In project management, the business case refers to a formal document outlining why a given project is slated for approval. It lays out the project’s goals and details and the reasons for spending resources on this specific initiative instead of possible alternatives.
The business case is often the only sure way to demonstrate the project’s value to stakeholders. In addition, it can sometimes serve as an organization’s key document to fund a project securely.
In this guide, we will learn about the definition and types of business cases in project management, how to write a business case template for your project, and how to present it to convince stakeholders of its worthiness.
What Is a Business Case?
A business case is a formal project management document that defines a project’s context and benefits, explains to stakeholders why this project should be approved and funded and seeks to justify an organization’s commitment of resources to that project.
In other words, a business case will usually accompany proposal documents and stand as the main argument for a project’s approval in an organization. It is the most tangible result of the project management process and offers stakeholders a more concrete understanding of why this project is necessary.
The project sponsor typically creates a business case at the beginning of a project as part of the initiation phase. This document aims to determine whether a proposed investment is worth making, considering many factors unique to the organization and its environment, including the available information and how it is used.
Why Create the Business Case
Usually, business cases are created as a response to some essential change.
For example, an organization might make a business case for implementing project management to cut costs and improve operational efficiency. As such, the business case will feature all the possible benefits of implementing a project management methodology, such as increased effectiveness and better coordination between departments.
The project management team will use the business case as a vision-giving document depicting the project’s primary goal and the motives for undertaking 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 gather all the information about how this project will improve 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 associated with this project? 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 summarizes the past planning process, including what happened, when, who was involved, and why. It is one of the most critical factors in a business case as it provides context for all parts.
Many organizations have specific processes to create a solid business case document for an investment decision. Those processes are based on similar experiences and lessons learned from other projects of the same type. Sometimes, this established process can be modified to fit an organization’s objectives and needs better.
The practice of project management does not establish a single and strict format for 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 and the project schedule?
- What benefits can be gained?
- What are the deadlines for achieving the benefits?
- What are the key people involved in the project, and what are their responsibilities and roles?
Types of Business Cases in Project Management
There are three main types of business cases in project management: the financial case, the management case, and the strategic case.
Financial Business Case in Project Management. The financial case explains how the return on investment is more significant than the investment made. This document helps evaluate the project’s benefits and risks in dollars and estimates the project’s cost-benefit ratio.
For example, it is common for organizations to submit a request for proposal (RFP) to outside vendors as they want the best rates for the products or services. An RFP may include a financial business case that shows the benefits of doing business with that company, such as lower cost and the possibility of a later purchase volume.
Management Business Case. The management case concerns the project’s outcome and benefits for the organization. Still, it focuses on the project’s ability to fulfill the management’s needs (e.g., to prove organizational capabilities and maturity or to evaluate a business process to see if it can improve). This business case type demonstrates that the project’s benefits will help reveal the organization’s strengths, weaknesses, and opportunities.
For example: to create a training program for new employees, the management team needs to know if this program will be more beneficial than the money spent and bring more value to the organization. A management business case also helps determine who will need training and what the program will focus on.
Strategic Business Case. The strategic business case is unique because it addresses the project’s long-term effects regarding the organization’s strategy, vision, and mission. It helps develop a plan for further action concerning the strategic goals after the end of the project.
Besides, when an organization defines a new strategy, they may want to go through the business case approach and document the project’s expected benefits to see if they can be achieved with the help of this new strategy.
For example: if the project aims to create a new product, the strategic business case can discuss if that product will be able to meet the organization’s strategy, what the risks are involved with creating and executing this new product, and how this development fits in with other projects or activities.
Business Case Main Sections
Project management business cases have four main sections: the background, analysis, justification, and conclusion, as follows below.
1. Project Background. This section briefly describes the project and its goals, including how they connect to the organization’s objectives. It will also include the project’s history, if applicable.
The project background section will help stakeholders understand why this project is necessary and what it aims to achieve. It should also address the project’s relevant context, such as the organization’s approach to business, culture, and financial situation.
2. Project Analysis. This section usually opens with a table that shows the project’s anticipated benefits based on how much money is invested and how many outcomes will be achieved. It is also known as “the cost-benefit analysis” in project management.
The process for calculating the benefits and associated costs should be clearly outlined in the business case document, with references as necessary to other supporting information.
A typical cost-benefit analysis as part of a project business case would show the following:
- The benefits expected from this project (e.g., increase in sales, customer satisfaction, public image, etc.).
- Estimates of the time and money needed to achieve the expected benefits.
- The assumptions on which these estimates are based.
- The level of uncertainty involved in the proposed project.
3. Project Justification. This section explains why a project is being considered and how it can fulfill the organization’s objectives. In addition, it will include a description of stakeholders’ and management’s needs, roles and responsibilities, and duties in this specific project.
This section explains the benefits calculated in step 2 and how these benefits are possible.
The justification section will address the following points:
- Why this project is considered necessary by the organization and its stakeholders.
- A list of other projects similar to the defined one and how their outcomes were compelling enough for this project to justify its investments
- A description of how the project will be managed, using clear roles and responsibilities for each role
- The confidence level with which this business case is written, including the credibility of the assumptions, calculations, and risks.
4. Conclusion. Finally, the business case will conclude with a summary of the main points presented in the previous sections and a preview of what to expect in the project’s next steps. It will also include a forecast of the project’s key milestones and their connection to the organization’s business goals.
How to Write a Business Case for a Project
First and foremost, business cases are written with the assistance of a skilled professional and should resonate with the project’s needs.
There are various approaches to writing a business case for a project, depending on the type of project and its goals and objectives.
Step 1: What is the Goal of the Project?
A clearly stated goal is the basis for a well-written business case. Therefore, this statement should be brief and to the point, summarizing why this project will take place. It should also include a clear definition of what it intends to achieve.
For example: “This project will optimize how we operate our website to increase online sales by a minimum of 30 percent over the next three months for our high-end products, reaching $15,000 in total sales.“
Step 2: What is the Project Scope?
The project’s scope should be clearly defined as part of its goals and include a list of project deliverables and a detailed description of the project’s benefits. It will also specify the resources and time needed to achieve each deliverable.
In the case of the online store example, the project’s scope would look like this: “We will improve our website by designing a new interface with an intuitive layout that generates more sales and increases customer satisfaction. We will implement the new UI over the next six months, with a short-term focus on improving customer responses to order queries and a long-term focus on improving the customer retention rate we experience in our online store.”
Step 3: What Is the Budget to Achieve These Goals?
There are two main reasons why the funding needs to be specified at the very beginning of a business case. First, it helps stakeholders see whether or not the project can be implemented within their financial capabilities. Second, it helps ensure that money is allocated to most of the project needs, which could lead to reduced project quality.
Back to the given above example: “The project budget will reach $10,000. This estimate is based on a website redesign and UI implementation that requires $8,000, to which the company will add another $2,000 for extra development costs.”
Step 4. What Are the Project Risks?
One of the biggest challenges of planning a project is the ability to assess and mitigate potential risks. For this reason, a risk assessment matrix is essential to any project business case.
A risk assessment includes a list of potential risks and associated probabilities ranked by priority. It should get updated every time the project is reviewed and included in the business case.
For example: “The risk of failing to achieve our sales goals is moderate (15-20 percent), while the risk of not meeting the project budget is relatively high (35 percent). We will mitigate these risks by establishing additional sales strategies and creating a detailed budget for extra expenses.“
Steps 5. What Are the Assumptions?
Assumptions should be defined when writing any business case because they are essential to assessing the project, considering factors you need more control over. Like with risks, these assumptions should be made visible and updated regularly.
For example: “We assume that the turnover rate will not change between now and the end of the project. We also assume that our competitor’s prices will not change significantly. We will run an A/B test of the new interface design over the next three weeks to collect visitor feedback. We will also review and price changes, if any.“
Step 6. What Are the Expected Results (Outcome)?
Next, the actual project results will be described. Starting from the project’s goals, benefits, costs, and risks, you can begin to specify and describe the expected results. Besides, it is essential to mention your project’s deliverables, especially the outputs or outcomes that will be achieved.
For example: “We expect at least 18 percent of visitors to complete an order after the website re-launch, up from 7 percent today. In addition, the program will deliver a 15 percent reduction in customer service calls and a 15 percent reduction in online customer wait times. This improvement will help us achieve a sales goal of $15,000 over the next three months.“
Step 7. What Are the Project Roles?
Finally, the business case breakdown should clearly describe all project roles and the resources available for its execution. These roles will be managed by your team members and may require hiring external collaborators. The positions should be specified and aligned with the company’s mission, vision, and goals.
For example: “We will assign a project manager, developer, graphic designer, and two quality assurance specialists to implement a new website interface for our online store. These roles will be filled by the company’s in-house employees, except for the graphic designer role that we will fill with an external contractor.“
Wrapping Up
Make sure to write your project business case in a way that is easy for non-technical readers to follow. A well-written project management business case should be 3-5 pages at maximum and be easily readable. Avoid using technical jargon. Create a clear, understandable document that will help everyone involved in the project to stay on track with its deadlines and activities.