What Is A Business Case? – [Explained]

This article of Business Case I will explain below:
  What is Business Case?
  Why do we need Business Case? Or Purpose of Business Case?
  Key elements of Business Case?

What is Business Case?

Business Case is a type of tool to determine whether the project will be a good investment for the organization. Business Case is a cost-benefit analysis of a project and its results are used by the project managers to support proposals and arguments and also to justify planned activities and a benchmark by which the project benefits will be measured. It captures all the required information about the project (i.e. reason and benefit of project initiation) for the authorization or approvals.

An effective business case is written in simple language yet justifying the project need and gives decision makers understanding and confidence that they need to take action. Business Case is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation.

Business Case Analysis reveals critical success factors and contingencies to watch and manage to target levels. The concept of the business case may exist under other names, e.g. Project Charter , Project Plan but irrespective of the name the purpose is to present justification for project start-up and initiation. Whenever an organization plans to invest money in any project, it should have proper justification and detailed return on the investment plan to support the project initiation. An organization uses Business Case to:

  Demonstrate the business need for a proposed plan
  Identify the project feasibility
  Cost benefit analysis to describe the return on investment – ROI (both monetary and non-monetary)
  Consider the strategic internal and external drivers for the project

Business Case also required to answer below questions if you are planning to build something new in your organization:

  Why exactly you need?
  What are the benefits it would add to the organization?
  Why should the organization invest in the project?
  What are the financial benefits i.e. return on investment?

Business Case is a key document of the project portfolio management process and it is used by the organizations’ project investment committee. However, the primary owner of the business case is the project sponsor. The sponsor is responsible for ensuring the continued viability of the project and that the benefits defined in the business case are realized after project completion.

Business Cases generally required in processes like;

  Capital acquisitions
  Project management
  Product management
  Program management
  Asset life cycle management
  Strategic Planning
  Budgeting and funding approval
  Vendor selection
  Accountability reporting
  Partnership negotiations

A standard Business Case generally follows the below life cycle:

  Initiation
  Identifying the objectives
  Assessing
  Validating
  Presenting to business committee

Business Case highlights the specific attention to cash flows over a period of time, and how costs and revenue will change.

Below are some examples of Business Case:

1. Analyzing the financial outcomes stemming from choosing a different vendor to market company’s product,
2. The software upgrade can improve the organization’s productivity.

The Purpose of a Business Case is:

1. To support business decisions, planning and provide solid accountability for decision makers and managers.
2. To sell the idea or concept to investors or organization’s finance administration department.
3. To outline the allocation of capital and resources required implementing the proposed Business Case.
4. To document the justification for the undertaking of a project.
5. To provides practical guidance for managing projects, programs, and the asset life cycle.
6. Helps the investors to understand the economic value of the project.
7. To send the early warning to project managers when the risks of schedule slip or cost overruns threaten.
8. To builds decision maker confidence by measuring and minimizing uncertainty in forecast results.

Major Key elements of a Business Case usually includes:

1. A brief description of the different options considered and suitable option recommended.
2. Project Objectives
3. Benefits expected from the project (Financial and non-financial)
4. Summary of Risk involved in project
5. Cost required for proposed project
6. Project Implementation Plan
7. Investment appraisal
8. Key Assumptions