Business cases can often be challenging to write but are key to ensuring your project gets off to a good start. So what should and shouldn’t be included in a business case?
Here are 10 questions you need to ask yourself, your stakeholders and suppliers to ensure you build a complete picture of the project and keep in mind that if you can’t find the answers you need to seriously consider whether to continue. Without this information your executive won’t be appropriately informed to make the right decision which could put the investment and your reputation at risk.
A business case is about putting the case forward as to why your business should invest dollars in this project versus other investment opportunities. A business case should be developed by the business and must always be owned by a Business Sponsor to ensure the business takes responsibility for its success.
10 questions you need to answer to build a strong business case.
- Do you need a business case?
Not every project needs a business case. Some projects are low cost, low risk initiatives that can be undertaken as a business as usual activity. Others are ‘no brainer’ projects in that they relate to a legislative or compliance requirement. If the size, risk and costs are within your company’s agreed limits then a simple briefing, either written or verbal, may suffice. Don’t over engineer something that doesn’t need to be. Some of the best successes have been planned out on a single page and then built on over time. Be careful though, if you don’t have the right level of support from your executives, the project may not get the required support and prioritisation. To avoid setting yourself up for failure test the waters for your project before you invest too much time and effort.
- What is the business problem?
A project should be about solving a problem or adding value to the business. If it isn’t doing either of those things, then you really need to review why you are considering making the investment in the first place. Business problems may be related to legislative and compliance requirements, productivity inefficiencies, poor customer experience or lost revenue opportunities. Ensure that the problems and opportunities you identify are tangible, real and acknowledged by your leadership team. You will diminish the value of your business case if you present problems that are not observable, measurable and comparable to others in your industry.
- Where are you now and where do you want to be?
To help your decision makers understand how the problem relates to the business operations it is always useful to include a ‘current state’ overview outlining where the issues lie. Then, depending on whether you are asking for vendors to provide proposals on solving the problem or you have a solution in mind, you should provide an outline of the future model or state you are planning on moving to. Try to use images as well as words to illustrate your points, as readers will absorb information in different ways – some love pictures while others relate to words.
You should detail the business requirements the project is going to address. These may be as simple as outlining the customer service improvements to be made through to listing detailed business requirements for the design and build of software. But they need to have been developed in consultation with the business and the business must have signed them off to say that this is what they want. These business requirements provide a framework which can be used to monitor how successful the project was.
- What are the available options?
Quite often business cases will be presented to the executive team with only one option, lacking the details of all of the options considered. With any decision there are always a range of choices. For completeness you should always include an analysis of the ‘do nothing’ option, although hopefully your business case will be able to dismiss this as an option. Even if it is a compliance or legislative requirement the business may choose to do nothing. Obviously that decision comes with associated risks, so it is useful to outline the risks and costs associated with maintaining the status quo.
Each of the options considered should be summarised in the business case to give the reader the benefit of the full analysis you undertook to reach your decision. Try to keep your writing unbiased at this stage, as you want to lay out all of the relevant facts for the reader to assess, but make sure you include the ‘pros’ and ‘cons’ of each option. It is when you outline the final recommendation that you will make your case for why the preferred option is the best to meet the business requirements.
- How much is the total cost of the project?
There are two types of costs you need to identify; the upfront costs for implementing the project and the ongoing costs related to maintaining the solution once it is in place. Often the upfront costs are considered a capital investment that the company can write off against their tax liabilities over a period of time; also referred to as CAPEX (capital expenditure). The ongoing costs are considered part of the cost of operating the business once the solution has been implemented; referred to as OPEX (operating expenditure). Consult with your finance department to confirm how they want the costs for your project to be allocated.
The business case needs to outline the Total Cost of Ownership, which is made up of how much it costs to implement combined with the cost of operating it each year going forward. Your decision makers need to know what they are signing up for. The solution may have low upfront costs and high ongoing costs or visa-versa, regardless make sure your figures are accurate and can be substantiated with up-to-date and current written quotes or proposals.
Depending on your company’s risk appetite you may choose to get your suppliers to provide you with fixed costs or a quote based on time and material (T & M) estimates. Obviously a fixed price reduces the risk of a price overrun for you, however it is likely to be more expensive as the supplier will have included an amount to cover their risk of the unexpected. While a T & M price could leave you open to the risk that the vendor is slower than expected in achieving your deliverables.
Equally, once you have got all the estimates in, there is still a risk the costs could be more than the budget so it is wise to include a contingency amount on top, just to cover the unexpected. If there is considerable uncertainty in the project, such as a software development project, your contingency may be up to 200% on top of the estimates. However, if there is a large amount of certainty in the price already, e.g. fixed price, you should still include a smaller contingency of 10 – 20% to cover things that may have been missed in the scope you used for pricing. Use a financial model or a spreadsheet to record and track your costs and possibly a financial model if your costs run over multiple financial years.
- What are the real benefits?
Benefits are often one thing that is overstated to try and get a business case approved. Your role as the writer of the business case is to be impartial and collect the data and base your recommendation on the facts.
Benefits can either be tangible or intangible. Tangible benefits are those that can be measured such as reduction in costs, reduced staff turnover, increased revenue or legislative compliance. While intangible benefits are things that are more difficult to measure such as staff and customer satisfaction. The issue with intangible benefits is that because there is no link to a quantifiable financial benefit they are can’t be used in your costs benefit analysis.
To help identify which parts of the project are more important than others you should map the benefits back to the business requirements. This traceability of benefits back to a requirement will be extremely useful when it comes time to realise the benefits. Unfortunately, all too often when it comes time to realise the benefits the business owner will conveniently have a reason as to why they can’t be delivered. Linking benefits to requirements removes this ‘wriggle room’ and makes it very clear when and how the benefits are to be realised. You should also get the business to sign up to a separate benefits realisation plan which outlines exactly when the benefits will be realised. If they are operation savings make sure the next budget is automatically reduced to align with the amount and timing of the benefits realisation plan.
To complete a proper cost benefit analysis you are best using a financial modelling tool that calculates the value of your investment compared to your tangible benefits. Because benefits are often realised over a period of time after the investment your financial modelling tool should calculate the Net Present Value (NPV) of the project. The NPV compares your costs and benefits and calculates a value in today’s dollars for the overall net position of the project. Without going into detail about the NPV math used, for our purposes, all we need to know is that a positive value means we will make a profit if we go ahead, while a negative means we would realise a loss by proceeding. Double check all of your calculations and where possible get your finance department to validate your work. Also make sure you understand each figure and how you arrived at it, because as part of the decision process you are likely to be grilled about the numbers and their accuracy.
- What are the risks involved with the project?
Whenever you try to change something there are risks involved. There are risks that the project won’t deliver or that it could run over budget, risks that benefits won’t be realised or very specific risks such as key people not being available when you need them. To ensure the decision maker is fully informed you need to include these risks, or at least the high rated risks, in the business case and rate them as to how likely they are to happen and what the consequences will be if they do eventuate. You should also outline the steps you will put in place to reduce or avoid the risk occurring.
- Should you still proceed?
You have reached a critical decision point! This can be a tough question, should the project go ahead or should it be canned? After all the work you have done, the engagement with the business and the stakeholders getting their hopes up about the project there will be an expectation that it will proceed. As the author of the business case you need to be able to break the bad news if it doesn’t stack up. Ask yourself, if this was my money would I spend it this way?
If the cost benefit is negative or you don’t have a legislative or regulatory reason to do it, or if it is too risky, then you need to inform the decision makers of the outcome. Base your decision on the facts and don’t shy away from it or try to cover it up, because it will eventually come out that it was not viable. Hopefully you will be recognised for not wasting company funds on something that was just not worth the effort.
- Can everyone understand it?
When you have been intimately involved in the analysis of a project, you become, in effect, a specialist and as such you are at risk of forgetting the basics. A business case should be a stand-alone document that can be read by someone who doesn’t have the benefit of your knowledge and experience. It shouldn’t have unnecessary jargon and should explain any acronyms you use. You need to ensure that your spelling and grammar are perfect as the executive reading it will start to discount the quality of all your hard work if there are multiple errors in it. Make sure you are concise, keep unnecessary information out of the document and use the appendix to put in detail that you may think some people may like to read.
Remember you are telling a story. Your writing style should flow from paragraph to paragraph and take the reader through a journey where they reach the same conclusion you did. If you have multiple people contributing make sure you combine the various styles into one cohesive paper.
Now that you have finished the business case it’s time to create the Executive Summary. This should be no more than two pages and summarise all of the key information you used to build your case. This is probably one of the most important parts to get right. Most people are time poor and will only read the Executive Summary if they don’t have time to read the whole case.
Once you have finished your first draft give it to someone you trust who has not been involved in the business case to date. Ask them to read it without any explanation and see what questions and comments they come back with. This will help determine if you truly did use simple English and explained yourself well.
10. Have you involved your stakeholders all the way through?
A business case is usually asking for dollars to be committed to a project. A key part of getting a successful outcome is to take a ‘no surprises’ approach to engaging with your key stakeholders. Take your decision makers on the journey with you and you will find that the final decision making process runs much smoother. Establish regular updates to present your findings at key steps through the process. An approach I have used in the past to familiarise executives with the business case include running three sessions where the following findings are presented:
- Outline the business problem definition, business case approach and business requirements
- Detail the solution options and costs and benefits
- Outline the implementation approach and risks
Ideally you will have the business owners there to bring the presentation to life for the executives. By doing this you are showing the level of business ownership, understanding and commitment for the project and the identified benefits. This three stage approach also enables you to include any comments and feedback in the final document and transfers ownership to the executives making the decision.
(c) Copyright Gary Waldon 2014