The Business Case underpins any successful project. It is one of the 7 Themes in the PRINCE2 methodology. It deserves more thought than it gets in most organisations. It balances Benefits, Costs and Risks. This Back to Basics post provides a quick refresher.
The Business Case should be objective and analytical with clear linkage to the higher level objectives of the organisation. All too often the Business Case is used retrospectively to justify a less than rigorous decision to proceed with a project. It is often not re-visited when project or external circumstances change.
What is the Business Case?
– A project brief describes what needs to be done.
– The project plan explains how you are going to do it.
– The business case gives the reasons why.
Who prepares the Business Case?
– The Sponsor (or in PRINCE2 the “Executive”) owns the Business Case but will often delegate its preparation.
– The Project Manager or Business Analyst may physically write the Business Case.
– For larger projects it is possible that suppliers, users, subject matter experts and external consultants may contribute.
Why do Organisations embark on Projects?
– Improve operational efficiency
– Increase sales
– Improve quality of products or services
– Comply with regulatory control
– Replace obsolete systems
The Business Case will normally link directly to the cascaded objectives from the Business Plan
Where does the Business Case fit in the Project Cycle?
– Developing the Business Case is part of the pre project activity as alternative solutions to meet an organisational need are reviewed and evaluated.
– Once crystallised, the Business Case provides the platform for the project plan (and in PRINCE2 the Project Initiation Document or PID).
– The Business Case should be regularly reviewed to ensure that the commercial logic remains valid and that any changes to the project are consistent with the Business Case.
What are the Essential Elements of the Business Case
Context
- Business drivers
- Options considered
- Option selected
Benefits
- Who
- When
- How much (may be financial or non financial but should be measurable)
- Any downside
Costs
- When
- How much (this will be refined as the project plan develops)
Risks
- Mainly strategic risks (eg sensitivity to market assumptions)
Financial Investment Appraisal
Organisations will have different approaches to financial evaluation of projects. Common tools used in the Business Case include:
- Payback – years necessary to recoup the investment
- Net Present Value (NPV) – value of cash flows arising (adjusted for cost of capital)
- Internal Rate of Return (IRR) – payback in the form of a % comparable to investing in a bank
The Business Case features in any best practice approach to project management. To find out more consider PRINCE2, APMP or PMP training and certification.
Blogalot – January 2012
