A business case explains the reasons a project or task should be undertaken. It should explain, in particular, how the project will further one or more of an organization’s underlying goals.
A business case can be a lengthy and highly formal document, or it can be as simple as a short memo or a verbal presentation.
Components of a Business Case
A fully developed business case presentation typically includes
- Background information on the project
- An analysis of a project’s expected benefits to the business or organization
- An analysis of the various options that are considered, along with the reasons for preferring some over others
- Expected costs and scope, including the cost in human resource time and equipment use
- An analysis of potential risks
- An analysis of the risks associated with not doing the project. This is also known as a gap analysis.
A well-researched business case provides top managers with a framework for deciding whether a project should be initiated. It also provides project managers and a project management team with a template they can use to track a project as it progresses to ensure that its core reason for existence remains valid, over time, and that its projected benefits are being achieved.
Advantages of a Business Case
A business case gives a company’s managers a chance to explore the potential rewards of doing a project -– as well as the potential losses associated with not doing it -– before they make a decision that based on the project’s out-of-pocket costs alone.
The process of writing a business case can also compel teams of managers and employees to:
- Organize their thoughts and knowledge about a potential project.
- Consider potential drawbacks and flesh out missing information with further research.
- Pinpoint the key pluses and minuses of a project, and develop a stronger ability to communicate those to others inside and outside of the company.
- Develop a financial justification for a project.
- Build teams that are familiar with a project’s main points even before it is approved.
ROI: Return on Investment
ROI, or Return on Investment, is a critical component of business case analysis. Determining the return, or benefit, that the company or organization is likely to receive in relation to the cost of the project is a ratio that commonly fluctuates as information is gathered in the business case formulation process, but it is often a critical factor in determining whether a project will ultimately go forward. Its clarification is commonly one of the key reasons that companies and non-profit organizations engage in the business case process in the first place.
When Is A Business Case Written?
Business cases should be flexible enough to change over time as the company’s conditions and knowledge change, but most are recognizable as complete by the time a product is through its initial planning phase.
Who Writes a Business Case
The personnel involved in writing a business case varies widely depending on the company or organization, but the process could involve input from key upper managers, along with project managers and the managers of key functions that might be affected by a project’s production, including marketing, manufacturing and finance. In a small business, some or all of these roles may be filled by one person; in a large business, the roles may be filled by a matrix of interlocking teams.
Aspects of an Effective Business Case
- Writing clarity. In a large company, businesses cases are typically presented to managers from a wide variety of backgrounds. Using technical jargon that is specific to only one aspect of the business may fail to connect with those who don’t share that specialty.
- Clear conclusions and clearly delineated options.
- A clear analysis of the potential value of the project.
Who Uses a Business Case
Business case analysis is used in all industries, in one form or another, but it is a particularly familiar concept in fast-moving industries such as software design and information technology. When product innovation occurs rapidly within an industry, a decision to not spend money on a promising new project could cripple a company – but decisions to spend money on projects with little or highly risky prospects could also lead to financial disaster. Thus, in those types of industries, adopting rigorous decision-making processes tend to be a key to any company’s success.
Related Business Case Resources
The Project Management Hut: Building a Project’s Business Case 
About.com Web Design: The Business Case for Editor Types 
About.com Business Majors: Top 5 Free Business Case Study Samples 
About.com Business Majors: MBA Case Study Directory 
U.S. Chamber of Commerce: Business Plan Case Studies 
About.com Management: Project Management 101 
Business-case-analysis.com.com: Return on Investment 
About.com Human Resources: Project Management 
About.com Human Resources: How To Manage the Perfect Project 
About.com Human Resources: Change Management In the Field 
About.com Human Resources: Make Strategic Planning Implementation Work 
Free Management Library: Brief Overview of Contemporary Theories of Management 
About.com Management: Business Management Theory and Discussion 
About.com Management: Management 101 
About.com Management: Manager’s Annual Plan, Mission and Goals 
About.com Management: Strategic Planning and Corporate Vision 
About.com Human Resources: Strategic Planning Resources 
About.com Management: Business Management Glossary Terms 
BPR Online Learning Center: Business Process Reengineering Template for Writing a Business Case 
BPR Online Learning Center: Survey of Best Practices 
BPR Online Learning Center: Business Process Reeingineering Business Case Toolkit 
Method 123: Business Case Template 
W3C: Building a Web Accessability Business Case 
Solution Matrix: Building a Business Case Analysis 
Marketing Teacher.com: Gap Analysis 
Solution Matrix: Encyclopedia of Business Case Terms 
Society for Case Research 
Andrew McAfee: The Case Against the Business Case 
Gantthead.com: Business Case Development Project Plan 
Harvard Business School: Business Case Development 
Impact Technical Publications: Sample Business Case 
Toolbox for IT: Sample Business Case for Change at XYZCO 
Ontario Ministry of Finance: Business Case Template