What is a business case?
Put simply, a business case outlines the benefits and potential risks of pursuing a particular project or initiative, and they play an integral part in getting new projects off the ground.
According to APM Body of Knowledge 7th edition, ‘a business case provides justification for undertaking a project, programme, or portfolio. It evaluates the benefit, cost and risk of alternative options and provides a rationale for the preferred solution.’
Whether it’s rebranding your company logo or making a significant investment decision, you’ll need a business case to get the ball rolling within your organisation.
Take your learning further with business case courses from the experts at QA.
Why use a business case?
All projects need to have a business case to exemplify the value of the proposed project. In large-scale and established organisations, you’ll need to put together a business case whenever you need to convince stakeholders of your point of view in order to undertake a task or project.
Whilst this may seem like a great undertaking, it’s actually a great way to share your vision and strategic awareness, and there are a number of benefits to using business cases.
1. Although it may sound simple, your business case provides indisputable evidence that your project has been thought through. Taking the time to evaluate the potential impact of your project provides your idea with credibility, which many big ideas in business will never have.
2. A range of teams and team members contribute to the business case in various ways, offering their expertise and judgement. This means that the business case is, in itself, a team effort, encouraging cohesion in alignment with the given project.
3. A detailed and well-structured business case prevents overpowering managers getting the go-ahead for projects without due consideration or peer review.
It’s also useful to think about what the consequences of not using a business case could be.
1. Resources are wasted that could be better used elsewhere.
2. Your organisation is unable to effectively prioritise projects. Without a defined measurement of ‘value’, it’s almost impossible to reach a consensus. In these environments, not only is time wasted, but the projects that get backing aren’t necessarily the ones which offer the greatest benefit for the organisation.
3. Expectations aren’t met. Without a business case to define and lay out expectations for your project’s outcomes, there’s often disappointment as stakeholders’ expectations aren’t met.
Creating a business case
It's clear that a good project, whatever it may be, needs a good business case, and a good business case needs a good structure. Let’s take a look at how to structure your business case to be as effective as possible.
How to structure a business case
Your business case is the go-to document to provide justification for whatever next step you see your organisation taking. When writing your business case, you need to follow a coherent structure and ensure you include the necessary detail to satisfy your stakeholders, whilst remaining concise and to the point with your tone.
It goes without saying that the content of a business case will vary depending on the individual context of the project, but as a general rule, businesses cases will all cover the same five elements, known as the Five Case Model.
1. Strategic case
How does this project align with your wider strategy and organisational goals? This case provides a strong reasoning for change. During this stage, the main goal is to illustrate how intervention, e.g., in terms of spend, will result in positive output for the organisation, e.g., the ability to deliver improved products or services to customers.
2. Economic case
What is the expected return on investment based on investment appraisal of options? This aspect of your business plan needs to determine the proposal that will result in the best public value, which involves evaluating a number of options. You must evaluate the business-as-usual option here, sometimes called the ‘do nothing’ option, as a point of comparison, and the proposed project must offer a significant enough benefit by contrast.
3. Commercial Case
this is established using the sourcing strategy and procurement strategy.
The idea of the commercial case is to demonstrate that the potential project option will lead to a viable procurement and a structured deal between the public sector and its service providers. This case requires a detailed knowledge of the market, an understanding of what is achievable on the supply side, and an understanding of the procurement routes that offer maximum value to both parties.
4. Financial Case
How feasible is the project in the given timeframe? The purpose of this case is to present the affordability and feasibility of the preferred option. This requires a detailed understanding of all the costs involved in the proposed project, including capital, revenue and lifetime costs of the project. This financial case needs to identify and counteract any foreseen gaps in project funding.
5. Management case: Life cycle choice, roles, etc.
The purpose of the management case is to show that frameworks are established for the consistent monitoring and evaluation of the project. Illustrating that the proposed project can be effectively managed in line with best practice is crucial, as a poorly managed project is unlikely to ever meet its objectives.
Once you’ve outlined all of the above, you’ll have given all of your stakeholders sufficient information to take your project to the next step, whether that’s the go-ahead or not.
In terms of general structure and layout of your business case, you need to keep your audience in mind and ensure your document is easy to navigate, with relevant clear headings and appendices to use as a guide.
It’s worth noting that the length of a business case can vary greatly depending on the scale and complexity of the project at hand. This is inevitable, and as long as all required information (as above) is presented clearly and effectively signposted, you’ll be on the right track.
Top tips for writing a business case
Below are some general tips to help you write the best business case you can:
- Outline the problem or opportunity – describe the problem or opportunity that your project seeks to address. Explain what the consequences could be of not dealing with this problem.
- Clarify the objectives – detail the specific aims of the proposed project, such as what it aims to achieve and the way it aligns with the overall goals and strategy of the organisation.
- Evaluate the alternatives - consider different options for addressing the problem, including what would happen if you were to do nothing. See how the benefits, costs, risks, and feasibility of each option compare.
- Assess the outcomes - identify and evaluate the potential benefits of the proposed project, such as an increase in revenue or an improvement in customer satisfaction.
- Consider the costs - provide an estimate of the costs of the planned project, including any potential risks or contingencies.
- Analyse the risks – consider the potential risks involved with the proposed project. Include a risk management plan to mitigate any potential risks you have found.
- Develop the financial analysis – work to produce a financial analysis that includes a cost-benefit analysis, a return-on-investment calculation, and a payback period.
- Summarise the business case - be sure to end your business case with a summary of your findings as well as suggestions for the proposed project.
- Consistently review – along with stakeholders, review the business case and ensure any feedback is incorporated into your project.
No matter the scale or complexity of your business case, these tips will guide you to create a comprehensive piece of documentation that will help decision-makers evaluate the proposed project plan and make an informed decisions about the project’s future.
Business cases in project management
There are a number of reasons why using a business case is important from a specific project management context too. Whatever the project management framework implemented within your organisation, a good business case will undoubtedly support it. It’s worth considering how a strong business case supports effective project management.
Business cases clearly define the objectives and scope of a project
In doing so, the business case outlines the project’s goals, expected outcomes, and how the parameters for success will be measured. This clear and transparent establishment of project goals also means wide ranging stakeholders are on the same page when it comes to the project’s purpose.
Determines whether or not the project is feasible
Business cases require risk, costs, and benefits to be carefully considered and evaluated against one another, meaning project managers and stakeholders can make informed decisions about the continuation or launch of specific projects.
Improves resource allocation and planning
Business cases provide all the information required to allow project managers to plan and allocate resources, specifically when it comes to timelines, budget and other resources needed. This ability to plan also means project managers are able to mitigate risk given their superior insight into the project’s future.
Ensures stakeholder buy in and engagement
There’s no better way to encourage stakeholder buy-in and support than with a clear business case. Offering a detailed, clear view of the project’s objectives, benefits, and potential risk factors.
Supports project governance
A business case provides a clear framework against which to track a project’s success and progress. Given this knowledge and understanding, project managers are in a better position to react effectively to change throughout the project lifecycle, and to make adjustments as and when change is required.
When to write a business case
We’ve already covered the basics of what your business case will contain with the Five Case Model. Now, let’s consider the more granular details of what happens when.
For large-scale spending proposals, you can use the following stages to develop your business case, with stages 1 – 3 being the crucial creation stages. For smaller projects, it’s still useful to bear these stages in mind and include relevant details wherever possible:
Stage 0 – Determine the project’s strategic context
Demonstrate how this project aligns with other projects being undertaken within the business, as well as with wider organisational goals. Being able to exemplify how this project will contribute to the existing strategy can be indispensable here.
Stage 1 – Scope and develop the Strategic Outline Case (SOC)
Confirm the strategic context for the project; it’s possible this may have changed if a considerable amount of time has passed since the initial conception of the project. Project assurance should occur at this stage.
Stage 2 – Planning the scheme and preparing the Outline Business Case (OBC)
This is essentially the planning stage, and it’s where the outline business case (OBC) is created.
Stage 3 – Secure the solution and prepare the Full Business Case (FBC)
This stage results in the Full Business Case (FBC), after agreement is reached with service providers prior to the formal signing of the contract. The idea of the FBC is to find the most economically beneficial option with the best public value.
At the end of this stage, the business case is complete. However, it continue to play an important role in the project’s development.
Stage 4 – Implement and monitor
Any alterations needed by the procuring authority or the service supplier should be recorded in the business case. The business case should be used to provide updates to the Project Board.
Stage 5 – Evaluation and feedback
The business case should be used to evaluate the project after completion. As the central place for recording the justification for decisions made throughout the project’s duration, it’s a crucial tool for retrospective analysis, as well as considering to what extent the project was a success against the expected outcomes. This retrospective consideration of the business case is crucial to evolving and improving project management within your organisation.
It’s important to regularly review your business case and revise it where necessary to ensure estimations remain as accurate as possible. A good tip is to review your business case at the decision gates as your project progresses, before deciding to continue into the next phase of your project.
If your business case is approved, this marks the beginning of your project, programme, or portfolio. Congratulations!
Business Case Training at QA
If you’d like to master the perfect business case or gain a deeper understanding of how they contribute to successful projects, QA offers a range of courses on this topic, including the Better Business Cases courses below: