Business case

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A business case examines a business scenario in terms of the profitability of the investment required. It is used to present and weigh up the forecast financial and strategic effects of a project, a plan or an investment. A business case describes the current situation, desired goals / business requirements, possible solutions (options for action), compares the possible solutions and makes a recommendation for further action. This can also include maintaining the status quo (so-called zero variant).

A business case is often created in advance of a project or plan to examine its profitability and the effects on the company. By analyzing benefits, expenses and risks, he helps ensure that a company's resources are concentrated on promising projects.

Components

A business case consists of:

  • Executive summary, management summary
  • Initial situation, as-is analysis
  • Goals, business requirements
  • Examined solution variants
  • Evaluation of the solution variants according to monetary (costs, expenses, revenues, income) and non-monetary aspects (benefits)
  • Risk analysis
  • Recommendation, decision template

In the summary , the topic and the objective are outlined. This management summary provides the essential information on the business case in compact form.

The content of the initial situation is the description of the current situation or problem that is the subject of the business case. This also includes analyzing the causes of existing problems. This is intended to give all important stakeholders a uniform understanding of the subject.

The goals, business requirements indicate the desired effects of the project or plan. This can be, for example, lower running costs or an increase in sales.

In order to investigate possible solution variants , a distinction should be made between what should / can / may be changed in the current state and which aspects should / can / may not be changed. This determines the scope . Solution variants are designed on this basis . These can range from minor changes in the actual status (so-called zero-plus variant) to major changes. Solution variants can be worked out empirically by looking for improvements based on the current state, or divergent by z. B. striving for novel solutions by means of creativity techniques.

The next step is to evaluate the solutions found by comparing them to the goals. This assessment can be based on monetary goals such as costs and expenses. Often there are one-off costs (investment or project costs) and periodic (e.g. annual) costs. These costs should be further broken down by type. For example, project costs can be divided into planning and implementation costs. The broader the problem under consideration, the more precise the breakdown should be. The same procedure should be followed for revenue and income. Here, too, categories such as "one-off" and "periodically occurring" make sense.

A possible investment calculation that can be used for valuation is the net present value . This discounts the cash flows with an imputed interest rate on an amount in the present. If several solution variants are evaluated, the variant with the highest net present value appears promising.

The monetary evaluation of actually non-monetary goals can be challenging. One example is the saving of working time when supporting employees through a software system. This is expected to save processing time. How high these savings will be can be determined less precisely. In addition, the question needs to be clarified whether the time saved is e.g. B. is evaluated with the hourly wage of the employee, with his personnel costs or with the additional sales that the employee can generate based on the time gained. So there is room for interpretation that can be interpreted positively or negatively.

The non-monetary aspects include all objectives that cannot be assessed in monetary terms or only inadequately. This can be, for example, increased customer or employee satisfaction or shorter process lead times. The evaluation is often carried out by assigning points (e.g. on a scale from 0 to 10) for the respective solution variant.

The risks of the examined solution variants should be examined. This risk analysis can e.g. B. financial risks or risks of implementation in the project. A risk is often described with its probability of occurrence and its impact (if it occurs).

In the recommendation , all information obtained is summarized in a decision template and the solution variant that is likely to best achieve the goals is proposed.

literature

  • A. Naumann: Business Analysis. Giessen 2018, ISBN 978-3-945997-11-6 .
  • J. Ritter, F. Röttgers: Are you still calculating or are you already benefiting? - Save 50% of your time on business case creation and ROI calculation. Frankfurt am Main 2009, ISBN 978-3-00-026824-3 .
  • G. Schmidt, A. Naumann: Organization and Business Analysis - Methods and Techniques. 16th edition. Giessen 2020.
  • M. Schmidt: The Business Case Guide. 3. Edition. Boston 2002, ISBN 978-1-92-950014-7 .

swell

  1. springer.com: Business Case - Basics
  2. projektmanagementhandbuch.de
  3. Naumann: Business Analysis, pp. 58ff.