Business case
A business case is a tool that supports planning and decision making–including decisions about whether to buy, which product to bring to market, which projects to fund, which vendor to choose, or when to implement, for instance. Business cases are generally designed to answer the questions: What will be the financial consequences if we choose X or do Y? And, what important non financial outcomes can we expect in either case?
A good business case shows expected cash flow consequences of each decision alternative (each scenario) over time, and it includes the rationale for quantifying benefits and costs. The projected cash flows are analyzed with financial metrics that the financially astute manager looks for, such as net cash flow, discounted cash flow (NPV), payback period, and internal rate of return (IRR).
A good business case also identifies critical success factors and contingencies that must be managed to target levels, in order to achieve projected results. And, the case should also identify risks--factors that cannot be controlled or managed, but which can cause different results to appear.
The organizing backbone of the case is a time line extending across months or years, as the figure suggests. This provides a framework for giving management practical guidance on how they can implement financial tactics: reduce or control costs, increase gains, and accelerate gains.
A serious business case for a complex business environment requires assumptions, arbitrary judgments, and the development of new data–new information that goes beyond existing budgets and business plans. This means that two people working independently can evaluate the same proposed scenarios, use correct financial math, and still produce quite different business case results. For that reason, the business case should also communicate the methods and assumptions underlying projected results.
What's a Business Case?
For a more complete, high level introduction to the nature of business case analysis and the essence of what it takes to "Make the Case," read online Chapter 1 of Business Case Essentials, "What's a Business Case?" Click here to open the 9-page PDF document, "What's a Business Case? in your browser. Read onscreen or save on your computer.
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