ManagementMania AppMania EduMania JobMania BusinessPages


What is Business Case
Business Case is a document that serves to present a project to the superiors or investors. It is a comprehensive summary of the project intent, revenue, costs, resources, risks and other important aspects.

Business Case is a document that serves to present a project to the superiors or investors. It is a comprehensive summary of the project intent, revenue, costs, resources, risks and other important aspects. It is actually the first phase of any project (or the zero phase, depending on how we look at the project life cycle). It is the starting point, the cornerstone of a project, it lays its foundations. It is also the key input to developing a business plan.

Who needs the business case and when?

Prior to launching any project, it is necessary to gather all the relevant information that influences the project, and that affects its meaningfulness, feasibility and ultimately its approval. A small company will most likely need a business case for the purposes of presentation to the potential investors, in a larger company, a business case is a common part of approval processes by the superior, the budget holder. Therefore, the business case precedes the project approval.

What to include in a business case?

A business case goes far beyond the scope of a project calculation. That’s because the costs and revenues alone do not indicate anything about the feasibility of the project. What are the project-related risks? What sources, people, materials and technologies will be needed? Will they be actually available at the right time, at the right volume (even though we make sure we have enough funding, they might simply not be available on the market at that time)? These are the questions that should be answered in a business case.

How detailed should it be?

We should focus on such information that would allow the reader to assess the real feasibility of the project, and that would allow the author to guarantee the correctness of his or her calculations. The level of detail corresponds to the type and scope of the project - whereas in some cases, only a rough estimate of new workers (e.g. 500) is absolutely sufficient, in another business case, it is necessary to detail the workers’ tasks (e.g. task breakdown of 53 man-hours). A 5-year-long project for a billion dollars will require a totally different level of detail of its business case compared to a 6-month-long project for a few hundred thousands of dollars. In both cases, however, the authors must have a clear idea about the answers to the same fundamental questions, just the level of detail won’t be the same.

  • Summary, reasons why the project deserves to exist, the objectives
  • Expected budget and financial evaluation
  • Expected organizational functioning (separate organization, part of existing structure, etc.)
  • Estimate of the resources needed (people, technology, information, infrastructure, etc.) - will the resources really be available?
  • Expected impacts of the project    * Impact on the current state of the organization, on its current projects and so on    * Benefits (financial and non-financial)    * Possible negative impacts of the project
  • Time schedule
  • Major project risks or other restrictions (e.g. legislative, etc.)

While creating a business case, we cannot bypass the budget establishment, impact analysis, risk analysis, budgeting, evaluating options (using sensitivity analysis, for example), or analysis of resources (for example, using VRIO analysis).

The business case must have the ability to convince the budget holder (supervisor or investor) of launching the project. Information contained should reflect the reality - business case shouldn’t be too optimistic, just realistic. For this reason, in many cases, several scenarios are worked out which are, ideally, the three following ones: optimistic, realistic and conservative. This provides the decision-maker with very important information based on which he or she can make the final decision.

Project approval as a part of business processes

If the project approval processes are well-adjusted within a company, the project-related risks are considerably lowered. This is because some countermeasures can be taken in time, or, as the case may be, the decision not to launch the project at all can be taken if the project is found pointless. If the company takes this into account, everybody can understand why the business case making and the approval processes are essential and why to put effort in it. The bigger the organization, the more importance should be paid to this process. Then, the left hand knows what the right hand is doing. In this respect, the impact analysis is particularly important as it allows us to eliminate the business cases that provide solution to one problem but, at the same time, they make three other things more complicated.

Related terms and methods:

Related management field:

previous next
Did this article help you?
Rating:
Last update: 07.06.2018

Comments



To enter the discussion you must be signed in

Sign in


Related consulting companiesmore...