What is Business Case Analysis?
Businesspeople everywhere are losing patience with management error. They also demand real accountability for decisions and plans. And, everywhere, the competition for scarce funds is increasing.
No surprise then, that many organizations now require business case support for project, product, investment, and capital acquisition proposals.
Business Case Definition
Even though everyone talks about the business case, surprisingly few really know what that means. Few understand the full business case definition correctly:
The Business Case is an analysis, meant to produce two kinds of results. A successful case delivers
- Forecasts. The business case asks “What happens if we take this or that action?” The case answers in business terms: business costs, business benefits, business risks.
- Proof. Reasoning and evidence make the case for choosing one action over another. The case proves in compelling terms why the chosen action is the better business decision.
Businesspeople sometimes call BCA by other names, probably to highlight the particular focus of a study. They may call it Financial Justification, Cost-Benefit Analysis (CBA), Total Cost of Ownership Analysis (TCO), or even Return on Investment Analysis (ROI). In any case, what they mean with these terms usually fits the two-part BCA definition above.
Decision makers and planners rely on solid business case analysis to build the understanding and confidence they need to take action. They need credible forecasts, but they also need trustworthy proof they are choosing the best course of action.
Five Reasons to Write a Business Case: What’s the Purpose?
Businesspeople turn to business case study examples analysis to meet a variety of business needs.
- Financial Justification.
The justification case demonstrates that an action meets one of three criteria. The proposed action:
- Earns enough to cover its costs (“pays for itself”).
- Is more profitable than other available options.
- Is the lowest cost solution available.
- The analyst must designate one of these as the meaning of justification for a given proposal.
- Decision Support
Given two or more possible courses of action, the business case provides objective, quantitative measures for deciding which action is the better business decision. The case also shows whether or not the business risks with possible actions are acceptable.
Capital review committees, for instance, rely on business case analysis to help prioritize and choose from among incoming funding proposals.
- Business Planning.
The business case can deliver accurate forecasts of future spending needs and incoming revenues.
- Management and Control.
For project and program managers, the case reveals critical success factors and contingencies they must manage to target levels. For business investments of all kinds, the business case provides practical guidance for minimizing costs, maximizing returns, and mitigating risk.
A solid case shows directors, regulators, and government authorities that decisions were made responsibly, with sound judgment, conforming to laws and policies.
The case builder may start with one of these roles in mind, several roles, or all five.
Who Builds the Business Case?
Businesspeople are finding that business case is no longer just a job for Finance in the back office. Financial knowledge helps in every step of the case building process, of course, but the most useful BCA knowledge lies elsewhere. The people best prepared to build the case are those who
- Know the details of day-to-day operations in the business unit.
- Understand the drivers for employee and group performance.
- Have a successful track record managing projects and programs.
As a result, case-building responsibility today rests squarely on those who propose and those who take action. Product managers, engineers, consultants, project managers, IT directors, line managers, and others “in the trenches,” are learning that meeting business case needs means building the case themselves.