The Essential Guide to Developing a Business Case
A business case captures the benefits of undertaking a project, and justifies the money and effort required to see it through. A solid business case is necessary for communicating the value to decision makers in order to gain approval and secure people resources, operating funds or finance for capital investments.
In smaller organisations, inadequacies caused by outdated systems, processes or equipment is more transparent, so the justification process is generally more informal. However, in large organisations the process is more complex and formal. Although various business functions share similar high level corporate goals, the day to day priorities, systems, processes and equipment will differ greatly. The executive team grapples with sorting through business priorities and assigning resources accordingly.
On top of this, “do nothing” is becoming a more common course of action as projects are deemed too risky, involve too much complexity, will cost too much or people are too busy. A thoroughly prepared business case is your best approach to challenging and changing the status quo.
As a solutions provider, we often participate in developing businesses cases alongside our customers to gain management approval and finance for a solution we have proposed. Regardless of the topic, a business case must capture necessary information in order to be compelling and attain buy-in from the management team.
Based on our experience, the following framework is effective for developing and writing any type of business case.
5 Steps to Business Case Success
1. Identify the Important Players
It’s now more common that the authority to make business decisions rests with groups of individuals - all of whom have different roles and priorities.
Take time to identify and involve the important players, such as those responsible for the budget, the influencers (people that can affect decisions because of their authority, knowledge or position) and the employees that will be directly impacted or will need to participate in the actual project.
Don’t underestimate the power a cross-functional team can have to fostering buy-in and for gaining support when the time comes to initiate the project. A business case created from the perspective of numerous, relevant people increases the chances for approval.
2. Document Current Processes & Performance
To make a comprehensive assessment of the current situation, it’s important to develop an understanding of existing resources involved, processes and how performance is measured. Create flow charts for each process, the resources involved at each step and the key employees involved. Determine what metrics are used to measure effectiveness and how current performance is tracking.
Be sure to leverage the knowledge of relevant employees involved in the day-to-day routine. Their feedback will provide solid evidence and a balanced view. Plus, it will gain their personal buy-in, which will be critical for project success later on. Be mindful that the information you are documenting is factual, laying blame and finger pointing will only harm your case.
3. Compare the Current Situation vs. the Ideal
Now that you've thoroughly understood and documented the present situation, you can begin to brainstorm what the ideal solution looks like. Focus on the ultimate goal, what are you trying to achieve or improve by changing the status quo? What’s the desired performance or capabilities?
It’s worthwhile developing a formal gap analysis. A gap analysis is an easy way to list aspects of the present situation (performance or capabilities) which aren't being met, highlighting the gaps that exist and need to be filled.
A gap analysis is also a powerful way to communicate the shortfalls currently experienced to the decision makers, and how your solution will resolve each of these. When analysing the gaps, also consider:
- People: asses existing people resources and whether changes or additional resources will bring you closer to the ideal.
- Business processes: if you haven’t already, map current processes into a flow chart and then apply the solution to show how each process can be improved.
It’s also a good idea to prioritise the gaps, focusing on the ones causing the greatest pain. Once the gap analysis is complete, you can begin researching potential solution options, ensuring that your short listed solutions are capable of successfully solving the greatest pain points.
4. Justify the Investment Required
The business case should explain why the investment should be made and how the business will see a return on that investment (ROI). Simply put, calculating a project ROI involves financially quantifying the value of the improvements that will be gained if the project is approved.
Consider the existing loss to the business if nothing changes in terms of productivity, efficiency, customer satisfaction or direct costs such as wastage. Then begin estimating what the business will ‘gain’ and determine what the project will cost will be (using quotes or other data you have obtained as part of your solution research).
It’s also important to show how the project will better align the business with its corporate goals and that the benefits will outweigh potential risks. Decision makers will also want to see practical suggestions on ways to improve the return on investment by reducing costs, increasing gains or accelerating gains1.
5. Writing the Business Case Proposal
The final step is to write the formal business case proposal. Many companies will have a preferred business case template, but if not there are common elements that should be covered. The content and length will vary, however you should find a balance between being succinct and providing enough information for the management team to make a decision.
Typical Structure of a Business Case Proposal
This is in fact the last section you will write, however it will appear at the beginning of your proposal. This is a 1 page summary of the proposal, addressing the problem or opportunity you have identified and the most important points supporting the case.
Provide a clear introduction to the business case and the reasons why the proposed project has come about, whether it’s to solve a problem or take advantage of an opportunity.
List the objectives the project aims to achieve, ensuring they are SMART: specific, measurable, achievable, and realistic and specify the time frame. Describe the link between the project objectives and the corporate goals to validate the overall strategic value to the business.
Describe the process you have followed developing the business case and reference the names and titles of everyone that had input. This demonstrates the depth of consideration and research you have undertaken, and builds confidence with the decision makers.
Benefits and Risks
Outline the financial and non-financial benefits of both undertaking the project and doing nothing. Utilise the gap analysis you prepared earlier and include the ROI analysis. Also, identify the project risks and describe how you will manage them.
List the various solutions you have considered (limit it to the top 3 if possible), summarising each of their benefits, costs and risks, as well as exploring the do nothing option. State what your preferred option is and explain why.
Define what budget is required and the people resources needed to implement the project successfully.
To demonstrate the solution has been carefully thought through, provide a plan of action detailing the steps required to ensure the project is a success and estimate the overall time frame. A large project should be divided into stages, with actions specified at each stage.
Include all supporting information, such as graphs, quotes and calculations in an appendix.
We hope that you've gained some practical advice on how to develop and write your own business case. We've also turned this information into a checklist that you can download and use.
1. Calculating Return on Investment
Prepared by Vivid Marketing