What is a business case? Definition and meaning

A business case may be a written document or verbal presentation which contains the reasons for initiating a task or project. It should be well structured, contain details on costs, risks, pros and cons, actions that need to be taken, time scales, and a compelling conclusion.

A good business case should also warn of what might happen if no action is taken.

The aim of the person or team of people who create the business case is to convince decision-makers and stakeholders to approve some kind of action, funding, or possibly a loan. It could even be part of a campaign to persuade lawmakers to alter legislation.

Business caseWhen presenting your business case, explain what the problem is, possible solutions, which one you picked, its pros & cons, and how the benefits outweigh the costs.

Some charities, angel investors and venture-capital firms may ask an entrepreneur who seeks funding to create a business case before deciding whether to back his or her project.

An example of a business case at a very simple level could be a restaurant manager telling its owner that staying open on Monday evenings is unprofitable, because there are not enough customers coming in to cover operational costs. This business case could be presented verbally.

According to ft.com/lexicon, a business case is:

“An explanation of how a new project, product etc is going to be successful and why people should invest money in it.”

Business case for short-term and long-term actions

It is generally easier to make a good business case for short-term actions that lead to immediate, measurable and considerable benefits, compared to trying to persuade people to agree to long-term projects which may initially undermine the bottom line (profits).

Investing in worker health and well-being, for example, may be expensive initially, and possibly unpopular among some decision-makers, especially during hard times. However, over the long-term such measures lead to better retention, greater productivity and less absenteeism.

For those wanting to pursue a project, the reasons and benefits for it may seem blatantly obvious, but to decision-makers and stakeholders, who are likely to be dealing with several different business issues, they may not be so evident.

In order to get the decision-makers to agree, your business case needs to stand out in the crowded field of all that is going on in the company.

How to make a good business case

Below are some components of a professionally-prepared business case:

1. Executive Summary: this section summarizes the business case, and includes your recommendation. Although this appears at the beginning of the written document, it is best to write it after you have completed the paper – when you are clear about all the arguments and details.

2. Introduction: briefly explain what the business case is about.

3. Explain what the problem is: this ideally should not be more than one paragraph long. Here you state what the problem is. Relate back to your company’s strategy or vision to illustrate how solving the problem is of vital importance.

4. Analysis: explain the problem in more detail and why it is necessary to deal with it. Describe clearly what the impact of the problem is – with hard evidence if you can.

5. Discuss possible options: identify and explain what the possible options are for dealing with the problem. Also warn what is likely to happen if no action is taken. Clearly describe the pros and cons of each option.

6. Recommendation: explain which option is best, with your reasons.

According to skillsyouneed.com, depending on your organization’s preferences and its type of business, you could include a 7th stage, which it calls ‘Details of your chosen option’. Here you could say how you feel about your option, and include more details on it.

Difference between business case and business plan

People often use the terms business plan and business case interchangeably – they are not the same. A business plan discusses the whole company, while a business case concentrates on just one single action or decision.

For example, a business plan may look at how to make the whole company more profitable over the next two years. This may include cutting the workforce, dropping some products, and restructuring middle management.

A business case, on the other hand, would focus on just one thing, such as shutting down one of the factories.

Video – Creating a business case