The business case is a document that allows you to justify your project. This document exposes the reasons why an organization should invest its resources in a certain project and what are the specific benefits that will be obtained from it.
Here is the step by step to structure a business case
STEP 1: Understand the context in which the company operates.
Understanding the strategic, competitive and market context in which the company operates is essential to ensure that a business case is successful and the project is approved.
Knowing this context, the project can be formulated in terms of the contribution it makes to the strategic objectives, becoming more competitive or to increasing market share.
A project thus formulated will always be well received by the company.
If your company is ruled by government regulations and is not complying or there is a risk of not complying with these rules, the approval of a project that allows this, will be done even if it does not report benefits to the organization.
STEP 2: Understand the internal context the company is living in.
Understanding this is very important to the business case.
If the company is going through a good time and there are many resources, the probability that a high-cost project will be approved (including return in the medium or long term) is higher than the cases where there are fewer resources, a situation in which the choice would be lower-cost projects and faster return.
STEP 3: Indicate how the project improves the performance of the company
If your project positively impacts the performance of the company, it is very possible that the company is willing to invest in it.
Projects that improve the efficiency and effectiveness of processes have a good chance of being approved.
Identify and describe how your project contributes to the company in this regard.
STEP 4: Identify the tangible and intangible benefits of the project for the company.
- It establishes as a reference a scenario in which the project is not carried out VS a scenario in which the project is carried out. For the case in which the project is carried out, you can define an optimistic, medium and pessimistic scenario. Describe the differences between the two scenarios. These are the basis of your business case.
- Make a list of tangible and intangible benefits that the completion of your project will bring to the company.
- Clearly describe the intangible benefits and how they contribute to the organization.
- Choose an economic evaluation framework for tangible benefits. In general, the most widely used model is the discounted cash flow since it allows to easily quantify over time the net income that the company will receive as a result of investing in the project. Prepare a discounted cash flow and obtain the net present value that the project will bring to the organization.
STEP 5: Create the business case
You are ready to assemble the pieces. Prepare the business case with the following content:
- Business context in which the company operates.
- Current situation of the company and opportunities for improvement
- Benefits of the Project implementation
- Conclusions
Author: Juan David Castañeda Sánchez
About the Author:
Mr. Castañeda is an Electrical Engineer from the National University of Colombia and a Business Specialist from the ICESI University. He has more than twenty years of experience in structuring, selecting suppliers, contracting and managing projects in public sector entities and private companies in Colombia, Bolivia, Brazil, Ecuador, Panama, Peru and Venezuela.
For more information please email: info@gprycon.com
