What is a business case? How is it assessed? And how should it be presented? Get the answers to all these questions and more in our list of frequently asked questions about business cases! Great reading for beginners and experienced project managers alike.
What is a business case?
A business case is used to justify the investment in a project. It attempts to describe a proposed project in terms of an investment and seeks to identify both the costs and risks of doing the project, versus the benefits to be gained. For commercial organizations, the benefits will almost always be measured in financial terms. For certain industries and sectors, non-financial factors might be considered as benefits e.g. the decline in mortality rates by introducing new treatments for disease.
What is the purpose of a business case?
The purpose of a business case is to justify the investment in a project or activity.
What's the difference between a business case and a business plan?
A business case is used on a project to set out the investment required both over the lifetime of the project and the operational timescales over which the project's outputs will be used. A business plan is used to set out the organization's future objectives and strategies for achieving them. A business plan might refer to specific projects which it believes will help it achieve the required objectives.
Who writes a business case?
On a project, it is the project sponsor (or project executive) who is accountable for the business case because it is the sponsor who commits the investment in the project. However, in practice, the task of developing the business case is often delegated to the project manager. If a project is part of a programme, then the project's business case is often aggregated into the programme's business case which is written by programme management.
What goes into a business case?
There are several key sections of a business case, including:
- • reasons why the project is needed (the problems being faced)
- • the considered options e.g. option A, option B, option Z, and the recommended option
- • the project's benefits
- • the project's costs and operational/maintenance costs over the lifetime of the project's outputs
- • the project's timescales and the operational timescales over the lifetime of the project's outputs
- • an investment appraisal which weighs up the costs versus benefits over the optional timescales
- • the project's major risks and associated responses
What format should a business case take?
You can use any format you choose for a business case. This includes, but is not limited to, document or slide deck formats created using standard business software; hand-written on a whiteboard in an office; or, for small home-based projects, written on a post-it note or the back of a cigarette packet.
How should a business case be presented?
A business case should be presented in a way which:
- is easy to understand;
- fits in with the corporate standards and guidance; and
- facilitates communication between the parties involved in developing and approving the business case
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What makes an effective business case?
An effective business case exhibits the following properties:
- describes the business problem to be addressed
- describes the alternative options considered
- describes why the chosen option is preferred
- states the project's benefits in measurable terms (both financial and non-financial)
- identifies the project's costs and timescales, and the operational/maintenance costs and timescales
- describes the project's main risks and responses
- weighs up the costs, timescales and risks versus the benefits to understand whether the project is worthwhile
How is a business case assessed?
A checklist of questions to be used to assess the quality of a business case include:
- are the project's reasons consistent with corporate strategies?
- is the business case aligned with the project plan?
- is it clear how the benefits will be realized?
- is the preferred business option stated?
- is it clear how the project will be funded?
- have operations and maintenance costs, as well as project costs been included?
- have the project's major risks and any proposed responses been stated?
Who approves a business case?
For a standalone project, it is the project sponsor (or executive) which approves the business case because the sponsor is committing the investment to the project. For a project which is part of a programme, the project's business case will be approved by programme management because the project's business case forms part of the overall programme's business case.
How is a business case developed?
When developing a business case, consider doing the following:
- Identify both the business and user stakeholders affected by the project;
- Ensure the user stakeholders are actively involved in identifying the benefits in the business case e.g. by getting them involved in a benefits identification workshop;
- Ensure both business and user stakeholders with appropriate level of authority to commit resources in the project are involved in reviewing and approving the business case
What are benefits in a business case?
Projects deliver outputs which are used by the organization as part of business as usual to bring about expected changes (known as outcomes). The positive improvements resulting from these outcomes are known as benefits. For example, a company invests money in a project to introduce a new I.T. system (output). Let's say this results in fewer staff being required (the outcome) and saves the company $1million per year (benefit).
What costs go into a business case?
There are two main costs to identify in a project’s business case. Firstly, the costs of doing the project. Secondly, the costs of operating and maintaining the project's outputs over their lifetime.
What is an outline business case?
An outline business case, as the name implies is a business case 'in outline' only. That means it does not contain all the details which a full business case would be expected to contain. Typically, an outline business case might only contain the reasons why the project is needed and how it fits in with corporate or programme strategies.
What is a business case in PRINCE2?
A business case in PRINCE2 drives the decision-making on a project. It's evaluation forms part of a go/no-go decision taken by the project board at the end of a management stage. It therefore helps reduce financial risk on a project because investment decisions are continuously being re-evaluated throughout the project, rather than being a one-off decision at the start of a project. A decision to close a project prematurely therefore is not seen as an act of failure on a PRINCE2 project.
Does agile use a business case?
A business case is used to justify the investment in a project. Agile refers to a series of frameworks for developing (mainly) software products. Agile frameworks don't concern themselves with deciding whether a project is worthwhile or not because it is assumed that the customer has already taken that decision. Therefore, agile frameworks do not refer to a business case.
What is a good business case example?
This article about writing a business case contains 2 good examples of project business cases.
What is a good business case template to use?
This article about writing a business case contains a simple but comprehensive business case template.