´Business Case Vs. Business Plan: Do You Know the Difference? Cost Benefit Newsletter No. 91.

With all the focus on ROI and business case accountability today, many people are confused about the difference between the business case and the business plan. The business case and the business plan both look into the future and complement each other, but they answer different questions.

Even those with a strong background in analysis or business planning sometimes have to ask: "What's the difference between a business case and a business plan?

It's a question you may have to answer many times for your colleagues and management. People often use the terms inter-changeably or ask for one when they mean the other. Both support decision making and planning, and both project business results forward in time. They are complementary, but they different.

Before you set out to build a business case or build a business plan, or before you ask someone to bring you one or the other, be sure that everyone involved understands clearly what is expected. (For a complete introduction to the business case, see our white paper "Business Case Essentials." or The Business Case Guide.)

It's About the Action, it's About the Organization

In a nutshell, a business case is organized around an action, while the focus of the business plan is the organization.

Use the business case to answer "What happens if...?" questions like these:

What are the financial consequences if we choose the IBM proposal? If we choose HP Proposal?
What will we need as a capital budget next year if we decide to buy the service vehicles instead of leasing them?
Is the investment in new phone technology justified? Is there a positive ROI?

Use the business plan to answer "What will the business look like....?" questions like:

What sales, margins, and revenues can we expect next year?
What will our balance sheet look like in two years, under the new strategic initiative? What will it look like in five years?
How many years will it take this startup company to become profitable?

When deciding which tool you need, or when explaining the difference to someone else, consider the important differences that follow from focusing on an action as opposed to the organization:

	A Business Case....	A Business Plan...
Is organized around...	A single action or single decision and its alternatives.	An organization or the whole enterprise. The plan may cover a single product or product line or the whole organization.
Predicts...	Cash flow results and important non-financial impacts that follow from the action.	Business performance of the organization, especially in the main categories of the income statement. May include projected pro-forma income statements or balance sheets for future years.
Focuses on...	Business objectives for the action. (What the action is meant to accomplish).	Business objectives for the organization.
Is based on ...	A cost model and a benefits rationale, designed for the case, and applied to one or more action scenarios.	The business model for the organization (showing where and how the company makes money, similar to income statement), as well as expected trends, competitor actions, etc.
Measures...	Financial metrics such as NPV, IRR, ROI, payback period, and TCO, based on projected cash flow. Also includes important non-financial impacts.	Business performance in terms such as sales, margins, profits, and business "health" by contributions to important balance sheet categories
In a non-profit or government organization...	The scope of the case may include benefits and costs to the population served as well as the organization itself.	May focus on funding needs, budgetary requirements, and ability to operate within budget.

A business case can support a business plan by helping answer questions like this: "How will the proposed marketing program (the action) impact our (the organization's) business performance.

A business plan can support a business case by helping case developers estimate costs and expenses, revenues, and expected changes in these areas.

Take action! Learn more about business case building from the Business Case Guide. Learn and practice proven methods for building your cases at a "Building the Business Case" Seminar.

Marty Schmidt
22 May 2006
mschmidt@solutionmatrix.com
www.solutionmatrix.com