Business Case

Why do too many projects fail to deliver their objectives even though project management
best practices appear to be used? Project management is naturally complicated, but it can
be disastrous if you don’t have sufficient buy-in from the right parties. Writing a strong and
complete business case can make all the difference.

 What is a business case?

 Why you need a business case

1. Is the project worth doing?

 When to use a business case

 How to write a business case

 The business case template

1. The Executive Summary

 Managing the business case

 Making the case

A business case is developed during the early stages of a project and outlines the why, what,
how, and who necessary to decide if it is worthwhile continuing a project. One of the first
things you need to know when starting a new project are the benefits of the proposed business
change and how to communicate those benefits to the business.

While the project proposal focuses on why you want a project, it will only contain an outline
of the project: business vision, business need, expected benefits, strategic fit, products
produced, broad estimates of time and cost, and impact on the organization.

In contrast, the business case, which is first developed during the project initiation phase, has
much more detail and should be reviewed by the project sponsor and key stakeholders before
being accepted, rejected, canceled, deferred, or revised.

Depending on the scale of the business change, the business case may need further
development as part of a detailed investigation. Therefore, it should be developed
incrementally so that time and resources aren’t unnecessarily wasted on the impractical.

Why you need a business case

Preparing the business case involves an assessment of:

 Business problem or opportunity

 Benefits

 Risk

 Costs including investment appraisal

 Technical solutions

 Timescale

 Impact on operations

 Organizational capability to deliver the project outcomes

These project issues are an important part of the business case. They express the problems
with the current situation and demonstrate the benefits of the new business vision.
The business case brings together the benefits, disadvantages, costs, and risks of the current
situation and future vision so that executive management can decide if the project should go
ahead.

Many projects start life as a walk in the fog, which is fine in itself, but never see the light of
day or stumble along aimlessly for too long because the clarity of scope, time-scale, cost, and
benefits are not defined adequately during the first stages of the project.

Is the project worth doing?

Why are you starting a project? Chances are you’re doing it because you need to solve a
problem.

Usually, the problem is something that gets in the way of achieving your goals. So it seems a
project is about achieving goals and your goals won’t be realized unless you deal with the
problem (or opportunity or circumstance.)

If a project is worth doing you need to answer 4 simple questions:

1. What is your goal?

2. What’s stopping you from reaching the goal?

3. How much change is needed to overcome the problem?

4. Are you certain this will solve the problem?

Can you answer these questions quickly? Do you have evidence to support or refute your
assumptions?

If not, it may not be worth starting a project.

When to use a business case

The business case is needed when resources or expenditure on a project has to be justified.
Approval is usually sought from the project sponsor and other interested parties.

For instance, the finance function may authorize funds and the IT department provide
resources.

How to write a business case

Moreover, it should only contain enough information to help decision making. When writing
a business case keep the following in mind:

 Be brief and convey only the bare essentials

 Make it interesting, clear, and concise

 Eliminate conjecture and minimize jargon

 Describe your vision of the future

 Demonstrate the value and benefits the project brings to the business

 Ensure consistent style and readability

The project sponsor is responsible for preparing the business case.

However, all appropriate team members should contribute to its development. Likewise,
subject matter experts from other functions ― finance, HR, IT, service delivery, and so on ―
can provide specialist information.

Those writing the business case should have a thorough understanding of the project’s aims
and be able to merge the varied and potentially complex plans into one document using the
following business case template.

The business case template

What follows are the four steps to writing a business case template for your project.

It includes the following four sections:

1. Executive Summary

2. Finance

3. Project Definition

4. Project Organization
Section Section Heading Question Answered

- EXECUTIVE SUMMARY -

1 FINANCE How much?

1.1 Financial Appraisal How much?

1.2 Sensitivity Analysis How much?

2 PROJECT DEFINITION -

2.1 Background information Why?

2.2 Business Objective Why?

2.3 Benefits and Limitations Why?

2.4 Option Identification & Selection What?

2.5 Scope, Impact, and interdependencies What?

2.6 Outline Plan What? When? Who?

2.7 Market Assessment Context?

2.8 Risk Assessment Context?

2.9 Project Approach How?

2.10 Purchasing Strategy How?

3 PROJECT ORGANIZATION -

3.1 Project Governance How? Who?

3.2 Progress Reporting How?

1. The Executive Summary

Depending on the length of the business case you may want to include a high-level summary
of the project.
The executive summary is the first section of the business case and the last written. It is a
short summary of the entire business case. It succinctly conveys vital information about the
project and communicates the entire story to the reader.

First impressions are important. Get this right!

2. The Finance Section

The finance section of an effective business case is primarily for those who approve funding.
The finance function will be interested in this plus the first half of the project definition.

Financial appraisal

When you prepare the financial appraisal seek advice on content and presentation from the
finance function. In the case of capital developments, consult subject matter experts.

The purpose of a financial appraisal is to:

 Identify the financial implications for the project

 Allow comparison of project costs against the forecast benefits

 Ensure the project is affordable

 Assess value for money

 Predict cash flow

Sensitivity analysis

Sensitivity analysis concerns project risk and looks at alternative futures by measuring the
impact on project outcomes or assumptions of changing values in which there is uncertainty.

In effect, sensitivity analysis lets the project accountant experiment with possible scenarios.

3. The Project Definition

This is the largest part of the business case and is for the project sponsor, stakeholders, and
project team. It answers most of the why, what, and how questions about your project.

Background information

The purpose of this section is to give a clear introduction to the business case and project. It
should contain a brief overview of the reasons why the project or business change has come
about: the problem, opportunity, or change of circumstances.
If necessary, refer to related programs, projects, studies, or business plans.

Business objective

This part describes why you are doing the project. The business objective answers the
following questions:

 What is your goal?

 What is needed to overcome the problem?

 How will the project support the business strategy?

Benefits and limitations

The benefits and limitations section describes the financial and non-financial benefits in turn.
The purpose is to explain why you need a project.

For instance, to:

 Improve quality

 Save costs through efficiencies

 Reduce working capital

 Generate revenue

 Remain competitive

 Improve customer service

 Align to corporate strategy

The business case should also include any limitations since these present potential risk to the
project.

Option identification and selection

Identify the potential solutions to the problem and describe them in enough detail for the
reader to understand.

For instance, if the business case and proposed solution makes use of technology, make sure
to explain how the technology is used and define the terms used in a glossary. Since most
problems have multiple solutions an option appraisal is often needed. This will explore the
potential solutions and recommend the best option.

When writing the initial business case the option appraisal is likely to contain a long list of
options and will cover many possibilities. As the project continues a number of options will
be rejected. The final business case may contain three to five options ― the short list ― that
includes a do nothing or benchmark option.

Scope, impact, and interdependencies

This section of the business case template describes the work needed to deliver the business
objective and identifies those business functions affected by the project.

Moreover, the project scope, impact, and interdependencies section should state the project’s
scope and boundaries. It describes what is included and what is excluded plus the key
interdependencies with other projects. It is important for the business case to consider the
failure of other interrelated projects and show how such dependencies make impact benefits.

Outline plan

The outline plan provides a summary of the main activities and overall timescale ― project
schedule ― for the project.

Ideally, the project should be divided into stages with key decisions preceding each stage.
Use this section to answer the following questions:

 What is required?

 How is it done?

 Who does what?

 When will things happen?

This outline plan lists the major deliverables and includes a brief project description plus
accountabilities for each activity.

Market assessment

It is important that the business case provides its readers with a thorough assessment of the
business context ― the market assessment. In other words, make the underlying business
interests explicit.
Therefore, the market assessment should show a complete understanding of the marketplace
in which your business operates.

A good starting point is the inclusions of a PESTLE ― political, economical, sociological,

Risk assessment

The risk assessment summarizes the significant project risks and opportunities and how they
are managed. The risks included should cover those that could arise from your project or the
organization’s ability to deliver change.

This section answers the following questions:

 What risks are involved?

 What are the consequences of a risk happening?

 What opportunities may emerge?

 What plans are in place to deal with the risks?

 Every project should include a risk log.

When writing a business case, make sure this is included as it explains how risk and
opportunity are managed.

Project approach

The project approach describes how the project is tackled. That is, the way in which work is
done to deliver the project.

For instance, a project with much of the work contracted out is likely to take a different
approach to a project that develops an in-house solution.

Purchasing strategy

This section describes how a project is to be financed and whether a decision to buy, lease, or
outsource should be taken by the organization before purchasing.

Moreover, the purchasing strategy should describe the purchasing process used. A formal
procurement process may save time and money and reduce project risk.

4. Project Organization
The last section of the business case template is of most interest to the project manager,
project team, and managers responsible for delivering work to the project. This project
organization section describes how the project is set up.

Project governance

This section of the business case template shows the reader how the project is structured and
the different levels of decision-making. Usually a business will already have implemented a
project governance framework that will support the project through each stage.

If your organization does not use a structured project management process framework use
this section to include:

 Roles and responsibilities (RACI Chart)

 Project tolerances

 Project standards

 Review points

 How decisions are made

Progress reporting

Finally, the business case should define how project progress is recorded and the project
board updated on project performance. Usually the project manager does this by preparing a
concise progress report or highlight report at regular intervals.

Managing the business case

The completed business case provides structure for the project and project organization
throughout the project lifecycle. Therefore it should be used routinely for reference and not
consigned to the shelf.

Accordingly, the project sponsor and project board should review and update the business
case at key stages to check that the project remains viable and the reasons for doing it are still
valid. Ideally, the review should take place before starting a new stage to avoid unnecessary
investment in time and money.

Making the case

This is not the case.

A business case should be concise and to the point. For small projects it may run to a few
pages. For larger projects and complex business change endeavors the document will be
large.

Therefore, be sure to keep the intended audience in mind when preparing each section and
include supporting information in an appendix.

For instance, the option appraisal section may summarize each option with the details
contained elsewhere for reference.

To conclude, the purpose of a business case is to outline the business rationale for
undertaking a project and to provide a means to continually assess and evaluate project
progress.