Why Business Case is an Essential Business Document?

It is a tough job to select the right project from the bag of opportunities. Some projects contribute towards increasing the revenue, some decrease wastages, some helps to optimize and improve processes. All of them have some value proposition, however, answering questions like which one is the most valuable, and which are aligned to the organization’s goals and strategies is not very easy.

One of the ways to answer the above questions, is by preparing an effective Business Case. A Business Case justifies the selection of a project, the benefits it will give to the organization, how it scores above other alternatives, and so on. Every organization before selecting any project must prepare a Business Case

Business Cases typically contains the following information:

  • Executive summary: Defines the important points in the Business Case, which should include benefits and the return on investment (ROI)
  • Reasons: Clearly defines how the project adds value to the organization and how it is aligned to the strategic objectives of the organization.
  • Business options: Proper analysis of all the other alternatives, for example:
    • Do nothing (status quo),
    • Do very minimal or
    • Do some major changes
  • Predictable benefits: Define the benefits that the organization will achieve by investing in this project. Benefits can be in financial terms (e.g. increase in revenue by certain $, or can be in non-financial terms like TAT to customers will decrease by certain %). Range of benefits might also be set if exact benefit cannot be envisaged.
  • Predictable dis-benefits: For example, a decision a merger may have benefits (e.g. better joint working through tapping the skills of one another), and disbenefits (e.g. reduction in productivity during the merger).
  • Timescale: The time period over which the benefits will be realized.
  • Costs: A summary of the costs e.g. project costs, operation & maintenance cost, etc.
  • Investment appraisal: Comparison of the aggregated benefits and dis-benefits to the project costs and operations and maintenance costs. To do this you may use techniques like ROI, net present value, internal rate of return and payback period. The objective here is  to define the value of a project as an investment. The investment appraisal should also answer the question — how the project will be funded?
  • Major risks: Summary of the major risks that may put the benefit of track and tentative responses to it if possible.

It may look like a document which might take a lot of time to be prepared, however, an effective business case actually holds the answer for the investors before they invest in the project.

Leave a Reply

Your email address will not be published. Required fields are marked *