Business case – definition and meaning
A business case is a written document or verbal presentation which contains the reasons for initiating a task or project. Whoever presents the case needs to structure it well. It should contain details on costs, risks, as well as pros and cons.
Additionally, it should include what actions to take as well as their timescales. Above all, a good business case must have a compelling conclusion.
A business case should also warn of what might happen if nobody takes the necessary actions.
The business case’s creator aims to convince decision-makers and stakeholders to approve some action. Perhaps they are trying to get approval for funding or a loan.
We even create business cases when we want to persuade lawmakers to introduce or alter legislation.
Some charities, angel investors, and venture-capital firms may ask for a business case. In other words, they will want you to convince them to invest in your startup or project.
You are more likely to convince your boss to agree with you if you make a good case.
Imagine Mary is a restaurant manager. She wants to convince the owner to close on Monday evenings because staying open is unprofitable.
In fact, so few customers come in that night that she cannot even cover the operational costs. Mary could present her business case 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 – short- & long-term actions
It is easier to make a good business case for short-term actions than long-term ones. Short-term actions lead to immediate, measurable, and considerable benefits.
Trying to persuade people to agree to long-term projects is much more difficult. In fact, if the long-term proposal undermines the bottom line, the task may be near impossible. In this context, bottom line means profits.
Investing in worker health and well-being, for example, may be expensive initially. Some of the decision-makers might not like it, especially during hard times.
However, over the long-term, such measures pay off. Not only do they lead to better retention, but also greater productivity and less absenteeism.
For those wanting to pursue a project, the reasons and benefits for it may seem blatantly obvious. However, to decision-makers and stakeholders, they may be less evident.
Stakeholders and decision-makers often have to deal with many different business issues at the same time.
If you want to persuade the decision-makers, your business case must stand out. Above all, it must 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 that successful professional use in their business cases:
This section summarizes the business case. It also includes your recommendation. Although this appears at the beginning of the written document, write it later. After you have completed the paper, you will have a clearer idea of the key details and arguments.
Here, you introduce the theme of the business case. Make sure you keep this section brief.
Explain the problem
This part should also be brief. In fact, ideally, it 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.
Explain the problem in more detail. You must also tell your listeners or readers why it is necessary to deal with it.
Describe clearly what the impact or potential impact of the problem is. You should also back this up with hard evidence. However, sometimes obtaining hard evidence is not possible.
Discuss possible options
Identify and explain what the possible options are for dealing with the problem. Also, warn what is likely to happen nobody does anything. Describe the pros and cons of each option.
Explain which option is best, with your reasons.
According to skillsyouneed.com, 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.
Whether you use this 7th option depends on your company’s preferences, and also what type of business it is.
Business case vs. business plan
People often use the terms business plan and business case interchangeably. However, 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.