Recent Project and Job Topics > Strategy
Business Case Analysis
Business cases are reports written by consultants or managers to facilitate project selection within a company. They are often referred to as a business case analysis (BCA). A solid business case leads to well-informed decision-making and ensures investments have value and importance. A robust and well-documented business case offers detailed analyses of costs, assumptions, implications and benefits and can include action steps and major milestones that will guide your venture through the entire project lifecycle, including that of the project outcome. Using real facts and metrics that can be measured in evaluating the business case strengthens the decision making process.
Firstly in a business case analysis, the objectives and intended benefits of the initiative must be outlined to justify the investment of time, money and people. In the business case, examine whether the objective of the business plan fits with the company’s vision, mission and values. Will fulfilling the project further the corporate strategy and sustain the competitive advantage of the company? Does the firm have the capability to deliver the benefits? Can the project be properly managed? Are the competitors doing this? If so, what are the results they are achieving? Who are the stakeholders and are they supportive of the proposal? Identify the assumptions and constraints. The more comprehensive the business case, the better the alignment to strategic goals can be measured.
Secondly, the financial aspects of the project must be outlined in the business case analysis. At a project level, factors to examine include the net present value (NPV), cost/benefit ratio, return on investment (ROI) and payback period. The project with the highest NPV is normally the most attractive. However, other factors that may influence the decision to adopt a business case include the timing of the project and the initial cash outlay. From a portfolio perspective, factors to consider and include are: a risk assessment, a benefit analysis, alignment to other projects within the company and a project lifecycle schedule. Will this proposal cut costs, save money, increase productivity, improve quality or speed development? Use standard metrics, KPIs and smart goals to evaluate the validity of the value the project brings to the company. Also look at the tax implications of the proposal.
Thirdly, possible alternatives to the proposed project must be developed or analysed in the business case analysis. A company should dedicate its resources to the highest value opportunities with inter-dependencies, and undertake them in the optimum sequence. Evaluation criteria can be outlined and weighed. Identify the next best alternative or alternatives and summarise the rationale for this recommendation. Then, check whether the rational for the original project is still stronger when deciding on whether to go ahead with it.
To facilitate business case analysis, many companies and consultants develop standardized processes. Document templates, standards and formalized processes will generate consistency in requesting, evaluating, prioritising and approval. For example, creating cost models and financial standards means projects can easily be compared, and facilitates management decision making. Software is also available to help companies with their business plan development and analysis.
A consultant conducting business plan analysis will either bring in his or her own set of standard tools, modified to suit the client company and project, or work with the standard process and documentation developed by the company. Before engaging consultants to conduct a business case analysis, be sure to determine which set of standards will be user. Consultants can also be engaged to create standard processes and templates for business case analyses, in anticipation of a specific project to evaluate.
