The Business Case: All you need to know about pitching ideas.
What is a business case?
Essentially, a business case is really just a story. It’s a story about a goal, what’s in it for the stakeholders, and how to achieve it. It maps a recommended path for getting around that obstacle and forecasts how surefooted that path should be.
You never know how a horse will pull until you hook him to a heavy load.
- Paul William "Bear" Bryant 1913 – 1983
Head coach of the University of Alabama football team; three times named coach of the year.
What types of businesses are there?
There are four types of businesses based on what their commercial output is and the nature of their business activities. Take a look at the table below to get a clear picture of the types of businesses out there.
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DESCRIPTION | EXAMPLES | ||
| Service | Provides intangible products such as professional skills, expertise, or advice. | Berkshire Hathaway JP Morgan Chase Boston Consulting Group |
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| Merchandising | Buys products wholesale and sells them retail, without alteration. The margin between the wholesale and retail prices enables the business to turn a profit. | Walmart Costco Tesco |
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| Manufacturing | Buys raw materials to make products to sell, incurring labor and overhead costs. | Volkswagen Samsung Royal Dutch Shell |
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A combination of any of the business types listed above. | Apple Amazon.com McDonalds |
What’s the business case funding range?
Fundings can range from zero to billions of dollars, with an average of $500,000. Though the higher the amount, the greater the probability for project failure.
Businesses will typically secure funding from savings or incoming revenues. Other possibilities include sales of ownership interest, grants, partnerships, and loans.
With an annual Project Management Office (PMO) budget averaging US$500,000, and an annual project budget of US$10 million,
the PMO budget is 5% of the total project budget on average (median), up 0.6% from 2014. [from this report courtesy pmsolutions.com]
What is the purpose of the business case?
A business case analysis is a shot to convince decision-makers that your concept should be funded over all others. It helps engender transparency about market opportunities and enable leaders and stakeholders to make evidence-based project funding decisions. A business case analysis also facilitates performance monitoring and serves as a tool for clarifying and encouraging accountability.
Who should build a business case?
Anyone who stumbles onto an opportunity that can be of benefit to the stakeholders of the business can develop a business case. This task usually falls onto the Project Manager, who builds it in collaboration with the business lead and executive sponsor.
Are there any guiding principles to keep in mind when making the business case?
Yes. Here are is a list of things to keep in mind while presenting the business case:
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Give them a reason to care: Leaders have a lot of business cases to read. Make your standout by tapping into a key motivator.
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Keep it concise: The more simply and concisely you can explain the idea, the more likely it is to gain resonance.
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Exclude conjecture: Conjecture or assumptions will detract from your credibility and make leaders question whether you’ve done your homework.
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Avoid jargon: You never know whose hands your business case analysis will make it into, so keep it clear by using terminology anyone could understand.
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Capture the vision: Painting a picture of your future vision, using story and visuals, will enable leaders to envision it as a reality.
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Demonstrate value: Make leaders see your idea’s value as non-negotiable by itemizing all the quantifiable and qualifiable value in-store.
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Stick to one writing style: Ensure continuity in the document by having one person author it throughout, and others simply provide comments and suggestions.
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Focus on the audience: Know who you’re writing to and what they’re looking for. Leverage your network to learn more about them if you don’t know them well.
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Back up your statements: Use references every time you make a definitive statement or refer to research, to convey you’ve done your homework.
Don’t follow the crowd, let the crowd follow you.
- Margaret Thatcher (1925 – 2013)
A British stateswoman who served as prime minister of the United Kingdom from 1979 to 1990.
How should you approach your business case?
Step 1: Map your idea’s purpose and vision. Look for gaps in your business and illustrate how your idea bridges them.
Step 2: Quantify and qualify the value that bridging the gap would result in.
Step 3: Explicitly define stakeholder engagement, project roles and responsibilities, tolerances, standards, review points, and how decisions are made.
Step 4: Size the project and brainstorm the team roster to make it happen. Match each person to their role in accomplishing the future vision.
Step 5: Tighten your scope as narrowly as you can so the team can focus all of their efforts on what’s most critical.
Step 6: Roughly sketch out potential future phases.
Step 7: Set an overarching budget and timeline frames. After that, break it down into tasks and components. Be sure to include a contingency of at least 10% to show you’re being prudent. Consider offering best, most likely, and worst-case scenarios.
Step 8: Plan out a schedule of when each milestone should start and complete. Then extrapolate when each team member would need to complete their deliverables by. Identify dependencies between tasks.
Step 9: Stipulate how you’ll keep an eye out for needed changes in due course so you can address them in time. Identify the change process for when that comes up.
Step 10: Plot out how you will gauge the degree of success and failure of your project success.
BUSINESS CASE EXAMPLES
Example # 1
Opportunity: Build a presence in the Asian market.
Solution: Open a permanently staffed office in Singapore to demonstrate commitment; Have more straightforward access.
Benefits: New business activity.
Link to business strategy: Diversified business activity, protection from localized slowdowns.
Impacts: Need to establish subsidiaries to protect parent company operations and mitigate liabilities.
Example # 2
Opportunity: Restructure department to cut overhead in the face of recession.
Solution: Automate processes where possible and eliminate procedural redundancy through centralization.
Benefits: Reduced staffing costs.
Link to business strategy: Trim down in preparation for anticipated recession.
Impacts: Need to thoroughly document and fulfill success conditions for all people, process, and tool changes.
BUSINESS CASE TEMPLATE
- COVER PAGE
• Title
• Subtitle
• Author
• Date
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EXECUTIVE SUMMARY
• Outline the benefits
• Outline how the opportunity fulfills the business strategy
• Outline each alternative considered
• Outline the recommendation and reasoning
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INTRODUCTION
• Illustrate the background
• Illustrate the current situation
• Illustrate the opportunity
• Illustrate the benefits
• Illustrate how the benefits fulfill the business strategy
• Illustrate the ask
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BENCHMARKING
• Detail benchmark 1• Detail benchmark 2
• Detail benchmark 3
• Itemize learnings from the benchmarking exercise
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POTENTIAL SOLUTIONS
• Describe solution # 1• Describe solution # 2
• Describe solution # 3
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SOLUTION ANALYSIS
• Explain the solution analysis methodology• Explain data collection methods
• Explain the metrics used and their relevance
• Present the results for each solution, including the metrics, sensitivity analysis, risks, and assumptions
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RECOMMENDATION
• Demonstrate the recommendation and reasoning behind it
• Stipulate the ask in terms of funding and resourcing
How can you address challenging climates in your business case?
While developing any business case analysis, be sure to ask yourself:
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Could any legislation or regulations be on the way that may impact the industry?
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What’s the region’s political situation, and what impact could that have on the market?
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Might any innovations, technology or otherwise, arise and impact the market?
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What role does culture play in the industry, and where would extra care be prudent?
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Are there any environmental concerns in the industry, and how could they support or challenge the concept?
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Where is the economy headed, locally and globally?
If any of these questions give rise to concerns, be sure to conduct a PESTLE (political, economic, sociological, technological, legal, and environmental) analysis. Building a holistic view of the environment will enable you to reframe your concept in light of myriad potential future realities, to assuage any concerns, and win broad support. And incorporate that view and those reframed perspectives into your business case analysis.
Someone’s sitting in the shade today because someone planted a tree long ago.
- Warren Buffett
American business magnate, investor, and philanthropist, who is the chairman and CEO of Berkshire Hathaway.
How to prepare for success in the face of a challenging economy?
Envision a range of revenue projections by quarter, from best to worse case. Build multiple budgets to suit each, identifying how the scope can be honed to work in any environment. Determine what you’d strip away if you had to take a hit of 20% or 40%. Build it into an appendix to your business case analysis.
Consider opportunities to look for subscription-based service model opportunities, generating a consistent cash flow that could incorporate a steady infusion of project funding over time. And identify what changes may be required to operate in that context.
(Speaking of challenging economies, here's an excellent article on safeguarding your job against a recession.)
Conclusion
A business case is a tool that enables you to convey that your idea shows promise.
When executed well, its rigor helps you see your idea from every angle, so you can see where your leaders may punch holes. Then you focus on strengthening the concept and reevaluate it until the value is clear and undeniable.
Tap into these techniques today to solidify your next great idea.