According to APMBOK a Business case: “provides justification for undertaking a project, programme or portfolio. It evaluates the benefit, cost and risk of alternative options and provides a rationale for the preferred solution”
From the definition, we can understand how important the Business case is to understake any activity in our Business. It is the first means of convincing our stakeholders and sponsors to start a new project or a new product development.
In the spirit of agile work (no complex documentation) you should not make it look complex, but on the other side, as the Business case is a negotiation document you should provide as many as convincing points and details on why it is worth pursuing your plan. Let’s see below what are the successful ingredients for a good Business Case:
Robust Busines case
According to AIPMM and 280Group, a Business case is ” a well-structured combination of information making a clear and compelling case for pursuing your idea” The structure of the document is very important. Let’s see below the sections that you should include:
Problem and opportunity
Strategic alignment and business value
Goals and objectives
Window of opportunity
Barriers to entry
Financial and Impact Analysis
Profit and loss projection
All these info seem like complex right? As I said before your role as a Business Case writer is to make it look simple according to each audience. For that you can use different versions of the Business case and include on the simpler some more Business graphs like the below:
The ultimate goal of the business case is to get buy-in I from stakeholders or management and ask for money for your project. It goes without saying that these people are interested in Financial returns and performance. Don’t forget to include the below points on your Business case:
When you present your Business case, be very clear on how it will solve the current problem of the business.
Include financial details. Of course, not everyone is a finance guy, but when you write the Business case be sure to include details from the below elements:
Cost of sales
Risk of investment
ROI analysisProfit loss analysis
Cash flow analysis
A profit & loss analysis worksheet is usually a popular way to show the high level overview of ROI. Check below the PLF from a software company:
You can understand why it is a software company if you see the technology licenses costs.
Break Even Point
Management can see your financial analysis, but for sure after the costs, the most important thing for them is to see when they will start making money. They can see that with the break-even analysis
BEP= fixed cost / gross margins
For example, on the below graph we can see on X-axis the units sold and on Y-axis the revenue
Profitability begins after selling 814 units, or sales of more than 9.766.667 dollars.
The sales bar shows the point that you have to reach to become profitable. If you have to sell to 85% of the target market then you will probably not make money but if the analysis shows that you have to sell to 5% then with marketing activities you can reach it pretty quickly.
What the numbers are telling us its ok to do financial analysis, but the real world is full of risks. You should include the below points on risks and how to mitigate it:
- Risk – what might adversely affect the company or project
- Probability – how likely is it
- Impact – how bad would it be?
- Mitigation – how to reduce its probability?
- Contingency – what is “plan B?”
To summarise please be prepared to include the below points in your Business case:
What problem are we solving? – value proposition
How might it be solved? Product concept
Why now? Window of opportunity
How big is the opportunity? % of total addressable market
Who has this problem? Target markets
What alternatives are out there? Company differentiator and route to market
How we will measure success? ROI and strategic objectives
What’s the recommendation? Go/No-go decision What is the product vision