Build a Comprehensive Business Case

Help decision makers understand the ROI for large, complex projects using cash flow projections.

Analyst Perspective

ROI is overused and ill-defined business jargon.

“The number of organizations claiming to use return on investment (ROI) as a criteria in their project portfolio prioritization structure is high. However, the number of organizations calculating ROI for the projects in their portfolio is very low.

I’m not surprised by the discrepancy between this aspiration and actuality, but allowing ROI to be a heavily weighted criteria, to steer the direction of the portfolio, without having any defensible business cases, is detrimental to organizational effectiveness.

The lack of standardization, documentation, and financial analysis, facilitates an environment where business leaders make decisions blindly and by gut feel. And for every underperforming, poorly defined, and disappointing project that gets approved, the opportunity cost grows.

The objections to a formal business case process typically involve responses like: I don’t know how to create a business case, or I don’t have the right data, or it takes too much time.

So how do we solve this conundrum? Well to address the first concern, it’s time to create a template. It’s both inefficient and ineffective to start from scratch every time. A template allows decision makers to understand what they’re looking at and helps requestors understand what information they should be looking for when building their business case.

To find the right data, you may need guidance from outside your department, specifically from finance or procurement. Collaboration is key to creating a thoughtful and defensible document.

To avoid taking too much time, use the business case process sparingly. Not every project needs a business case. There is a cost to building the case itself. Use proper project classification to build business cases for requests that have enough risk, complexity, and magnitude to warrant the additional cost.”

Teodora Siman Research Director, PPM Practice Info-Tech Research Group

Executive Summary

Info-Tech Insight: Financial analysis is not the business case, but it makes your business case defensible.

EXECUTIVE BRIEF

Place the burden of proof on the project

Large, complex, risky endeavors require scrutiny. Dream big, but balance aspirations with feasibility. Business case analysis must be defensible and thorough because there is always an opportunity cost to approving the wrong projects.

Insight summary

Overarching Blueprint Insight: Financial analysis is not the business case, but it makes your business case defensible.

The outputs of various calculations are critical to standardize a business case process. However, finance is part science and part art. The business case should transparently represent the assumptions built into the analysis and should overtly explain what those numbers mean, and what the implications of the numbers are, to the audience reviewing the documentation.

Phase 1 Insight: Lack of fungibility between business cases misrepresents project value.

When decision makers can’t compare across a standard format, the risk of malinvestment increases.

Clearly define ROI calculations and other business case KPIs to uphold the integrity of your business case process. It is insufficient to state that ROI should be provided for the business case.

Should ROI be represented as a percentage, pay-back period, or dollar amount? Should it include TCO or just project costs? How is the forecast period determined? Does time zero begin once the project is finished, or when the project is starting?

Slight variations in calculations can have a big impact on results. Collaborate to define the necessary KPIs and calculations for the business case standard.

Phase 2 Insight: A process without governance will dissolve or diverge and become unrecognizable before it is adopted.

Have a clear and agreed upon RACI for the business case process.

Failing to assign responsibility and accountability for creation, validation, and approval of the business case will result in either chaos or complete abandonment of the process.

Be mindful of the expertise and authority each role must have to effectively govern the process.

Phase 3 Insight: A comprehensive business case may not apply to every project.

Determine when it makes sense to invest the time and money to develop a comprehensive business case. Where the risk is low, the project is simple, and the work effort is minimal, there is no sense in requiring a comprehensive business case.

The only thing that applying a one-size-fits-all approach to the business case process will do, is ensure exceptions are made regularly and the standard process is not followed.

Overprescribing business cases dilutes the gravity of overstating earnings and understating costs.

What is a business case?

Defined by the Oxford English Dictionary as:

“A justification for a proposed project or undertaking on the basis of its expected commercial benefit.”

Why are business cases important?

Market Overview in Historical Context

Every project needs a business case. Sort of.

“It’s often said that every project needs a business case. And for a lot of organizations, the entire intake scoring paradigm is based around return on investment (ROI).

But the practical reality is that very few IT projects are supported by a business case that would be recognized by Finance as being legitimately based on an appropriately comprehensive cash flow projection with revenue or income in the bottom half of the P&L.

For context, the early era of corporate information technology involved business cases with a serious commitment to costs and benefits. Misrepresentation of those financial drivers was seen as a grave injustice to the shareholder. Sure, the inability to forecast or constrain cost was legendary and the attainment of benefits was dubious, but the deliberate misrepresentation of the business case was unacceptable.

The ‘.com’ era of the late nineties changed everything. As business units and IT competed for scarce resources and executive attention, it became acceptable to inflate benefits forecasting with hockey stick hypergrowth in year three or four. It was probably impossible to get your project funded without a blatant lie, and a completely fabricated business case was increasingly seen as charming in an ‘aw shucks’ sort of way. Junior IT executives would shrug with a wry grin and say, ‘that’s how you play the game’ as they claimed multi-trillion dollar returns on their pet projects.

For the next 10 or 15 years, the business case became imperative but aspirational. The authors were rarely held to account for an actual cash flow projection, and ROI payback periods went largely unchallenged. The actual contribution to intake assessment was weak.

We are only now seeing the resurgence of business case legitimacy. As Finance reengages on the auditability of business cases, IT may have to relearn the age-old discipline of cash flow projection.”

Barry Cousins
PPM Practice Lead
Info-Tech Research Group

How can Info-Tech’s approach help?

Info-Tech’s methodology for building a robust business case

Blueprint deliverables

Each step of this blueprint is accompanied by supporting deliverables to help you accomplish your goals:

Key deliverable: Business Case Executive Presentation Deck Make your analysis consumable and meaningful with the Business Case Executive Presentation deck.

Business Case Classification Matrix Info-Tech’s Business Case Classification Matrix can be used to develop a rubric that can assess the requirement to produce a business case for a potential project. This approach will help you create a standard and remove the subjectivity often involved when deciding whether a project request warrants the effort to go through business case development during project intake.

Comprehensive Business Case Analysis Tool Info-Tech’s Comprehensive Business Case Analysis Tool can be used to help develop steering-committee-ready deliverables for your proposed projects. Features include: A configurable calendar and cost/benefit allocation cadence (e.g., months, quarters, or years). The ability to develop a cost-benefit analysis from one to four options. A robust set of graphs and reports that can go into a presentation template.

Info-Tech offers various levels of support to best suit your needs

Diagnostics and consistent frameworks used throughout all four options

Guided Implementation

A Guided Implementation (GI) is a series of calls with an Info-Tech analyst to help implement our best practices in your organization.

A typical GI is between four to five calls over the course of two to three months.

What does a typical GI on this topic look like?

Workshop Overview

Contact your account representative for more information.
workshops@infotech.com1-888-670-8889

Phase 1

Speak the language of the business

This phase will walk you through the following activities:

• 1.Defining ROI
• 1. Considerations when calculating ROI
• 1.3 Understanding business benefits

This phase involves the following participants:

• Portfolio manager
• PMO analyst
• Business analyst
• Business relationship manager
• Business unit representatives

Step 1.1

Understand the terms and context to build a business case

Activities

• Define ROI and variables
• Review business case terminology
• Understand business benefits

This step involves the following participants:

• Portfolio manager
• PMO analyst
• Business analyst
• Business relationship manager
• Business unit representatives

Outcomes of this step

• Aligned IT and Business stakeholders on business case terms
• Documented goals of the business case process

Unpack the Hype Around Return on Investment (ROI)

The fascination with requiring project ROI is common among our member base. However, it’s not typically the PMO requiring it. Most often it’s the CIO or CFO.

The many variables affecting ROI

Context is important. The organization needs to have a standard way of calculating ROI, and those determining, aiding, or evaluating the business case should be familiar with the necessary components.

Apply Estimated Useful Life (EUL) to get the proper timeline for your business case

Estimated Useful Life is applied to capital expenditures.

You’ve probably heard the term CapEx thrown around the organization a fair bit. CapEx or Capital expenditures are typically part of large projects and require a significant investment. Capitalization thresholds vary from organization to organization, but the general idea is that capital expenditures will generate revenue for more than one year. Capital expenditures are recorded as assets and then depreciated over their estimated useful life. Useful life refers to the number of years the asset is likely to remain in service. So why, despite different useful lives, do some organizations insist on analyzing the same time horizon for their business cases? Doing so neglects projects that perhaps have massive benefits beyond the three-year mark. It also fails to account for delayed benefits across the life of an asset. For example, delayed benefits can be the result of the steep learning curve that impedes adoption and delays the realization of benefits.

Time Value of Money: A dollar today is now worth more than a dollar tomorrow

Time Value of Money is an important principle of finance. In simple terms, due to the combination of inflation and opportunity cost, a dollar today is more valuable than a dollar tomorrow.

Let’s take a look at a simple example regarding inflation: If an organization has $1 million dollars today and let that money sit in a bank account for five years, they will likely be able to buy less in five years with that money than they could today (Recognizing the modern era of Central Bank interest rate policy). Their purchasing power has gone down because costs have gone up due to inflation. Hence, a dollar today, is worth more than a dollar tomorrow. Let’s take a look at a simple example regarding opportunity cost: If an organization could increase earnings by $250,000 in two years from implementing system A, and $550,000 in two years from implementing system B, their opportunity cost for choosing system A is $300,000. Because of multiple opportunities and their potential pay-off, again a dollar today is worth more than a dollar tomorrow.

Opportunity Cost Defined: “The potential benefit foregone from not following the financially optimal course of action.” (Berman, Knight, Case, 2013)

Demystifying the weighted average cost of capital (WACC) and the hurdle rate

Even if you’re not in finance, it’s important to understand what the weighted average cost of capital signifies.

The WACC indicates the minimum return that an asset must make to satisfy all the stakeholders (lenders and owners) that provide capital (money) to the organization. It’s a calculation that requires knowing the interest cost on the company’s debt, interest rates in the market, the company’s tax rate, and the proportion of debt and equity that the organization uses to fund its operations. Bottom Line: the organization shouldn’t invest in projects where the rate of return doesn’t meet the WACC. The hurdle rate is a term used for the required rate of return. The organization can have varying hurdle rates based on the project risk. The most important thing to note is that folks in finance should be able to provide you with the hurdle rate. Your job is to understand what the hurdle rate means and where it came from.

Net Present Value (NPV): Discounting Cash Flows Into Today’s Dollars

How do WACC, hurdle rate, and the time value of money all tie together?

When can I expect to get my money back? Identifying the Payback Period.

A simple and straightforward way to determine the value of project benefits is to calculate the payback period.

Cash-Flow Analysis: How much money are we making?

	Cash is king and without it, your projections can be misleading. Neglecting cash flow may present a falsely optimistic view of the project.	Cash-flow analysis can be very telling about the viability of a project. It can help reason through why a profitable project may run out of cash.
Cash-flow analysis can be done in different increments of time, but it is typically analyzed monthly. Think about the cash flow as you would a bank account. Using the direct method for calculating cash flow, you are literally adding up and subtracting cash inflows and cash outflows for each period to calculate the net cash flow or what’s left in the bank account after all of your spending. This is the method used in our Comprehensive Business Case Analysis Tool. It’s important to understand that a company can still be profitable without cash and this is because by using an income statement: Revenue is recorded at the time of sale not at the time of the cash transaction Expenses may not reflect when they were paid Capital expenditures are recorded as assets and don’t count against profit even though they are paid for in cash (Financial Intelligence)

Depreciation: Accounting for the wear on an asset

When new machinery or equipment is purchased, it is often expected that it will be used for more than one year. But that doesn’t mean it’s going to last forever. Life beyond one fiscal year is a reason why tangible property as well as certain intangible property (i.e. intellectual property, patents) can be capitalized and listed as assets for an organization. However, the asset doesn’t stay in perfect condition. To account for the loss in value over time, assets can be depreciated. This means a portion of the asset value is expensed each year. Some assets/organizations use straight-line depreciation, where the same amount is depreciated over the life of the asset. Other assets/organizations use declining balance depreciation, where a bigger portion of the asset is expensed during the first few years and then less and less is depreciated in the subsequent years over the life of the asset. You will not need to calculate depreciation for your business case if you are using the direct cash-flow method, but it’s important to understand its relationship with estimated useful life.

Key Takeaway: Assets have an expected or estimated useful life. When building your business case, you will want to build out the time horizon to match the useful life of the asset to get a clear picture of the cost/benefit.

Factor in confidence for each scenario

Identifying your preferred vendor and less desirable option is great, but remember to complete a sensitivity analysis. Your preferred vendor may have a stellar outcome based on your projections, but how confident are you that it will happen? What if your increase in revenue didn’t go up by 20% as you had predicted, but instead by 15% or 10%. How does that outcome affect your net cash flow each year? Are you still able to generate a positive return on your investment? Maybe you are more confident about your numbers for the less desirable option. How do those numbers compare to the confidence you have in the preferred vendor? Considering confidence for each option can help set a more realistic comparison and allows business leaders to make decisions with their eyes open.

Sensitivity Analysis Defined: “[Financial Sensitivity is a] tool used in financial modeling to analyze how the different values of a set of independent variables affect a specific dependent variable under certain specific circumstances.” (Corporate Finance Institute, 2015)

Don’t neglect the status quo

Always consider the do-nothing option. If we do nothing, how much better or worse do we fare?

While it might be exciting to consider all of the possibilities that new technology offers; it’s always a good practice to compare these scenarios with the status quo. After all, if we could do nothing and end up in a similar position without having taken on any risk, then that is seriously worth considering. As a business case developer or approver of the business case, this is a scenario that should be standard in the analysis. In many cases, the status quo may emphasize why the need for change is urgent and important. For instance, perhaps the current system will be end of life and that poses a big risk to revenue-generating processes. Or perhaps refusing to take action might put the organization out of compliance and having to incur a hefty fine. The status quo can set up your call to action. There are often less unknowns in the analysis making it the more accurate forecast.

Top-line versus bottom-line benefits

• The colloquial business terms top-line and bottom-line can be helpful categories for types of business benefits. This categorization can get requestors and sponsors thinking about whether this project is going to increase the money coming into the organization or help decrease the amount of money going out of the organization. Top-line refers to gross revenue, while bottom-line refers to net profit. Both are beneficial!
• Top-line is associated with growth – it refers to the gross revenue or total sales an organization records on its Income Statement. Often, top-line benefits are the ones that get executive attention. For example, if we do X project, we can increase average selling price by 10%, which will contribute positively to our top-line. Or, if we do Y project, we can bring in 100 more customers every year, which will contribute positively to our top line. Another example would be, if we do Z project, we can get each customer to buy two times more product, which will double our top line.
• Often IT departments struggle articulating business benefits for their projects because they are narrowing in on the top-line benefits. For example, if we negotiate a new ISP contract that is now 10% less expensive, that doesn’t contribute to the top-line. However, it does reduce expenses for the organization, which can be very beneficial in increasing our bottom-line.
• Another example might be that an IT department enables a hybrid work environment where 40%-50% of staff are now fully remote, which allows the organization to lease a smaller office space. In this case, fixed overhead such as rent and utilities are reduced and the bottom-line increases. Projects relating to compliance and regulations, technical debt, and application rationalization can greatly contribute to a better bottom-line.

1.1.1 Define the rationale and goals of the business case process

Input: Understanding of business case components, terms, and their importance

Output: business case process rationale and goals

Materials: Whiteboard

Participants: Portfolio manager, PMO analyst, Business analyst, Business relationship manager, Business unit representatives

Setting up a process without a clear purpose and set of goals will leave many stakeholders unmotivated to engage and adopt.

Take time to establish a cross-functional group that can identify the goals of the business case process.

1. Collaborate to get insight on the goals of the business case process. It may be helpful to start out with everyone thinking about the problems with the current process and how those could be solved with more formality around business case development and approval.

For example:

• To reduce the risk of approving the wrong projects
• To minimize opportunity cost
• To define project success using measurable KPIs
• To hold people to account on the promises they make when they require significant access to human and financial capital
2. Once these are written down, look for similarities between ideas to develop common themes for the goals.
3. Document the goals and keep them handy for the next phase of this blueprint to ensure the group is neither over nor under engineering the process based on the agreed upon desired outcomes

Phase 2

Customize Business Case Framework and Governance

This phase will walk you through the following activities:

• Determining your business case levels
• Defining the business case governance
• Creating the business case workflow

This phase involves the following participants:

• PMO director
• Business analysts
• Business relationship managers
• IT Steering Committee

Step 2.1

Determine your business case levels

Activities

• Build a Business Case Classification Matrix

This step involves the following participants:

• PMO director
• Business analysts
• Business relationship managers
• IT Steering Committee

Outcomes of this step

• Business Case Classification Matrix

When is a business case necessary?

Not all projects are created equal, and neither are all organizations.

The best way to determine when a business case is necessary is to design an approach tailored to your organization that can be standardized across all project requests. You might be asking, why do we need to tailor? There are two critical reasons. The first is that we should not allocate the time and money required to build a business case to all projects. This would be unnecessary overhead, often squandering organizational resources. For example, we don’t want to spend 40 hours and $2,000 on a business case for a project that is going to take 40 hours and requires only internal resource costs. The second is that the range of project types is vastly different from across organizations. This means that for one organization a project taking 200 hours might necessitate a business case, where as another organization might decide that anything taking less than 500 hours doesn’t require a business case. This depends on the appetite for analysis from leadership or the organization’s resource capacity, but ultimately it comes down to the organization’s risk tolerance.

Prepare your requestor for the business case requirement. Make it known where support can be found. This might come from a resource within the finance department, or a business analyst/business relationship manager who is part of the PMO, or a combination of both. Make it reasonable for requestors to reach out and collaborate. Our last intention with a business case process is to stifle innovation or frustrate stakeholders to the point where they decide to circumvent the process entirely.

2.1.1 Create a Business Case Classification Matrix

Input: List of key business case process decision points, List of who is involved in the business case process

Output: business case process RACI

Materials: Business Case Classification Matrix

Participants: PMO, Business leaders, Finance, Business analysts

• The ability to develop a comprehensive business case hinges on the understanding that not every project needs one. In fact, most projects, do not. This process should be reserved for the projects that have commensurate risk, size, and complexity.
• Being able to classify projects according to such factors will help you put projects in the appropriate queue for business case development.

Set the groundwork for right-sizing. This involves three objectives:

1. Criteria: Determine the right criteria to evaluate the rigor necessary around the business case process. i.e., budget, work effort, number of departments involved, etc.
2. Levels and thresholds: Establish proper levels and thresholds for each criteria. Consider what would help distinguish a high-risk project that warrants extra scrutiny from a low-risk project that can be confidently executed. Is a budget over $50,000 the threshold for a comprehensive business case or is it a budget over $500,000? This will vary by organization.
3. Evaluating and refining: Apply the framework to a set of projects and validate the suggested business case process the spreadsheet proposes. Refine the framework, as necessary. Once it passes the test, apply it consistently to all new requests.

Download the Business Case Classification Matrix

Determine metrics to keep your business case process effective and not burdensome

The business case process should be a mechanism to help leadership determine the right projects for the organization, not unnecessary overhead.

1. Time: The creation of a business case should not take an undefined amount of time. Prolonging the process may reduce organizational agility and lead to effort to circumvent it as a hurdle.
2. Bottlenecks: There will be challenges in your processes that are systemic and produce delays. Including them in estimates as an element of organizational reality will create cases with more feasible timelines.
3. Precision: Information will not always be available, and in some cases, estimates will rely on partial data or assumptions that were not signed off on. Decisions will need to be made with a recognition that there is an allowance for error.
4. Strategic Relevance: Some cases will be more strategically important than others, which may relegate the cost and time constraints typically assessed to a lower priority.
5. Cost: Business cases, particularly ones involving complex systems, will require an expanded effort to gather and synthesize information. Consider how much internal or external investment the organization will dedicate to the task.

Step 2.2

Develop a business case RACI

Activities

• Assign responsibility for business case creation
• Determine accountability for business case validation
• Determine business case approver

This step involves the following participants:

• PMO director
• Business analysts
• Business relationship managers
• IT Steering Committee

Outcomes of this step

• business case process RACI

Assign clear responsibility for the creation of the business case

Everyone wants a business case to evaluate, but nobody wants to build or develop the business case.

The PMO often has to create a business case for someone else’s idea. It’s okay to build your own business case, but it makes less sense to have someone else create it when they are not the subject matter expert or the recognized authority on the topic. It sets the project up for failure from the start if the sponsor is not passionate about it. There needs to be a very clear distinction between PMO owning and understanding the business case process, i.e. providing the template, sharing the approval workflow, receiving or redistributing the results of the completed business case, versus building the business case.

The person responsible for building the business case must be qualified

Consider the important questions below

Who understands the benefits? Who can/already knows the end-user/functional requirements? Who can help determine cost? Who can help translate benefits and project costs into a defensible cash-flow projection? As you can probably see, there are likely going to be several stakeholders involved in the business case creation. You will likely need technical expertise, financial expertise, and overall business/strategy insight. However, it is effective to have someone from the business unit be responsible, or a BRM (business relationship manager) or BA (business analyst) that is closely working with someone from within the requesting business unit. This person will be your “R” on the RACI chart, while all the other contributing stakeholders will be your “C” on the RACI.

Who owns the business case? Narrow the accountability to one person

Like all processes, there is a difference between doing and owning.

There may be multiple people doing the work, but best practice states that it is most effective to have one who is ultimately answerable to the contents of the business case. Due to the nature of this role requiring authority within the organization, typically this falls on the shoulders of someone higher up in the organizational hierarchy. At the very least, this should be someone at the manager level in the organization, and depending on the structure this could extend up to the executive layer. The person who owns the business case should be prepared to defend the financials. Often, the owner of the business case is the sponsor or executive sponsor of the project. The owner should be prepared to contribute and provide feedback on the creation of the business case. This person will be your “A” on the RACI chart.

Business cases might be presented and evaluated in front of a panel or steering committee at the end of the scope development phase of project intake. It is always best practice to try and design a process that results in the more valuable projects making it to prioritization and resource allocation. Don’t lose sight of how the business case process will overlay your project intake workflow.

Who evaluates the business case?

Ensure that the evaluators of the business case do not have a conflict of interest to pursue the project.

To have the best projects move forward, the party that evaluates the business case remains as objective as possible. In fact, it can be worth considering having a consistent set of scoring criteria to measure the validity, as well as the merit of the business case conclusions. That is, can we reasonably trust the numbers, and if we do, are the proposed benefits enough to approve this business case for further scoring and approval by the project portfolio steering committee? This person or group will likely be your “I” on the RACI chart. Perhaps this group is the VP or department head, or perhaps it is the PMO or IT director, depending on the nuances of the intake process. Maybe it is Finance. Whichever group it is, make sure they know their role and have the authority to resist being bullied or unduly persuaded by the sponsor or business case owner.

2.2.1 Develop your business case RACI

1-3 hours

Input: List of key business case process decision points, List of who is involved in the business case process

Output: Business case process RACI

Materials: Whiteboard/Flip charts

Participants: PMO, Business leaders, Finance, Business analysts

1. As a group, have a discussion to identify key stakeholders in the business case process.
2. A RACI will help create a clear understanding of the tasks and expectations for each stakeholder at each process step, assigning responsibilities and accountability for the business case process. Use the considerations in the previous slides to identify the role best suited to be responsible, accountable, consulted, and informed.
3. As a reminder:
   1. Responsible: the role creating the business case
   2. Accountable: the role owning or answerable to the information in the business case
   3. Consulted: the role(s) participating in discussions and activities to develop the business case
   4. Informed: the role(s) notified when the business case has been developed to evaluate the information

Step 2.3

Create the business case process workflow

Activities

• Create the business case process workflow
• Communicate the workflow to relevant stakeholders

This step involves the following participants:

• PMO director
• Business analysts
• Business relationship managers
• IT Steering Committee

Outcomes of this step

• Business case process workflow

2.3.1 Craft and communicate your business case workflow

1-3 hours

Input: List of key roles involved in the business case process, List of steps required in the business case process

Output: Easy to digest business case workflow

Materials: Whiteboard/flip charts

Participants: PMO, Business leaders, Finance, Business analysts

• Take all the components listed in this step of the blueprint and craft the business case workflow with key stakeholders.
• List out your roles and your steps in chronological order and include your critical decision points. Try to balance detail with sustainability of the processes as well as readability of the workflow itself.
  • Don’t put so much detail that your organization cannot possibly sustain the amount of rigor, and don’t crowd the workflow with obvious information that doesn’t need to be part of the graphic.
  • Once your workflow is complete brainstorm how it can be represented as part of your project intake process.
  • Communicate the proposed workflow to anyone impacted by this new process. Remember to build in time to gather feedback and incorporate changes to your initial work.
  • Consider the importance of tailoring your message to each stakeholder group once the new process is rolled out. For the full methodology around the organizational change management process, see our blueprint Master Organizational Change Management Practices.

Phase 3

Leverage Info-Tech Tools and Templates to Develop your Comprehensive Business Case

This phase will walk you through the following activities:

• Using Info-Tech’s Comprehensive Business Case Analysis Tool
• Using Info-Tech’s Executive Business Case Presentation template

This phase involves the following participants:

• PMO director
• Business analysts
• Business relationship managers
• Project sponsors

Step 3.1

Get to know Info-Tech’s Comprehensive Business Case Analysis Tool

Activities

• Walk through the Set-up tab of Info-Tech’s Comprehensive Business Case Analysis Tool
• Walk through the data input tabs: initial costs, projected benefits, and maintenance costs
• Get familiar with the reporting tabs
• Activity 3.1.1: Prepare to develop your business case

This step involves the following participants:

• Business analyst or business relationship manager
• PMO staff
• Project sponsor

Outcomes of this step

• An understanding of how to use Info-Tech’s Comprehensive Business Case Analysis Tool

Get to know Info-Tech’s Comprehensive Business Case Analysis Tool

Our robust, yet scalable Excel-based business case tool can be used to help develop a purpose-built cost-benefit analysis.

Info-Tech’s Comprehensive Business Case Analysis Tool can be used in conjunction with this storyboard and our Business Case Presentation template to help develop steering-committee-ready deliverables for your projects with business case needs. Features of the Comprehensive Business Case Analysis Tool include: A configurable calendar and cost/benefit allocation cadence (e.g., months, quarters, or years). The ability to develop a cost-benefit analysis from one to four options. A robust set of graphs and reports that can go into a presentation template. See the slides ahead for a full explanation of the tool.

Download Info-Tech’s Comprehensive Business Case Analysis Tool

Items to note

The Comprehensive Business Case Analysis Tool is a complex spreadsheet. However, once you’ve noted a few housekeeping items up front, you should find the user experience to be straightforward and friendly.

1. Mind the cell shading; the colors are important to a frustration-free user experience. The cells within the tables on each of the tabs have been strategically shaded to help guide the user. Refer to the Cell Shading Legend found on the “Introduction” tab of the tool as you work your way through the tabs (see screenshot below).



2. Work within the logic of Power Query and Power Pivot. This spreadsheet uses Power Query and Power Pivot on its backend to help analyze data and create outputs. While these technologies make this spreadsheet more stable, scalable, and easy-to-use, there are a few items to be aware of in order to maintain proper tool functionality. Refer to the “A note about Power Query and Power Pivot” box on the “Introduction” tab to get familiar with these items.
3. Devote some time to proper set-up. The Comprehensive Business Case Analysis Tool is extremely customizable. While “comprehensive” is in the title, the tool can be configured to apply to a single solution, high-level business case up to a multiple solution, granular approach. Similarly, your cost and benefit data categorizations can be high-level or granular. Tab 1, “Set-Up,” is where you can configure the tool to your needs. Spend some time on this tab getting the set-up right before jumping into the cost and benefit tabs.
4. Note the instructional call-outs for columns and tables. When you download the tool, it will have instructional call-out boxes for many columns and tables. These boxes contain additional information that will make your use of the tool problem free. Take note of these instructions before deleting these boxes.

Set-up your calendar and solution options

The Comprehensive Business Case Analysis Tool allows you to customize calendar features to suit your needs and organization’s requirements.

Screenshots on this slide are of tables 1 and 2, tab 1, of the Comprehensive Business Case Analysis Tool

Table 1. Use the drop downs in C4 and D4 to select the year and month your project and business case calendar will start. This will determine the first costing period (the green “initial investment” period) in tabs 3, 4, and 5. In C5, select the bucket size for your cost/benefit forecasts--i.e., monthly, quarterly, bi-annually, or yearly. In C6, select the date period where the project delivery portion of the business case will end, but maintenance costs and benefit projections will still occur (your date options in this drop-down are determined by your inputs into C4, D4, and C5). In C8, select the end period for your business case. The corresponding cell in D8:10 will let you know the number of months, quarters, half-years, or years your end period represents. This will be the duration of your business case on tabs 3, 4, and 5.

Table 2. Enter the solutions you will be assessing in your business case in this table. There is only enough room for four solutions, and you do not have to use all four rows. If you are not using all four, leave all columns in unused rows in Table 2 blank. You can categorize your solutions by the categorization options in column D. There are four categorization options. You do not have to use all options and you should only use a categorization option once (i.e., do not use the same categorization for multiple options).

Set-up your cost and benefit categories

The last set-up items are cost and benefit categories. While your hurdle rate and options will change project to project, these can stay constant.

Screenshots on this slide are of tables 4, 5, and 6 on tab 1 of the Comprehensive Business Case Analysis Tool
Tier 1 is the highest level, and items in this table should be very high-level.	Tier 2 is the middle level, where you break your tier 1 categories into lower-level buckets. Use the dropdowns in the second column to connect your tier 2 items to their tier 1 categorizations.	Tier 3 is the lowest level, most granular bucket of cost categories. Use the dropdowns in the second column to create a connection between tiers 3 and 2; tier 1 will auto update based upon tier 2.
Your categories can be set up in the same manner in tables 8 and 9. The only difference is there are only two tiers for benefits categories.

Forecast your initial investments (1 of 2)

With the Set-up tab complete, you’re now ready to start building your business case. Tab 2 is where you forecast your initial investment (i.e., project costs).

Each of the options you set up on tab 1 will appear in the drop-down in column B. If you are analyzing multiple options in your business case, use the filter in column B to make data entry for each option easier.	Column E is an open text where you can describe each maintenance cost item.	Use the drop-down in G to categorize by expense type.
Columns C and D are calculated columns. They will populate according to your input into column F.	Use the drop-down in column F to categorize your cost items by your Tier 3 cost categories. Columns C and D will auto-populate based upon your setting in this column.

Forecast your initial investments (2 of 2)

In column J, enter the certainty or likelihood that your cost projections in columns L and beyond will not be impacted by identified risks and will be correct. The preferred and logical setting for this column is 100%, though it can be adjusted if need be.		The calendar in row 6 is configured via your set-up on tab 1.
In column K, enter the certainty or likelihood that your cost projections in columns L and beyond will be impacted by known risks, causing your projections to be higher than forecast. The percentage you put in this column will determine how much higher your cost projects are in the "worst case scenario" reports on tabs 5a to 5e	Columns L to BG are configured based upon your calendar set-up in tab 1. You should enter your projected costs under the relevant columns on this tab. Refer to the cell shading reference legend to properly understand the meaning behind the column header colors.

Forecast benefits and maintenance costs (1 of 2)

Tabs 3 and 4 of the Comprehensive Business Case Analysis Tool are where you enter your post-project benefit and maintenance projections.

Tabs 3 and 4 of the Comprehensive Business Case Analysis Tool function in the same way as tab 2. Insert rows for your options, use the dropdowns to categorize your data, and input your benefit and cost forecast under the appropriate date columns.

Screenshot of columns B to E on tab 3 of the Comprehensive Business Case Analysis Tool	Columns C is an open text where you can describe each benefit item.	Column D is calculated columns. It will populate according to your input into column E.
Each of the options you set up on tab 1b will appear in the drop-down in column B.		Use the drop-down in column E to categorize your benefit items by your Tier 2 benefit categories.

Forecast benefits and maintenance costs (2 of 2)

Screenshot of columns H to Q on tab 3 of the Comprehensive Business Case Analysis Tool
In column H, enter the certainty or likelihood that your benefit projections in columns J and beyond will not be impacted by identified risks and will be correct. The preferred input for this cell is 100%, but it can be adjusted.	In column I, enter the certainty or likelihood that your benefit projections in columns J and beyond will be impacted by known risks, causing your projections to be lower than forecast. The percentage you put in this column will determine how much lower your benefit forecasts are in the "worst case scenario" reports on tabs 5a to 5e.
	Columns J to BE on tab 3 are configured based upon your calendar set-up in tab 1. You should enter your projected solution benefits under the relevant columns on this tab. Refer to the cell shading reference legend to properly understand the meaning behind the column header colors.

Make use of your results

Tabs 5 to 5d are results tabs containing the outputs of the previous tabs.

The remaining tabs in the Comprehensive Business Case Analysis Tool are reporting tabs that contain data, charts, and graphs that can be used to quickly create a visual business case. Please note: tabs 5a-5d align with options A-D from table 2 on the Set-up tab, so depending on the number of options you are analyzing in your business case, some of the tabs may be blank. As covered in the next step, the visual outputs on these tabs can be used in Info-Tech’s Business Case Executive Presentation template. A screenshot of one of the charts from tab 5, showing comparative results of all solutions being assessed.

Screenshots from tab 5a, showing a summary of the best case scenario financial data and a cumulative cashflow projection for one solution.

3.1.1 Prepare to develop your business case

1 hour

Input: Calendar set-up requirements, Cost and benefit categories, Business case options, Cost and benefit forecasts for proposed options

Output: Project details for Business Case Executive Presentation

Materials: Comprehensive Business Case Analysis Tool

Participants: Project sponsor, Business analyst or business relationship manager, PMO

Now that you understand the functionality in the Comprehensive Business Case Analysis Tool, you’re ready to start developing your business case.

• Calendar set-up: Unless your organization has a prescribed standard, work with your sponsor and PMO to determine the horizon of your business case and an appropriate allocation cadence (e.g., monthly, quarterly, or yearly).
• Hurdle or WACC set-up: As discussed, you’ll need to work with your peers in Finance to determine an appropriate rate. This can sometimes be project specific and subject to risk and other factors.
• Cost and Benefit forecasts: Determining these forecasts can require research and interviews with internal and external SMEs. Refer to the RACI developed in activity 2.2.1 of this blueprint, and be sure to allow yourself time to schedule required time with SMEs and other stakeholders.

Download Info-Tech’s Comprehensive Business Case Analysis Tool

Step 3.2

Develop an executive business case presentation

Activities

• Determine scope and goals of the presentation
• Develop a concise and insightful presentation
• Practice and deliver presentation to key stakeholders

This step involves the following participants:

• Project sponsor
• Business analyst
• PMO analyst

Outcomes of this step

• Executive Business Case Presentation
  

Make sense of the data with an executive presentation

Define the scope and goals of the presentation

Time How long do you have to present? How much time do you need for discussion and questions?

Audience Who are you presenting to? Who has the final decision-making authority?

Outcomes Are we getting approval for the project to be prioritized, or final approval for the project to be started?

Content What is the audience expecting? How should you divide your time on the content?

3.2.1 Document product or service must-haves

1 hour

Input: Project Request Form, Project Scope Document, Benefits Commitment Form

Output: Project details for Business Case Executive Presentation

Materials: PowerPoint

Participants: Project requestor, Project sponsor, Business analyst, Business relationship manager

Use Info-Tech’s Business Case Executive Presentation to put all your hard work into a consumable and concise format. Bring your requestor, sponsor, and BA or BRM together to craft the high-level requirements you will be articulating to the leadership team.

• Customize slide 2: High-Level Requirements. Use this slide to communicate the functionality you are seeking from the product or service. The message should be short and sweet for the audience to get a sense of the project outcomes. These requirements should be designed with key stakeholders.
• If this is a “buy” project, this summary should remain vendor agnostic and can be the start of your demo script to evaluate your short-list of vendors.
• If this project is to be a “build” project, this list can help open discussions with the internal development team.

Business Case Executive Presentation

3.2.2 Articulate Business Rationale

1 hour

Input: Intake Request Form, Project Scope Document, Benefits Commitment Form

Output: Project details for Business Case Executive Presentation

Materials: PowerPoint

Participants: Project requestor, Project sponsor, Business analyst, Business relationship manager

Use Info-Tech’s Business Case Executive Presentation to articulate the business rationale for the proposed project.

• Customize slide 3: Business Rationale. Use this slide to communicate the business benefits of the project. Remember to include the proposed improvement associated with each benefit regardless of whether it is financial, quantifiable, or intangible. This is potentially one of the most important slides for the executive presentation, so spend time here to articulate clearly and concisely.
• The content in this slide should not be new or a surprise. Following our project intake framework, business rationale should be articulated in the Intake request form and depending on your process may have been detailed by the sponsor in the benefits commitment form.

Executive Business Case Presentation

3.2.2 Showcase Alternatives Analysis

1-3 hours

Input: Comprehensive Business Case Analysis Tool

Output: Alternatives analysis for Business Case Executive Presentation

Materials: PowerPoint

Participants: Project requestor, Project sponsor, Business analyst, Business relationship manager, Finance

1. Using the financial analysis done within the Comprehensive Business Case Analysis Tool, put together the Alternatives Analysis for the Executive Business Case Presentation.
   • Introduce all the alternatives analyzed and why they were chosen for review
   • Compare costs across all options including capital costs, operating costs, and total costs for each option. Consider highlighting the option with the lowest cost.
   • Compare Net Cash Flow across all options and highlight the best result.
   • Showcase the cumulative cash flow for each option and make notes for discussion during your presentation for key statistics like breakeven point, total inflows, total outflows, etc.

Executive Business Case Presentation

3.2.3 Craft Final Recommendation and Appendix

1 hour

Input: Comprehensive Business Case Analysis Tool

Output: Final recommendation and appendix for Business Case Executive Presentation

Materials: PowerPoint

Participants: Project requestor, Project sponsor

1. Use the final recommendation slide to summarize the decision and rationale behind the chosen option. Customize the text, as necessary, to represent key points for the leadership team.
2. Use the appendix slides to show-case details to support your final recommendation. You do not need to use these slides as part of the executive presentation. However, you may want to pull them up as part of the question and answer period if the audience would like to dig further into the analysis.

Download Executive Business Case Presentation

Hone presentation skills before meeting with key stakeholders

Know your environment Think about your audience – would they appreciate you starting with the vision, or do they want you to get to the point as quickly as possible? Are they used to reviewing quantitative data on the spot, or would they prefer to have reviewed the numbers beforehand?

Be professional and confident State the main points of your presentation confidently. While this should be obvious, it is essential. Your audience should be able to clearly see that you believe the points you are stating. Present with lots of energy, smile, and use hand gestures to support your speech.

Connect with your audience Look each member of the audience in the eye at least once during your presentation. Avoid looking at the ceiling, the back wall, or the floor. Your audience should feel engaged – this is essential to keeping their attention on you. Avoid reading from your slides. If there is text on a slide, paraphrase it while maintaining eye contact.

Summary of Accomplishment

A comprehensive business case process for large, complex projects.

Throughout this blueprint you have become familiar with the basics of finance. You have determined the goals of your business case process and have worked to identify what projects necessitate a comprehensive business case.

Along with your team, you have determined the proper governance structure for the business case process and have developed a workflow to communicate to relevant stakeholders.

The blueprint has walked you through the Info-Tech tools and templates designed to complete the business case analysis and develop a clear and concise executive presentation.

This pilot can provide structure for the ongoing business case development, review, and approval process at your organization.

If you would like additional support, have our analysts guide you through other phases as part of an Info-Tech workshop.

Contact your account representative for more information.

workshops@infotech.com 1-888-670-8889

Additional Support

If you would like additional support, have our analysts guide you through other phases as part of an Info-Tech Workshop.

Contact your account representative for more information.

workshops@infotech.com 1-888-670-8889

To accelerate this project, engage your IT team in an Info-Tech workshop with an Info-Tech analyst team.

Info-Tech analysts will join you and your team at your location or welcome you to Info-Tech’s historic Toronto office to participate in an innovative onsite workshop.

The following are sample activities that will be conducted by Info-Tech analysts with your team:

Bibliography

Berman, Karen, et al. Financial Intelligence A Manager's Guide to Knowing What the Numbers Really Mean. Harvard Business Review, 2013.
Bonnis, Henri-Jean. “A Business Case? What for? Or the Importance of a Good Business Case.” PMI Montréal, 2019. Web.
Byatt, Gareth. “Delivering Project Benefits--a Practical Plan for Success.” Project Management Institute, Feb. 2010. Web.
HBR Guide to Finance Basics for Managers. Harvard Business Review Press, 2012.
Kennon, Joshua. “Understanding Top Line vs. Bottom Line on an Income Statement.” The Balance, 9 Oct. 2021. Web.
Larson, Elizabeth, and Richard Larson. “Creating Bulletproof Business Cases - Project Scope Analysis.” Creating Bulletproof Business Cases - Project Scope Analysis, Oct. 2011.
O'Hara, Carolyn. “The Right Way to Present Your Business Case.” Harvard Business Review, 16 May 2017.
“Pulse of the Profession (2020).” PMI, 2020. Web.
“Pulse of the Profession (2021).” PMI, 2021. Web.
Thorp, John. “Lies, Damn Lies and... Business Cases.” APM, 12 Apr. 2017. Web.
Ward, John, et al. “Building Better Business Cases for IT Investments.” MIS Quarterly Executive, Mar. 2008.
“What Is an Income Statement.” BDC.ca, n.d. Web.
“What Is Cash Flow? Almost Everything You Need to Know: Freshbooks Blog.” FreshBooks Blog - Resources & Advice for Small Business Owners, 9 Oct. 2021. Web.
“What Is Depreciation?” BDC.ca, n.d. Web.
“What Is Sensitivity Analysis?” Corporate Finance Institute, Jan. 2015.