers every year. We can then work out what this means in monetary terms.
  • For the no action option the big risk is that our diary management system may fail and prevent us booking appointments at all.
  • Timescales can be approximately worked out by breaking the project down into steps. Once again, it’s not a bad idea to include some contingency.

#4 How to implement the project

In the business case we want to demonstrate that we have thought about how we will get the project implemented. We might need to hire a project manager or utilise specialist resource from a third party supplier. We may just follow our standard project lifecycle if we have one.

#5 Other considerations

There are often other things that influence the decision on how a project will progress and it can be useful to include them in your business case.

You can just brainstorm any other things that may have an impact on your project.

For our diary management system we know there will be some organisational impact as we will have to retrain our diary management system operators and sales reps.

There may also be external factors like changes to regulations or market changes in the sector we work in.

#6 Executive summary

Finally, a good tip is to pull together all the information and summarise it in an ‘Executive Summary’. This is a great way to start off any document or presentation as it gives the reader all the info they need in one quick hit.

Although it’s normal to have the executive summary at the start of the business case, it’s best to leave it to the end to write it as all of the other information will feed into it.

So armed with this information you should be able to go away and start creating business cases. Good luck with getting your project justified and on the road.

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