The ULTIMATE overview and GUIDE to reviewing and analyzing a project BUSINESS CASE [Download]
A business case justifies the economic benefits of a project or investment and helps assess whether the investment will be worthwhile in economic terms - or for other, e.g., strategic reasons.
In addition to purely economic information, it also contains information on risks, the business environment, different alternatives, and a clear recommendation for action.
Decision-makers can then approve or reject a project based on the business case.
In this article, I will answer the following questions:
- What exactly is a business case?
- What does it have to do with projects?
- When is a business case created?
- How should a good business case be structured?
- What are the main benefits of a business case?
Furthermore, you will get a few tips along the way ... here we go:
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Why a project should be based on a business case
Before starting a project, there should be one big question:
For what reason should we undertake this project and make a corresponding investment?
Since the question "Why?" is all-encompassing but not very tangible, we will now take a closer look and ask the following additional questions for clarification:
- What benefits will we derive from undertaking this project?
- What are the consequences if we do not carry it out?
- Is it economically worthwhile to invest time and money?
- Are there other reasons - e.g., business strategy reasons - that make it worthwhile?
- Why is precisely this project more important than others?
A business case answers all these - and other - questions.
It justifies why a project makes sense, how costs and benefits are related, and what risks could arise.
If a project is started without this justification, it can lead to massive problems in the course of the project:
- The project may not be aligned with the company's goals.
- As a result, it is given a lower priority than other projects and is at a disadvantage when allocating budgets and resources.
- It becomes irrelevant after financial and human resources have already been wasted in the worst case.
So a business case or some other form of justification should always be available or prepared. Therefore, let us look a little deeper ....
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So what exactly is a business case?
It is a document that describes an economic and/or business justification for a possible project or investment.
The most important question:
Is it worth investing time, money, and resources in this venture?
To answer this question, the business case ideally includes the following information:
- Intended benefits
- Contribution to the achievement of strategic business goals
- Profitability
- Possible risks
- Actual situation and effects if no action is taken
- Possible alternative solutions with a clear recommendation for action
- Initial information on rough timeframe and stakeholders
Based on this information, the management or other decision-makers can then make an informed and reasoned decision on how to proceed.
As a starting point for the creation of your own customized template you will receive - besides all the other tools and documents - ready-to-use MS Office Templates with Examples and a lot of helpful information.
Here is the overview of the Business Case Template Outline that will come with the "MP4PM - Business Case Package Download" (click on the image to head over for the download >>>):
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When is a business case created?
Business cases are always used when a basis for decision-making is required.
The subsequent decisions could be pending, for example:
- Would we rather make investment A or investment B?
- Which projects are more likely to contribute to achieving the company's goals?
- Will new opportunities arise in the market?
- How risky is an investment?
Important: A business case is always created BEFORE an investment or the start of a project. The next step (development of the project charter) is taken only when it has been approved.
Excursus:
The PMBoK Guide assumes that a business case has been created and approved before or at the start of the project (e.g., by a business analyst).
In this case, the business case would have to be reviewed and analyzed from the perspective of the responsible project manager to determine any relevant information for the project and the development of the project order.
However, it may also be that the project manager must first create a business case or at least determine all the information mentioned from alternative documents - such as the customer order (Review Business Documents).
Our "MP4PM Business Case ToolKit" can provide valuable support in all these situations.
Suggestion for a great Business Case structure
Unfortunately, a business case is not a standardized document and can be structured very differently, even within a larger organization.
However, the following elements should ideally be included as a minimum:
Executive Summary (Management Summary): the content of the business case in short form. Here it would help if you summarized the most important findings.
Initial situation and motivation: What is the strategic relevance of the project? Why is implementation so important - and what happens if it is not implemented?
Cost-effectiveness analysis: Different methods are used here, such as cost and benefit calculations, return on investment (ROI) calculations, or payback periods.
Risks: What are the most significant potential risks?
Assessment and recommendation: Finally, the creator should make a clear recommendation for action on whether and in what form the project should be implemented.
Often, individual projects are described, but options are examined in more detail. In such cases, the business case contains the following additional information:
Description of variants: Several possible solutions are compared and examined for their benefits, risks, and cost-effectiveness.
In some business cases, the intended project is even roughly outlined already; then the business case also contains information such as:
- desired start and/or (more often) end of the project
- rough cost estimates
- necessary resources and
- other information
On the one hand, that can make it easier for decision-makers to assess a project and, on the other hand, make it easier for the assigned project manager to develop the project charter(next step).
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To access the complete
"MP4PM - Business Case ToolKit"
and a ton of additional content click on the following Image (or HERE):
The most important advantages of a Business Case
Developing a business case is always helpful as decision support, especially for more extensive and long-term investments. Here are the main benefits of developing a business case:
Facilitated decision-making:
Before projects are launched, their impact on the overall business is carefully studied.
Focus on project benefits:
By looking at the economics and benefits to strategic business goals, the project is motivated from the start.
Comparability and prioritization:
Standardized formats allow business cases to be compared with each other and the most promising approaches to be selected.
Sensible use of resources:
A company's resources are reserved for projects that promise tremendous success.
Early risk analysis:
Even before the project is launched, risks are examined more closely.
Securing funding:
If a business case is approved, the project often receives official clearance - and thus the necessary budget.
Overall view:
Not only do economic key figures play a role, but also project scope, alternatives, and non-monetary benefits.
(Note: This downlaod button works for MP4PM members only! If you are not a Member yet you can become one HERE! If you do not want to become a Member yet, you can purchase the Business Case Analysis-Package HERE.
The best tips for a convincing business case
A meaningful and well-structured business case can be the deciding factor in whether you receive approval for your project - and the related resources - or not.
So do not take this task lightly and invest enough time and care in creating a convincing business case. In the following and concluding for this article, here are a few hopefully helpful tips that can help you with this:
Always keep the overall, strategic business goals in mind:
The likelihood of your project being approved increases the more clearly you can demonstrate your project's contribution to achieving the strategic business goals.
Change perspective:
Look at your business case with some distance, as if you were reading it as an outsider. Put yourself in the shoes of the decision-maker. Are all the details coherent and comprehensible? Do you feel motivated to release this project?
If you find it challenging to change your perspective, you can alternatively ask a third, neutral person to review the document and give you their feedback.
If possible, always present several options:
Even if the procedure is unambiguous from your point of view and an alternative is out of the question in your opinion - present some anyway. As soon as you present additional solutions and their advantages and disadvantages, your business case will appear more complete. It also shows that you have the big picture in mind.
Justify your recommendation:
A perfect business case always includes a clear recommendation for action. Your recommendation should always be economically justified. Work carefully and with high quality, and ensure that your business case provides a coherent overall picture.
Optimize the executive summary:
Although the executive summary comes first in the business case, it should always be written at the very end.
You should pay maximum attention to this section and work on it until you are delighted. This section will most likely be the first to be read and must therefore make a strong impression.
Perhaps you know the saying:
"There is no second chance for the first impression!"
Conclusion
Before a project is launched, the business case provides a comprehensive view of the estimated profitability, benefits, contribution to corporate goals, and risks.
Decision-makers get the essential information carefully prepared and prioritize and approve projects based on it.
Describe the "why"! Complete it with the "what," "how," and "who" and compare the possible options for action.
As a result, you will have a basis that convinces decision-makers of your project and a meaningful communication basis that motivates other stakeholders and the entire project team from the very beginning.
With our "MP4PM -Business Case ToolKit" you have a tool at hand, which makes the development - or the analysis of an already existing business case - extraordinarily efficient and effective for you.
To access the complete
"MP4PM - Business Case ToolKit"
and a ton of additional content click on the following Image (or HERE):
Now it is up to you!
We wish you success by creating your next Business Case using our "MP4PM -Business Case ToolKit".
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