Business Case | By Carole Embden-Peterson | Read time minutes
Writing a business case is a crucial component in the business process. In my article The Nuts and Bolts of Preparing a Business Case, I described its importance, and how to get started in writing one.
The first section is the overview; it sets the stage for your reader. This covers the background to the project, its history or the context surrounding the project. The Business Case Guide By Marty J Schmidt notes that, "Introductory statements will often "position" the case by reminding or telling the audience of such things as:
- Objectives, needs or problems addressed by the subject of the case. For example, the need to lower operating expenses, problems in customer satisfaction, the need for more computing capacity, the need to improve professional selling skills, and so on
- Other business considerations that should be in view when basing decisions on case results. May include external factors, such as increased competition, or internal factors such as policies or management directives
- Other important and related management plans. For example, business plans, budgets, or special project or programme plans
- Important historical information. For example, the "track record" of previous business case analyses on this subject
- Alternative actions. When the case addresses a proposed action that is competing against other proposals, this is a good place to sketch briefly the alternatives that will be compared with these results
Here the reader wants to know how much or what it will take to accomplish the goal. In this section you would therefore outline the following financial metrics:
- Cash Flow
- Rate of Return
- Payback Period
- Return on Investments
- Cost of Ownership
You will have to make some assumptions in a business case. Assumptions would come into place for instance, for predicting future prices, salaries, and business volume. Schmidt suggests
you record assumptions whenever you cannot take it for granted that any other analysts would make the same assumptions automatically.
Scope and Boundaries
This section discusses the rules of the case.
- Duration: It looks at the duration of the analysis and whether it is mapped along calendar or fiscal years
- Location: Is the analysis specific to a site, region or any particular locality?
- Function: This examines who the analysis includes and the specific department or organisation that the case covers
- Technology: Any computer hardware or software, electrical engine and maintenance that the analysis covers should be discussed in this segment
The data pertaining to cost and benefits are presented in this section. Cost information for instance, would cover salaries or computer software. Benefits would include sale profits and time savings. When presenting cost/benefit data, this could be done either showing the full values or incremental values depending on the purpose of the business case.
You can use incremental values if:
- The action is to be evaluated as an investment
- If the scenarios cannot be fully analysed
- Incremental costs and benefits would be negligible
- There are different funding sources to cover varying costs
You can use full values if:
- The action is to be evaluated in terms of total costs or total cost of ownership
- It is possible to analyse all scenarios
- You need to evaluate the impact of an action in terms of existing or planned budgets
This is a crucial section of your business case. It is here that the reader wants to see, how business will be affected financially. This section should be factual with tables, graphs and explanation, but no interpretation or subjectivity.
You would present your:
- Cash Flow Statement: This should include only line items that represent true cash inflows or outflows
- Result Analysis: Use charts, graphs and tables to the fullest. Let the numbers represent themselves
- Non-Financial Results: These are not quantifiable, but should be made known as clearly and explicitly as possible
Risk and Contingencies
Business cases have risks and uncertainties. These should be recorded and assessed on the likely impact this could have on business. This section also looks at the worst-case scenario and analyses the impact of external forces or situations such as prices, inflation, and changes in the economy.
This section also links the objectives of the case to contributions of different departments. It points out that reaching the goal is contingent on the contributions of the ABCD department or XYZ person. Reaching the goal could also be contingent on the services of an outside vendor or contractor. This should also be explained here.
Conclusion and Recommendation
This section wraps up all the points made in the introduction. No new points are introduced in the conclusion. The complete case is reiterated here tying in the business objectives with the important decision criteria necessary for the case to achieve its objective. Unusual results from your analysis and any findings that may be nebulous may also be clarified in this section.
The recommendation emanating from this, is the final portion of the business case. Schmidt recommends that you end with a formal recommendation statement. This statement should remind the audience/reader that it's now up to them for action, and why they should take a positive action and why the action is recommended.
Wrapping it Up
To ensure that your business plan has a finished professional appearance you should include cover and preview sheets.
The cover sheet should include:
- The Title (This should give a clue as to, or identify the general nature of the business case)
- Company, Address or Department
- Telephone Number
- Date Completed or Submitted
The first preview sheet(s) should include:
- The objective or purpose of the business case. Here the author of the case will detail explicitly what the case will be used for and how it will be used
- Executive summary. This is a paragraph that explains the business case in a nutshell. This should be narrative with data or numbers to support the information presented. Some people only read the executive summary; therefore you need to ensure that it is clear, complete and carefully presented. Do not forget to number your pages
Presentation is the final ingredient to the success of your business case. Speak with aplomb and exude confidence. If any uncertainty is detected, that could sound the death knell for your case.
Schmidt, Marty, (2002) The Business Case Guide. Rochester, New York.
Carole Embden-Peterson has over 25 years experience as an award winning journalist, communication specialist and training development expert.