A business case is essential whenever a new product needs to be launched or a new service must be created.
TABLE OF CONTENT
- What is a business case?
- Why create a business case?
- How to write, build and use a business case
- Step 1: identify the business problem
- Step 2: Identify alternative solutions
- Step 3: Identify and recommend the preferred solution
- Step 4: Predict the risks of the project
- Step 5: Estimate the budget and search for funds
- Step 6: Describe the implementation approach
- Step 7: The executive summary
Once the business case is prepared, it must be presented to stakeholders, investors, supervisors, department managers … In any case, whatever the public, the project manager needs to be prepared to make a good impression and be convincing.
What is a business case?
In short words:
The business case is traditionally a document that defines the main advantage of a project in order to justify its expense.
Why create a business case?
The preparation of the business case allows the project manager to adopt a disciplined approach to critically examine the opportunities, alternatives, phases, and financial investment of a project. All this in order to formulate a plan for the best course of action in order to create business value.
A well-structured business case will increase the perception of the benefits and value of the project and reduce the risk perception. Moreover, it will create more chances of getting support from investors, both internal as well as external to the organization.
A business case is needed when:
- We want to demonstrate the value of a product or service proposed for the organization;
- We want to get investor approval;
- It must be decided whether to outsource a particular function;
- It is necessary to relocate and reorganize the commercial operations and the productive structures;
- Priority must be given to projects within the organization;
- It is necessary to ensure funding and financial resources to implement the project.
By working well and correctly on a business case, the project manager is able to competently present the project to stakeholders whose approval is essential.
How to write, build and use a business case
A project manager needs to take the time to write a business case that can justify the costs of the project. It will have to identify the benefits for the business in general and has to emphasize the profits for the stakeholders.
Step 1: identify the business problem
Projects are not created solely for the sake of the project itself, but they also have broader goals.
Usually, they are initiated to solve a specific business problem or create a business opportunity, but in the end, they have to benefit the company in general.
Therefore, the first task when drafting a business plan is to understand what the “general” problem or opportunity is, describe it, find out where it comes from, and then identify the time needed to deal with it.
Step 2: Identify alternative solutions
How to know if the project you are undertaking is the best possible solution to the problem defined above? Of course, choosing the right solution is difficult.
One way to narrow the focus and make the best solution clear is to follow these six steps that go from examining alternative solutions:
- Record alternative solutions.
- For each solution, quantify its benefits.
- Predict the costs involved in each solution.
- Understand the feasibility of each.
- Discern the risks and problems associated with each solution.
- Document everything in the business case in order to make the preferred solution clear.
Step 3: Identify and recommend the preferred solution
Once the solutions are classified, it is time to identify and recommend the preferred one.
Step 4: Predict the risks of the project
In order to predict the risks of the project, it must first be foreseen what the scope of the project could be. Once this has been done, it is possible to proceed with the forecast of the possible risks.
Here are the questions to ask in this case:
- What will be the main goal?
- How long will it take to make it happen?
- What actions are included in achieving this goal? And which ones are excluded?
When we talk about risk, we will ask instead:
- What are the obvious risks of undertaking this project?
- What are the less obvious risks (such as opportunity costs)?
- What is the point of taking these risks?
- Does the benefit outweigh the cost?
- What are the intangible benefits?
Step 5: Estimate the budget and search for funds
This is where we estimate the money needed to complete the work related to the project.
It is also a good time to indicate where the funds are expected to come from: will they be collected? Borrowed? Donated or transferred in the budget?
Moreover, the following questions must be answered:
- What amount of money will be allocated to each of the necessary resources?
- What is the interval you can expect to wait to pay for each resource?
Step 6: Describe the implementation approach
At this point, the business problem – or the opportunity – and how to reach it is identified. Now is the time to convince stakeholders of the advantages of the project by describing the best way to implement the process in order to achieve the goals.
Here, in short, a preliminary project plan is made and this will include:
- Goals, preferably SMART
- Project phases
- Tasks required at each stage
- Communication systems
- Dependencies between resources
Step 7: The executive summary
An executive summary is simply a summary – a page – of everything that has been analyzed so far.
The easiest way to do this is to provide quick summaries of:
- Return on investment potential
- Time frame
- Who is involved
To make the executive summary as clear and concise as possible, the project manager should aim for an average of one sentence for each point above.
To conclude, by clarifying the goals, identifying the value that the project will bring, and explaining the implementation with clarity and security, the project manager will already be on his way to building and presenting a credible business case.
The facts are important and the numbers are just as important.
But there is an additional element to consider when it comes to exposing a business case to the stakeholders: It is necessary to connect with the public also on an emotional level and tell “a story”.
When a solution is presented and a new story around it is created, it will be very unlikely that stakeholders will give a negative feedback to the presentation.