A Project Business Case: What is it? Why do you need one? How to write a good one?

The business is the business rationale for selecting, implementing, and delivering a project based on business benefits. It describes what you are trying to achieve through your business change initiative or project. Business cases may involve justifying costs before an investment approval by management or budget holders at different levels of seniority in an organisation’s hierarchy.

What is a business case, and why is it so important?

Key decision-makers such as Boards, senior management, or a project sponsor focus on investment appraisal of business-value assets within the strategic context of their Organisation. For example, innovative initiatives are often accepted or rejected based on an investment appraisal of their business value and include new products, service innovations and Information Technology (IT) investments. Therefore, decision-makers must develop and document a solid business case following the current investment appraisal, project management and business case approval process. The complete business case should include the business need, justification, value proposition and financial analysis.

A solid business case is important because it can help to:

-Define the business problem or opportunity

-Determine the feasibility of a project

-Establish business objectives and goals within the strategic context

-Develop a strategy for achieving those objectives

-Measure results

These are just five reasons why a business case is so important. There are many, many more. So if you’re a project manager thinking of starting a project or undertaking any business initiative, make sure to create a business case first. It will save you a lot of time and headache in the long run.

If you’re still not convinced, here are five more reasons why you need a solid business case:

-It can help you get funding for your project or business idea or proposed business change

-It can help you make a strong business case to your boss or stakeholders for the project’s success

-It can help you track progress and ensure that you’re on track to meet your objectives and project schedule

-It can help you evaluate the success of your project after it’s finished

-It can help you learn from your mistakes and improve future projects.

Creating a business case document is essential for any business venture. However, make sure to do it right the first time so that you can avoid costly mistakes down the road.

Types of Business Cases

There are many types of business cases depending on the size and complexity of the underlying investment. Listed below are some business cases and their defining characteristics.

– Decision to make a substantial investment of time, money, or resources in something new (Rational business case)

– A decision not driven by cost/benefit analysis but rather out of morality or ethics (Values business case). For example: if we invest $100m into developing an environmentally friendly product, will it sell enough units to make up for the cost of developing that product?

– A business case where a company is looking to divest or reorganise one or more of its business lines (Strategic business case)

– To improve performance, effectiveness, and efficiency within an organisation by making changes to work practices or business processes (Operational business case)

– A business case to support the development or acquisition of a new business (Business Development business case)

– To obtain funding from investors, banks or other lending institutions for a project or company (Financing business case). This type of business case is also known as a “pitch” deck.

Organisations can classify investments differently. The content of the business cases will have a different business case structure. The business cases will have various business objectives, require further business analyses and strategy development to obtain approvals for the investments.

A business case is different to a business plan.

The two documents are often confused because they have similar aims, but they are very different. The business case is crucial for getting approval to start a project while the business plan details its delivery. The business case should answer whether a project represents value for money. In contrast, the business plan sets out how to run and achieve business objectives, making it an essential document for managing and monitoring the business on an ongoing basis.

While both these documents are essential for your business success, there’s also some overlap in what they contain. So how do you know which is a business plan or a business case? A business case is different to the business plan because:

– A business case includes all costs and expected benefits of an idea before it begins, whereas a business plan doesn’t need such detail.

– To initiate a project, you usually require a business case, but you can write business plans beforehand.

– They differ in length; business case reports usually contain around 20 – 50 pages of information compared with business plans that tend to have between 50 and 100 pages.

– They evolve differently; business cases need constant updating, whereas business plans are more stable.

The need for a project business case?

A project business case provides a detailed analysis of the costs, expected benefits and major risks associated with a proposed project. It is essential for all projects, regardless of size or complexity, as it helps to ensure that the organisation is making sound investment decisions.

Here are six reasons why you need a project business case:

To establish business value.

A business case is a business tool that helps the business justify and prioritise its investment decisions. The process of creating a business case can help you determine why an organisation wants to do something, which in turn enables better decision making around what gets done and helps prioritisation against other projects or initiatives.

To assess business risks.

A business case also helps identify and assess the potential risks associated with a project so that you can put in place mitigating actions to reduce the likelihood of these major risks materialising.

To ensure compliance with organisational standards.

Most organisations have a set of standards or requirements around how project managers should develop business cases. A business case template is a key document (if available) to support the implementation of these standards.

To identify relevant project stakeholders.

Organisations need to know who is interested in or can influence how projects get implemented throughout their life cycle. The business case helps you identify and map these stakeholders so that you can engage with them early and effectively.

To provide a basis for business decision making.

The final business case is the critical document that provides all the information needed to proceed with a project. It answers questions such as how much value the business expects to get out of the project and the associated risk.

Project justification

You need to justify your project and business case as a project manager. Use business cases to help you demonstrate the business value of your project and how it fits within the business strategy.

The business case provides a framework for assessing all aspects of a proposed project so that organisations can make well-informed decisions about whether to proceed. By taking the time to develop a solid business case, you can be sure that your organisation is making sound investment decisions.

Before you start writing a Business Case

If you are looking to write a business case, your organisation must have a business plan in place. Without this essential document, your business case will lack the necessary foundation and may not be as successful as you hope. So make sure there is a comprehensive business plan before starting on your business case – it will be worth it.

When business owners and managers use business cases in their day-to-day business, they must ensure it is linked to an overall business plan as it provides several business benefits:

Firstly, it makes you more likely to succeed with your strategy because everything comes from one place; this reduces confusion for all parties.

Secondly, it makes business cases much stronger because you have a business plan built upon the foundations of your business goals and objectives.

Thirdly, by linking business cases to an overall business plan, there is more clarity on how it contributes to achieving those goals, making it easier to measure business case success.

So, if you’re looking to start using business cases in your organisation, be sure to link them to an overall business plan – it will make everyone’s life a lot simpler!

Critical elements of a project business case

There are business case template(s) available on the internet for writing a business case. Many organisations have also developed project business case templates as part of their Project Delivery and Governance Frameworks and business case process. Here are some key elements that all project business cases should at the very least contain.

Vision, goals, and objectives of the project business case

Your business case should state what the Vision, goals and objectives of the project are upfront, so everyone is clear on what the project proposal is trying to achieve.

You need to know your goal and your solution to that problem. Therefore, the business case should include a high-level overview of the business problem that the project is addressing and how it will solve that problem. You can do this by providing background information on why the business problem exists, its current form, the progress made, and what you will achieve with your solution. In addition, it can help to get stakeholder buy-in early in the project.

You must identify your project goals. ‘What results do you want to achieve?” “What value will the project bring to the organisation?”

You also need to identify your objectives. These are specific, measurable goals that support the achievement of your project. They should be attainable and relevant.

Project Business Case Scope

The business case scope outlines tasks and the delivery of your project to accomplish your business case objectives. There are key business activities that one needs to undertake to define the scope of your business case.

You usually require a business case for essential projects, so it’s important to have a clear understanding of your business needs and how you will achieve them. Before any work can begin on the actual scope, there should be an initial meeting with stakeholders to brainstorm solutions and clarify business objectives.

After the meeting, create a draft scope document outlining what the project will entail, including deliverables, milestones, and timelines. This document should be circulated to stakeholders for feedback before being finalised. Work on the project and the supporting business case document can begin once all necessary parties approve the scope!

Background Information

Background information is an essential component of the business case for stakeholders to review and should be updated as the project business case progresses. It’s an excellent way to keep everyone on the same page and understand how the project progresses.

Background information on a Project typically includes project goals and objectives, the business context, i.e. reasons for initiating the project in the first place, and a high-level description of the project. It helps stakeholders understand what the project aims to achieve and how it ties into business objectives.

Defining the Project Business Case

The project definition section of your business case requires accurate details so that readers can understand what they should expect from your business case. It also helps to sell key business stakeholders on why this business case will work without even reading through other sections of the document, if necessary. Here you need to be very clear and concise in your explanation and avoid any vagueness or ambiguity.

One of the most important things that go into a project business case definition is understanding the goals for this specific project business case. “What needs to change within the organisation due to this project?” “How will the organisation benefit overall?” “What are the business goals that you will achieve through this business case?”

Another essential thing to include in this section is any previous business or customer research conducted. It should give readers a sense of how well-researched and informed the document is to help them make sound business decisions.

Business Case Governance

Business case governance is an integral part of business case development and is usually a part of a Project Delivery Framework in many organisations. These frameworks provide the discipline needed for successful business cases while promoting consistency in approach, ultimately reducing risk exposure throughout all stages.

Here are three reasons why project business case governance is necessary.

– Limits business cases to a single business event or decision

– Ensures that the business case can be made at an appropriate level of detail, with sufficient information and evidence for the business decision-makers to make their choices using clear criteria – if required by regulation, law or policy

– Provides a structured and consistent approach to business case development, review and approval tailored to the organisation’s needs.

Many project delivery frameworks such as PRINCE2 (AXELOS) and PMBoK (Project Management Institute) guide project governance. These frameworks have authoritative guidance that organisations should consider when developing their business case governance approach.

A Project Steering Committee or a Project Board usually is responsible for project business case governance. However, other business cases may require different governance structures, depending on the needs of the business case and organisation type.

Senior executives who have the authority to make critical decisions are usually members of the Project Steering Committee or Project Board. They are accountable for making decisions on business strategy, implementation approach, time frame, procurement strategy, ongoing maintenance costs of the preferred solution, business benefits, non-financial benefits, project costs, and significant risk acceptance for their functional area(s) and business case. In addition, they approve the business case, provide resources, monitor progress, and make decisions on changes to the project scope or business objectives.

Business Case Success Criteria and Metrics

Identifying business case success criteria and metrics is essential because it ensures that the business case meets the organisation’s needs. It also helps justify investment decisions and provide a measurable standard against which one can evaluate the solution’s benefits. In addition, the business benefit, or goal, should align with organisational objectives, strategy, and values. Without clear business case success criteria and metrics, there is a greater risk that the business case may not meet the business need and valuable resources invested in vain.

Business case metrics are indicators that help to determine the success of an investment or business opportunity. They provide quantifiable values that give feedback on whether business goals, expected benefits have been achieved or not and can be used to measure business performance or project success. There is no one best metric; it depends on what your goal is, but here are five standard metrics you might encounter:

– Return on Investment (ROI) measures how much money is gained or lost because of the business case, expressed as a percentage.

– Net Present Value (NPV) calculates the present value of all cash flows associated with the business case, both positive and negative.

– Cash Flow from Operations (CFO) indicates how much cash the business generates from its normal business activities.

– Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) is a measure of a company’s profitability that excludes interest, tax, depreciation, and amortisation expenses.

– Internal Rate of Return (IRR) determines the rate of return that makes the net present value of all cash flows from the business case equal zero.

While these are standard metrics, it’s important to tailor them to your specific needs. For example, if you’re trying to measure customer satisfaction, you might use surveys or focus groups instead of financial data. The most important thing is to choose metrics that accurately reflect the goal of your business case.

If you’re unsure which metrics to use or need help putting together a business case, don’t hesitate to contact a business case professional or consultant to help you compile all the information needed to make your business case successful.

Options Analysis and Financial Appraisal

When making a business case for a project or investment, it is essential to consider all the available alternative options. Options analysis includes conducting sensitivity analysis and a detailed investigation to identify and evaluate all potential courses of action.

One should analyse the number of options depending on the project, investment, or business opportunity type. For example, if the goal is to maximise profit, all possible business combinations should be considered. However, if the goal is to minimise risk, you may analyse fewer options.

The purpose of an options analysis is to identify and compare the benefits and drawbacks of each option. This information can help business decision-makers make informed decisions about their projects or investments. However, it is essential to note that not all business cases require an options analysis. In some cases, one option is the best choice, and you can make a business case by focusing only on its benefits and drawbacks.

Critical elements that one should address in any options analysis

What elements should one address in an options analysis for a business case? Business managers must consider this when looking at new projects, business investments or opportunities. The business case must provide details about each option to allow the management team to make informed decisions as they move forward. In order, here are some of those essential elements:

Detail the business case for the option:

The business case for the option should articulate and include information about “why you are considering this option”. For example, “What are the potential benefits of pursuing this path?” “What are the risks associated with it?” Managers need to have a clear understanding of what could happen if they choose this option so that they can make an informed decision.

Identify the significant risks and rewards associated with the option:

The options analysis should address the risks and rewards associated with the option. “What are the potential rewards for pursuing this path?” “What are the risks?” “Is the potential reward worth the risk?” A risk assessment will help senior executives understand what could happen if they choose a particular option to make an informed decision.

Look at the financial implications of the option:

One should consider the financial implications of the option. “What will it cost to pursue this option?” “What are the potential returns?” Senior executives need to have a good understanding of the financial benefits to make an informed decision.

Assess how well the option meets business objectives:

The analysis should address the business objectives of the option. For example, “Is this option aligned with the company’s goals?” “Will it help or hinder achieving the objectives?” Senior executives need to ensure that the option they are considering aligns with their business goals.

Consider stakeholder feedback:

All stakeholders impacted by the business case should be allowed to provide feedback. “What do the stakeholders think about this option?” “Will they support it or oppose it?” Senior executives need to understand how the option will impact their stakeholders and feedback before deciding.

By taking all these factors into account, senior executives can prioritise projects and make sound decisions that will lead to project success.

Key characteristics of a successful project business case:

Now that you know what the critical elements of a project business case are, here is some business case advice that you can use for managing successful projects.

The business case is a document produced to justify expenditure on a project or activity. It should identify and quantify project costs, projected benefits, alternative options and outline how the project will mitigate significant risks and control costs.

Business cases must always include an executive summary that clearly states what the business case is for, what it will deliver and who benefits.

The business case must include a business problem section that clearly states the business issue or problem addressed. It should also explain why spending money on this business solution is the best option available.

A good business case always includes full details of the costs and expected benefits of the proposed business solution, including hard numbers (quantified in monetary terms) and qualitative information (such as estimated reductions in time or increases in efficiency).

The business case must identify all risks associated with the project and mitigate these risks. It is important to outline a plan for ongoing monitoring and management of these risks.

The business case must include a clear project plan to implement critical milestones, target dates, and associated funding.

By following these key characteristics, you can ensure that your project business case is as strong as possible and stands the best chance of being approved.

Best Practice Business Case Development Methodology

The best method to develop a business case is to complete it internally, using a globally recognised, robust business case development method such as Better Business Cases (BBC). Besides, you know your business operations, markets, customers, and finances the best. An external consulting firm or consultant will never know as much you about your business. That is why we recommend getting yourself or your employees trained in using the APMG International Better Business Cases 5-case model framework which is based on the UK government’s best practice approach to developing spending proposals & enabling effective business decisions. . The benefits far outweigh the costs.