Creating a Business Case is essential to build a solid case for your project, gaining buy-in from stakeholders and management, and demonstrating its value. A Business Case is an evaluative approach that uses financial concepts such as Net Present Value (NPV), Internal Rate of Return (IRR), and payback period to calculate and showcase the expected outcome of a project or initiative. The following steps outline an effective process for creating a Business Case:
Frame: Start by outlining your project's essential costs and benefits in an Influence Diagram. This diagram breaks down your NPV into one-time expenses (such as new hardware), ongoing costs (such as software licenses), and benefits (such as reduced downtime and increased production). To ensure that the benefits and costs are process-oriented and technically feasible, involve business and technical Subject Matter Experts (SMEs). Focusing on concrete benefits that you can quantitatively demonstrate rather than "soft" benefits like productivity increase, which can reduce management buy-in, is essential.
Validate: The next step is to elicit and engage stakeholders and SMEs in iterative interviews to flesh out specific estimations you can enter into the Business Case calculations. During this process, it is vital to ask relevant questions to understand the effort and costs for each aspect of the outlined benefits. In addition, it helps to assign ranges to each of the assumptions defined during this process to allow for base-case, best-case, and worst-case scenarios.
Evaluate: You should develop the Business Case model for the project in Excel that calculates the NPV and other decision factors such as ROI, payback period, and IRR. Then, you can load all the assumptions related to costs and benefits into the model as probabilistic values based on the ranges identified in the Validate phase. Finally, it would be best to run a Monte Carlo simulation to find the best-fit NPV.
Deliver: After obtaining a positive NPV, share the results with your Decision Executive and Project Sponsor. Provide stakeholders and SMEs with a PowerPoint presentation with a use case that resonates with their managers. This process will enable a project advocate with appropriate tools, gain a strong supporter to socialize the project with their peers and demonstrate benefit to potential financial decision-makers.
A Business Case evaluates a project, ensures that stakeholders understand its value, and certifies that you spent enough time on the initial project analysis. This metric, in turn, leads to practical implementation, for which there is no substitute. With a well-designed Business Case in hand, staunch supporters across the organization, and proven value, success is within sight.