How to write a business case

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A business case is the most important document you will ever need to write for a project. It explains why your organisation will invest time and resources into a project. Without a rock-solid business case your project is unlikely to get a return on investment. This article explains how to write one, includes some examples and includes a free business case template for you to download. After reading this article, why not check out our business case writing course?

Introduction

You’re probably reading this article because you want to know how to write a business case. Perhaps your organisation is embarking on a major project to develop a new product. Or, perhaps you’re thinking of moving house so your family can enjoy a better life. In either case, a business case is needed to ensure the investment is worthwhile.

In this article we’ll look at some examples of business cases, provide you with a simple business case template for you to use, and explain how to go about writing a good business case for your project.

What is a business case?

A business case is the justification for some activity (e.g. a project) undertaken by an organisation. It usually contains timescales, costs, benefits, and risks. The benefits of the activity are judged against the timescales, costs and risks of doing it, so that a decision can be taken to judge whether the activity continues to have the ability to deliver the agreed outputs.

Is a business case only used by organisations?

No. You may use a business case to justify some investment you make. For example, if you’re thinking of moving house to another area you and your spouse will need to understand the costs of moving, the timescales and risks involved, and weigh these up against the benefits to be gained e.g. save time traveling to your office, your children can go to a better school.

Why do you need a business case?

A business case is used to justify the investment in a project. Projects should not just start on a whim or because of vanity – although a lot of money has been wasted over the years on such projects.

For business organisations, justification for a project usually takes a commercial form i.e. evaluating how much money could be made from the investment. With so many competing claims being made on scarce funds, organisations need the assurance that the decision they are taking is the right one. After all, there will not be enough funds to pay for all the ideas for projects which are floating around the organisation.

What form does a business case take?

Business cases can take many forms – digital or analogue. The tools you use to create one are also many and varied. Common business tools such as Microsoft Office might be used. Rather than being a document or slide deck however, it could equally be in the form of an email.

Equally, a business case could be written by hand on a whiteboard or flipchart, or on the back of a cigarette packet, if you’re a smoker!

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Business case examples

Moving house

Suppose you and your spouse are considering moving to a new house. You will need to weigh up the pros and cons of moving. This is done using a business case. You might not call it that, but that’s what it is. Let’s look at an example.

Click here to download the example

As you can see from the example, the first thing to be clear about in a business case is the reason for doing the project or activity. In this example, the couple has answered the question Why? In fact, there’s two problems here – the local school and John’s long commute.

A business case should weigh up the competing options which have been considered. After all, there is usually more than one option. Perhaps an alternative option would have been for John to change his job to one nearer their current house. However, this wouldn’t solve the issue with the school.

The benefits of a project or activity are the positive things you’re going to get back in return for your investment of time and money. In this case, the kids will get a better education, and John will save time each day.

It’s also important to understand how long the investment of resources will take. This is so that the organisation (or family in this case) knows when the resources will be freed up to work on other projects or activities. There’s usually 2 timescales to consider. First, the timescale of the project or activity – in this case 3 months to find a new house and move there. Second, the time over which the benefits shall be realised. In this case it’s 5 years until the kids leave school.

The costs of doing the project or activity is the next important bit of information. On this project, the costs of moving to a new house will be £5,000. These are the project costs. However, the couple will spend an additional £2,000/year for every year over which the business case is calculated. For a project in an organisation, this is usually referred to as the operational costs of maintaining and operating the projects outputs e.g. an IT system. At this point, the couple knows the total costs over the timescales when the benefits shall be realised.

For any activity or project, it’s also important to understand the major risks involved. Risks are the uncertain things which may or may not happen during the period of the investment. There is only one risk identified here, which is the risk that the couple might lose touch with friends who live close to them right now.

The next section is where the costs and timescales and risks are weighed up. For this project, it’s a simple decision for the couple to decide if it’s worth spending money over the next 5 years to give their kids better schooling and to save John 2 hours a day commuting. For an organisation to decide if an investment is worthwhile, however, there are several different ways in which it can decide about the investment.

Often in organisations there are rules defined to help business analysts or project managers write what’s called an investment appraisal. In the next example, we’ll look at one example known as net benefits.

Handheld device project

Imagine a heating repair services company that uses a paper-based set of forms filled in by an engineer during site visits. The spare parts required to fix the heater are recorded on a form which is given to staff to process back in the office. They then order the parts, and schedule a follow-up visit for the engineer to fix the heater. Let’s look at this example business case.

Click here to download the example

This example contains an executive summary. This quickly describes the selected option and the key benefits it will bring.

The reasons for the project are clearly spelled out when describing the 3 current problems which the company faces.

In this example, there are 2 options (other than do nothing) which have been examined. Each option is summarised and the reason why option 3 is the preferred option has been stated.

The expected benefits of reduced overheads are clearly stated. Benefits should be measurable and quantifiable. That means that the benefits can be measured later. But what about the reduced errors, rescheduled appointments and customer contract cancellations? Aren’t they benefits? Well, these are in fact something else – they’re called outcomes. Outcomes are the results of the changes which come about by using the new handheld devices. The ways you measure the improvements resulting from these outcomes are known as benefits.

This example also contains a dis-benefit which is that the back-office staff morale will be lower due to reduced overtime payments. A dis-benefit, if you’re wondering, is a negative consequence of a project. It’s not the same as a risk because a risk implies something uncertain. A dis-benefit is something which you know will happen because of the project and it has negative consequences for the organisation. It’s the opposite of a benefit!

Just as we saw in the previous example, the business case contains 2 timescales – the project timescales and the benefits realisation timescales. Again, there are 2 costs – project costs and the ongoing operational costs over the benefits realisation timescale. One major risk has been identified in this example, but on your project, there could be lots of risks.

The final section is the investment appraisal. The investment technique used in this example is called net benefits. As you can see from the table, the project and operational costs are recorded for each year of the investment. The project lasts 1 year which is why the project costs are zero after year 1. Of course, the benefits won’t be realised until the solution is in place and the company starts to use the handheld devices. The net benefits are simply the total benefits minus the total costs. This shows that the company will start to get a return on its investment sometime towards the end of year 2.

Business case template

Click here to download a simple but comprehensive business case template

Who approves a business case?

Usually on a project, the project sponsor (the person or people who are committing the funds) will approve a business case. Before approving it, they need to have confidence that the problems have been addressed and the right solution has been selected, that the benefits are achievable and realistic, when the investment will pay off, and how big will the return on investment be.

What makes a good business case

As you have seen in this article, there’s a number of important bits of information which goes into a business case. Don’t spend unnecessary time though adding information which isn’t required. Your project sponsor will have to read your business case before they approve it, and you don’t want to make their job any harder than it already is!

There’s several things you can use to check whether your business case is adequate or not. Here’s a checklist of 10 questions to ask yourself before you submit your business case to your sponsor for approval:

  1. Have the reasons for the project been specified and are they consistent with any corporate strategies?
  2. Has the preferred business option been stated?
  3. Has it been explained why the preferred business option was recommended?
  4. Are the benefits clearly identified and justified?
  5. Have both the project timescales and the benefits realization timescales been identified?
  6. Is it clear how and when the benefits will be realized?
  7. Have both the project costs and the ongoing operational and maintenance costs been specified?
  8. Have the funding arrangements been specified?
  9. Has the investment appraisal used the organisation’s recommended standard?
  10. Have the major project risks been stated, together with any proposed responses?

Summary

A business case is the most important item on any project. That’s because it justifies the investment. It helps an organisation be clear about why a project is needed, and what the results of the investment will be. This is crucial because no organisation has unlimited funds to spend on an unlimited number of projects. Therefore, a business case gives confidence to senior managers when deciding to invest in one project rather than another.

However, as you have seen in this article, a business case is something which you can find useful when taking major decisions in your own personal life. Remember - a business case doesn’t need to be a lengthy document. It could easily be a few notes scribbled on the back of something or even sent in an email.

Whatever form your business case takes, remember one thing – it will help you or your organisation take sensible decisions about committing time and resources to a project or activity.

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Simon Buehring

Simon Buehring is the Founder and Managing Director of Knowledge Train.

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