Published on 22 march 2017 by Bram Vromans.
Some weeks ago, I internally discussed the do’s & don’ts for creating a strong business case. Why not sharing the key insights on linked-in? Feel free to add your personal tips.
Personally I have quite some experience with developing/reviewing business cases. As well before as after project implementation. Although an idea is what often gets investors / business sponsors interested, a business case is definitely needed to get financial support from them. For example, I wrote business cases for product launches, process improvements, software development, new tooling introduction …or a combination of them all.
Your business case should be clear, simple and
provide a realistic & logical financial base for
the implementation of your project/idea.
Here are five business case writing tips I’ve found useful during my career as a project/pmo manager:
1. Don’t forget internal costs. It is important that the ‘project board’ makes a go/no go decision based on ALL costs and benefits that are related to the project. This means that also effort spent by internal FTE should be taken up in your business case. The assumption that ’these people are present anyhow’ does not add up. If your project is not implemented, they can spend their time on other projects/tasks. For clearness, also don't forget to make a split between recurring and one-time costs.
2. NPV above Payback. Use NPV (net present value*) calculations as a measure for making go/no go decisions and to compare different projects and/or scenario’s. It is possible that two projects have the same payback time but that the first project adds more value to your company than the second one. Simply because the absolute amount of benefits/costs is higher/lower.
3. Use measurable benefits. Choose benefits that you can measure during and after implementation of your project. If you don’t measure realisation of assumed benefits, you completely loose the aspect of lessons learned. Moreover people will also start to create more ‘unrealistic’ business cases because they know they are not accountable in the end. If you have non-quantifiable benefits (improvement of company image, customer satisfaction,…), explicitly mention them in the business case but don’t valuate them. They help creating common ground about the added value of the project.
4. Don’t use calendar years. A business case is typically made for a 3 or 5 year period. Always use FULL years (year 1–year 2–year 3) and not calendar years (2017–2018–2019) because you don't know yet when your project will go live exactly. If your finance department asks for example for the 2017 impact of your project, start from the full year benefits and calculate on a pro-rata base the estimated impact for the requested year. But please do this on the side and not directly in the business case.
5. Keep it simple. A business case is always based on assumptions. This means that it is no exact science. It makes no sense of calculating hundreds of numbers in several worksheets with the most complex algorithms. Use Pareto (20% of the drivers causing 80% of the effect) to choose the main drivers for your benefits/costs.
That’s about it. Hope these tips can be useful for the creation of your future business case. Let me know your thoughts too and if you have other tips to add to this list.
*for more info on NPV see https://en.wikipedia.org/wiki/Net_present_value
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