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 the each decision alternative, 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 costs, increase gains, accelerate gains.
A good business case in a complex environment requires assumptions, arbitrary judgments, and the development of new data–new information that go beyond existing budgets and business plans. This means that two people working independently can evaluate the same proposed scenario, use correct financial arithmetic and still produce quite different business case results.
What's a Business Case?
For a complete, high level introduction to the nature of business case analysis and the essence of what it takes to "Make the Case," read 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.Improve your Business Case skills with one of the New Solution Matrix Books on the Business Case!
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Business Case Essentials, 3rd edition
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