A business case is a verbal or written proposal developed at a project’s earlier stages that aims to provide justifications for carrying out a program or project. It also involves the evaluation of the costs, benefits, and risks of alternative options, which might also offer an acceptable solution.
Nowadays, the senior management, as well as board members, must pay close attention to investments which promise actual business value. Some of these initiatives in the business include business ventures, innovation, IT investments, new products and services, and factory relocation. These initiatives are assessed on the business value they offer before they can either be accepted or rejected.
Before the management or board approves any project, you should first create a business case that demonstrates a project’s importance as well as its benefits once it is completed. Whereas the merits and reasons the project is beneficial to the business may be apparent to you and other parties involved, the same cannot be said for stakeholders and other decision-makers. This is because they usually are already tasked with other business objectives and units, which are also important. Therefore, you should aim to create a comprehensive business case that makes your project stick out amongst other contending issues in the company. This then may very well be the secret having your projected approved and the needed finances disbursed.
A business case is a process of critically scrutinizing the opportunities, project stages, alternatives as well as financial investment. Consequently, this allows you to make appropriate recommendations on what is the best action to take that will bring the greatest business value.
Differences between a Business Plan and a Business Case
A business plan is a detailed document explaining the objectives, goals, and strategies a business has in place that it aims to achieve in the coming three to five years. Typically, included in the business plan is the customer segmentation, market information, financial forecasts, product, and services, as well as sales and cost estimates.
In contrast, a business case is a proposal that seeks to answer the question of what is the impact of making a certain investment decision. This comprehensive explanation aims to come up with a rationale to convince decision-makers to approve the proposed recommendations.
Some of the crucial questions to answer when creating a business case include;
- What are the alternatives to invest in that provide the organization with the most value, that is, does the investment generate high-value benefits and are other substitutes more profitable?
- Should the company invest in this proposition?
- Is this the best approach to take?
Additionally, practical questions that should be answered include whether the business recommendations can be put in place, as stated, using the allocated budget, and time to generate the desired benefits.
The business case should also carefully assess the risks and benefits of the proposal before implementing the recommendations, appropriate substitutes, the recommendation benefits as well as possible risks of not implementing the proposition. Because of this, solid business cases should come up with a convincing recommendation on the importance of implementing it.
Why should you create a Business Case?
The preparation of the business case allows you to put in place a meticulous approach of examining the opportunity, options, project stages, and financial investment. With this in mind, you are better-placed to recommend which strategy will provide value to the business.
When developing a solid business case, the investment proposal needs to be more detailed. This will consequently lower the risks and increase a project’s value as well as benefits. Moreover, there is a higher chance you will get the necessary support to go ahead with the investment.
Typically, you will need to produce a business case when;
- Illustrating what value the product or servicing you are proposing will bring to the company.
- Get the board’s approval for the venture.
- Decide whether you will outsource certain functions.
- Relocate manufacturing and business operation facilities.
- Prioritize the organization’s projects that need funding and resources.
- Get the necessary financial funding and resources to put a project into effect.
With a comprehensive business case, you will be in a better position to present your proposals to the organization’s stakeholders whose backing is necessary for approval. The well-documented business case will win over the stakeholder’s confidence as they will have improved confidence that the recommendations will be a success.
What should you include in a Business Case?
There are a few vital elements you need to include in a business case including;
- The primary objectives
- An outline of the company’ needs
- Crucial background and supporting data to understand the investment idea better
- An explanation of how the venture observes the organization strategic business plan
- A comprehensive estimate of the total investment costs as well as its financial benefits
- An approximation of the investment’s non-financial advantages
- A clear description of a strategy to be employed and this includes resources, timelines, governance and procurement strategy
- An accurate calculation of the intrinsic risks. For instance, their possible effects on the investment as well as a clear plan on how to alleviate them.
- State the uncertainty level of your recommendations
- Offer the management and board with other options to consider before making a decision.
Free Templates & Examples
Business Case Sample (Plus Guide)
Business Case Template (For Approval of A New Commercial Activity)
Business Case Template for Excel
5 (Five) Step to Create a Business Case
The business case development process is crucial. With a well-implemented process, you will be able to come up with a strong business case that minimizes risks plus increases value and benefits. Additionally, this further improves your chances of getting the necessary backing to carry out the investment.
The five essential steps to follow when creating a solid business case are;
Step 1: Confirm the opportunity
You should then proceed to implement the business case project and confirming the business prospects. This includes the investment logic, the project’s background as well as high-level business conditions. Additionally, specify the requirements you should follow to achieve a high level of success.
Step 2: Evaluate and come up with other eligible options
Pinpoint other viable suitable approaches to your business case by analyzing three or four other options. To do this, you should collect enough information on these alternatives before proceeding to analyze them and choosing the shortlisted options.
Step 3: Assess the options
Do a compressive analysis on how the substitutes will affect the company’s performance as it looks to achieve its business goals. Consequently, choose the preferred option by considering strategies and financial values generated as well as the risks.
Step 4: Implementation approach
You should then proceed and create an implementation plan for recommended options including;
- How to attain the set objectives?
- Who is responsible for the achievement of each milestone?
- How to prevent project risks?
Step 5: Recommendations
Confirm the endorsed choice. In the business case, you should document;
- Definition and scope of the project
- Strategic benefits
- Non-financial benefits
- Financial benefits
- Financial analysis
- Incorporate a corporate strategy
Proceed with the business case for approval. Moreover, all these steps must be followed when you are creating a robust business case.
After reading through this article, it is now clear what a business case, its difference to a business plan as well as the reasons why you should have one. Furthermore, you also know the steps involved when making a compelling one. With this in mind, you are now better placed to create a detailed business case that will undoubtedly win over the senior board and management. Consequently, this will see the implementation of its proposals to further help the company generate more profit.