Business Case in Project Management: A Complete Guide

Business Case in Project Management: A Complete Guide

In general terms, a business case describes the benefits and intended outcomes of a situation, with emphasis on its value to the organization and potential return for stakeholders, in order to justify an investment decision (e.g. receive funding) or make an intangible asset visible for decision-making purposes.

For example, in project management a business case describes the benefits or value of a project initiative in monetary terms. It provide the rationale for projects, which is imperative to not only streamlining the project management process but to ensure its success.

In this guide, we will define the term “business case” in projects and discuss the activities that go into building a business case example at various stages.

What is a Business Case in Project Management?

A business case is a project planning document that contains the background, analysis, and justification that links a given project or initiative to a company’s strategic goals and objectives. It contains key information that is used by decision makers to determine if the project should be funded.

A business case is typically created by the project sponsor at the beginning of a project as part of the initiation phase. As a process, it determines whether a proposed investment is worth making or not, taking into consideration many factors that are unique to the organization and its environment, including the available information and how this information is used.

Usually, business cases are built as a response to something. Many organizations have a specific set of processes which must be followed in order to create a good or solid business case for an investment decision. In many cases, these processes were established based on similar experiences and lessons learned from other projects of the same type. Sometimes, this established process can be modified to better fit an organization’s objectives and needs.

The practice of project management does not establish a single and strict format of the business case document. Still, the development process tends to answer several common questions, including:

  • What is the business problem?
  • What is the budget available?
  • What are the timelines?
  • What the benefits can be gained?
  • What are the deadlines for achieving the benefits?
  • What the key people will be involved in the project and what are their responsibilities and roles?

Why Create the Business Case

The business case is one of the key documents that help organize resources in business terms and facilitate making discussions between the sponsor and managers of the performing organization concerning the business justification of the project.

The project management team will use the business case as a vision-giving document depicting the primary goal of the project and outlining the motives to undertake this initiative. The importance of the business case document consists in answering these questions:

  • Why is this project worthwhile? The justification section is the place for the business case to pull together all the information about how this project will make things better for the organization. The justification uses a variety of factors to provide an assessment that answers “why” this investment should be made.
  • What are the risks and benefits of taking this project on? The analysis section provides a detailed description of the current situation and creates an assessment that answers “what if” scenarios for the organization.
  • What sort of planning process will be required to move forward with this? The background section provides a summary of the past planning process, including what happened when, who was involved and why. This is one of the most critical factors in a business case as it provides context for all parts of the business case.

Because business case templates are critical to the right understanding of the project analysis and justification, the document should be available to all stakeholders. Usually copies of the document are distributed among the stakeholders.

3 Main Sections of a Business Case

Project management business cases are split into three main sections: the background, analysis and justification, as follows below.

  1. Project background – provides a brief description of the project and why it is being developed (for example, to meet a specific customer need, or to demonstrate the capability of certain software). It also needs to include information regarding any known constraints which the project may face.
  2. Cost-benefit analysis – usually opens with a table that shows the anticipated benefits of the project based on how much money is invested and how many outcomes will be achieved. The process for calculating these benefits should be clearly outlined in the business case, with references as necessary to other supporting information.
  3. Justification – explains the benefits that were calculated in step 2 and how these benefits are possible. To reiterate from the example above, the business case justification section would explain the possible solution to a problem or opportunity that has been identified. It should also include a financial analysis of the initiative’s benefits for investors.

Types of Project Business Case

 

Eric Morkovich

Eric is a enthusiastic project manager who has worked on various projects in the software industry for over ten years. He took a variety of roles and responsibilities for projects and teams. Today Eric helps product companies in reviewing and improving their software definition, development and implementation processes. Follow Eric on Twitter.

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