Business Case
Business Case
DEVELOPING
A BUSINESS CASE
What is it?
A guide focused on the activity of producing a
business case. It provides a roadmap on developing a
high-quality business case document that can be used
for your critical projects.
Who is it for?
Whether you are developing a business case for the
first time, or are familiar with the subject matter,
every person using this guide should walk away more
confident and better prepared than before.
Who is it from?
This guide was developed by Engage Energy &
Industrial Consulting for the specific purpose of
helping you develop a robust Business Case.
The business case is the Decision makers may The Business Case should
“why” an organization be dealing with a host answer the following two
is embarking on the of competing priorities, key questions:
project. business objectives, and
resource constraints. 1. “What business value
According to the Project The Business Case is will be gained from
Management Institute the primary tool an this investment?” and
(PMI) “the business case organization uses to
provides the necessary assess the probability and 2. “Do we have enough
information from a viability of committing information to make
business standpoint to resources to an initiative. an informed decision
determine whether or The business case is often to go forward?”
not the project is worth used to:
the required investment.” By developing the
• Demonstrate the
The business case is Business Case,
value of a project.
considered an input to you will be able to
a Project Charter along • Inform stakeholders of confidently present the
with a Statement Work. risks associated with recommendation(s) to
the project the key stakeholders that
The organizational will ultimately approve
• Provide alternatives.
benefits for making an the investment decision
investment and taking • Secure resources such and guide the project’s
on a specific project or as investment dollars, success.
initiative may be obvious labor, and materials.
to the person(s) involved
• Prioritize the project
with it. However, to the
within a broad
decision makers that
portfolio of projects
must commit dollars,
time, and resources to the
endeavor, the decision
to “go or no go” is often
more complicated.
The depth of analysis and rigor applied may be based on the size and complexity of
the project and the rules established by the organization. For example, a business
case for an investment of $10,000 may be much simpler than the business case for
an investment of $10,000,000.
For large investments and/or high-risk projects, a preliminary business case is often
prepared as a first step in reviewing the opportunity, securing a placeholder in the
budget, or informing regulators prior to preparing the full business case.
Project governance addresses how decisions are made and accountabilities are
disseminated and assigned between the project team and executives. Good project
governance takes discipline. An organization needs to set up governance structures,
train the sponsors who oversee them, and enforce basic procedures that will assure
the quality of work.
Establish a stage gate process for your project, regardless of whether your
organization mandates it.
The business case forms the foundation of any project. It aligns executive leadership
around the goals of the initiative and puts their participation and decision-making
authority on point through a formal update and review process. This reduces the
likelihood of competing priorities or agendas.
The business case is “the why” an organization is embarking on the project. Your
business case must answer the questions the decision makers will and should ask.
These include:
• How does this • How confident are you • How will the
project align with the that all of the costs organization fund and
organization’s overall have been identified? provide resources for
mission, vision, and the project?
strategic plan? • What are the risks if we
do the project? • Does your project
• What are the benefits represent an optimal
of the project? • What are the risks if we
use of limited funds
don’t do the project?
and resources
• How confident are
• Does the business compared to
you that the project
case consider a viable competing projects?
will achieve those
benefits? range of alternatives or
options?
• What are the costs?
The best way to determine your “why” for the project is to formulate a problem
statement. A problem statement should describe the undesirable gap between the
current-state level of performance and the desired future-state level of performance
that the project seeks to remedy. It should not include possible causes or solutions.
1 2 3
Project Determine Benefit
Identification Alternatives Analysis
4 5 6
Risk Create Present
Assessment Business Case Business Case
The business case document should also include the required analysis so your
leadership team can prioritize this project against the many other initiatives in the
businesses project portfolio that are competing for capital investment.
The final important role that the business case document plays is to provide
a consistent message to many different stakeholders. It is a high-level view of
the entire project and enables all organizations affected by the project to be
knowledgeable about the project purpose.
1. Executive Summary
2. Project Definition
3. Business Requirements
4. Evaluation of Alternatives
5. Preferred Recommendation
8. Risks
13. Appendices
1. Executive Summary
The Executive Summary should provide a high-level summary of the most critical
points from the business case. Include the most relevant facts in clear and concise
statements. This typically is no longer than one page. We recommend this section
be done last.
2. Project Definition
The Project Definition outlines the project objectives
and scope. It is an important component for stakeholders
to ensure buy-in. The project definition should be a concise
description clearly stating the projects objectives. The objectives
should be clearly stated and describe “why” this project should address a need.
We recommend referring to the Problem Statement to form the input for the
Project Definition.
• Background — describes the history of how and why this project was initiated.
3. Business Requirements
Business requirements defines the reason behind a project and what objectives will
be fulfilled by undertaking the project. There is an intent behind every project and
the project must fulfill these needs to be defined as successful.
Based on the size and complexity of the project, the business requirements could
be a simple description of business need or a complex set of business objectives
involving multiple requirements and dependencies.
• Transitional Requirements — these are the steps needed to implement the new
product or process smoothly.
4. Evaluation of Alternatives
The Alternative analysis is the evaluation of different potential choices available to
achieve a project management objective. It is an analytical comparison of different
factors like costs, risks, time to implement. It requires different tools such as asset
life-cycle costing, and cost-benefit analysis. With the evaluation of alternatives,
options to the solution are identified to satisfy the needs of the organization.
Many companies require an alternative analysis before they can even start with a
project. The recommendations from the alternative analysis determine whether
another project should be pursued, or if the existing project that was initiated should
be continued.
The alternatives analysis involves narrowing down the list of options through a
structured process based on strategic fit and a detailed appraisal of costs and
benefits. At the conclusion of the analysis, the best performing option will become
the preferred project recommendation.
Example:
Options Insert Text / Details Insert Text / Details Insert Text / Details
Meets business
Insert Text / Details Insert Text / Details Insert Text / Details
requirements
Investment Required Insert Text / Details Insert Text / Details Insert Text / Details
Benefits
Insert Text / Details Insert Text / Details Insert Text / Details
(Quantitative & Qualitative)
Risks Insert Text / Details Insert Text / Details Insert Text / Details
Schedule Insert Text / Details Insert Text / Details Insert Text / Details
Impact Insert Text / Details Insert Text / Details Insert Text / Details
5. Preferred Recommendation
The work performed as part of the alternative’s analysis should lead to the selection
of a project recommendation. The preferred option should deliver the benefits for
an acceptable level of risk. The level of rigor applied to the alternative’s analysis
will be more extensive the higher the potential cost and strategic benefit to the
organization.
This section of the business case describes how the project will fit with the overall
strategic plan of the business. The Strategic Value to the Business provides the
stakeholders who will ultimately approve the project with the assurance that the
project aligns with the organization’s goals.
Financial
• Revenue enhancement
• Cost reduction
• Cost avoidance
• Return on assets
• Return on equity
• Return on debt
• Internal rate of return
• Payback period
Strategic
• Reduce Risk
• Business model
• Improved reliability
• Improved productivity
• Increase capacity
• Improve customer service
• Expand brand awareness
• Innovation
• Enhance capabilities
• Sustainability
• Product or service quality
• Regulatory compliance
• Customer satisfaction
• Employee growth and retention
8. Risks
All projects face risks. Regardless of how well you plan, unexpected issues will always
arise. Risk identification is a critical element of business case development.
For business case development, we advocate for a simple five step risk assessment
process:
1. Identify and list potential risks to the project, the business, and likely owners.
The financial analysis determines the project’s cost, the ongoing operating costs
(asset lifecycle cost), and the revenue to be generated from the project.
As noted in the Benefits section, the following Financial Elements are used to
determine the opportunity:
• Revenue enhancement
• Cost reduction
• Cost avoidance
• Return on assets
• Return on equity
• Return on debt
• Internal rate of return
• Payback period
Note: Always include a detailed project cost breakdown in the Business Case
Appendices.
Once the scope is determined, you should clearly explain the timing required (Stages
& Schedule) for the project. Your ability to get a project approved, funded, and
scheduled has a great deal to do with what resources may be required.
Key steps:
Estimate resource requirements is the process of estimating the type and quantities
of material, human resources, equipment, or supplies required to perform each
activity.
The key benefit of this process is that it identifies the type, quantity, and
characteristics of resources required to complete the activity which allows more
accurate cost and duration estimates. Quotes from suppliers are often gathered to
ensure estimating accuracy.
Generally, you would perform task estimates from the bottom up. In otherwords,
each task is given an individual estimate which is then rolled-up into the overall
project estimate.
Project authorizations are often defined for stakeholders when their roles and
responsibilities on a project are being determined. A Delegation of Authority or
policy may be established within the organization for the sole purpose of budget
control.
Project authorization also ensures that key personnel have the formal authority
to control the sequence of work and commit resources to project activities in
accordance with the agreed upon budget.
Most companies will have a formal portfolio and project review committees that
meet on a regular basis to review project proposals, project business cases, and
project progress reports.
Note: A formal signature page authorizing the project should be included on the
Project Charter as a matter of policy.
Business Case
Development Program
Business Case Template
WHAT IS A BUSINESS CASE?
The Business Case is a carefully constructed communication tool detailing
critical information decision makers need to make sound business decisions. The
development of the business case enables you to take a disciplined approach to
examine the opportunities, alternatives, project stages, and the investment required
to make a formal recommendation for the best course of action that will create
business value.
According to the Project Management Institute (PMI) “the business case provides
the necessary information from a business standpoint to determine whether or not
the project is worth the required investment.” The business case is considered an
input to a Project Charter along with a Statement of Work.
“What business value will be gained from this investment?” and “Do we have
enough information to make an informed decision to go forward?”
By developing the Business Case, you will be able to confidently present the
recommendation(s) to the key stakeholders that will ultimately approve the
investment decision and guide the project’s success.