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Build a Comprehensive Business Case

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

Determining project ROI is difficult because:

  • Many ideas are half baked
  • No one defined what they meant by project ROI
  • The requestor expects the PMO to come up with the business case for their project

Trying to develop ROI for projects without input and guidance from your leadership team and finance department is a sure-fire way to fail.

Our Advice

Critical 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.

Impact and Result

  • Collaborate to define the necessary KPIs and calculations for the business case standard.
  • Have a clear and agreed upon RACI for the business case process.
  • Determine when it makes sense to invest the resource time and money to develop a comprehensive business case.

Build a Comprehensive Business Case Research & Tools

1. Build a Comprehensive Business Case Storyboard – A step-by-step document that walks you through how to properly develop a defensible business case.

Use this research to understand the finance basics, determine business case governance and when a business case is necessary, complete business case analysis, and build a comprehensive executive business case presentation.

2. Business Case Classification Matrix – An excel tool to help you determine the right criteria to evaluate the rigor necessary around the business case process.

Use this tool to classify your projects to help determine the appropriate queue for business case development.

3. Comprehensive Business Case Analysis Tool – An excel tool to complete your business case financial analysis.

Use this tool 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, and a robust set of graphs and reports that can go into a presentation template.

4. Executive Business Case Presentation – A PowerPoint template to aggregate your business case analysis into a consumable and concise format.

Use this template to put your analysis into a consumable and concise format. Bring the requestor, sponsor, and BA or BRM together to craft the presentation you will be articulating to the leadership team.


Workshop: Build a Comprehensive Business Case

Workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn't enough, we offer low-cost delivery of our project workshops. We take you through every phase of your project and ensure that you have a roadmap in place to complete your project successfully.

Module 1: Define the Current State

The Purpose

  • Align stakeholders on terminology and goals

Key Benefits Achieved

  • Develop stakeholder buy-in for the process rationale

Activities

Outputs

1.1

Review the business context

1.2

Identify the current pain points around business case development

  • SWOT Analysis
1.3

Become familiar with business and finance terminology

  • Business Case Process Start-Stop-Continue
1.4

Understand the key elements of a business case

  • Goals for the business case process

Module 2: Develop Business Case Framework and Governance

The Purpose

  • To clarify roles and responsibilities

Key Benefits Achieved

  • Develop a repeatable and enforceable business case process

Activities

Outputs

2.1

Develop a Business Case Classification Matrix

  • Business Case Classification Matrix
2.2

Determine responsibility, accountability for the business case, as well as who should be consulted and informed

  • Business Case Process RACI
2.3

Draft a workflow to detail the business case development and approval process

  • Business Case Development Workflow

Module 3: Pilot the Comprehensive Business Case Analysis Tool

The Purpose

  • Pilot a project for the business case development process

Key Benefits Achieved

  • Get familiar with Info-Tech’s Comprehensive Business Case Analysis Tool

Activities

Outputs

3.1

Brainstorm a candidate to pilot

  • Comprehensive Business Case Analysis
3.2

Set up the comprehensive business case analysis tool

3.3

Populate the project costs

3.4

Populate the ongoing maintenance costs

3.5

Review the results of the analysis

Module 4: Develop an Executive Business Case Presentation

The Purpose

  • Articulate the analysis and benefits of your pilot project to the leadership team

Key Benefits Achieved

  • Get familiar with Info-Tech’s Executive Business Case Presentation

Activities

Outputs

4.1

Determine the appropriate audience and forum for the business case presentation

  • Executive Business Case Presentation
4.2

Craft a presentation using the Executive Business Case Presentation template and make the final recommendation

4.3

Develop a roadmap to operationalize the process for business case development

  • Process Implementation Roadmap

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.”

Photo of Teodora Siman, Research Director, PPM Practice, Info-Tech Research Group.

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

Executive Summary

Your Challenge

Determining project ROI is difficult because:

  • Many ideas are half baked
  • No one defined what they meant by project ROI
  • The requestor expects the PMO to come up with the business case for their project

Trying to develop ROI for projects without input and guidance from your leadership team and finance is a sure-fire way to fail

Common Obstacles

When you’ve tried implementing a business case process in the past:

  • It became clear that decision makers like saying “ROI” more than they like calculating it
  • Requestors had a barrier to obtaining the data to building the business case
  • Nobody could define what the business case template should look like

Making business cases a universal requirement for projects has diluted their impact.

Info-Tech’s Approach

Build a better business case:

  • Understand the finance basics
  • Determine business case governance
  • Determine when a business case is necessary
  • Complete business case analysis
  • Build a comprehensive business case document

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.

Visualization of an iceberg with a large-looking portion above the water labelled 'What organizations need to focus on', but a larger portion of it under the water is labelled 'What organizations overlook'. What organizations focus on: 'Business Value - The projected business benefit from delivering the product or service', 'Increase Number of Customer Acquisitions', 'Improve Customer Loyalty', 'Increase Revenue', 'Reduce Competitive Risk', 'Avoid Non-Compliance Penalties'. What organizations overlook: 'Ongoing Maintenance Costs - The perpetual costs required to keep the product or service up and running', 'Training', 'Support', 'Ongoing Infrastructure Costs'; and further down: 'Project Costs - The initial capital outlay and other expenses associated with completing the project', 'Licensing Fees', 'Facilities', 'Salaries & Wages', 'Hardware & Software'.

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.”

Business cases should:
  • Help decision makers with project prioritization decisions
  • Offer the business rationale for undergoing the project effort
  • Quantify the project costs and benefits
  • Examine alternative solutions
  • Conduct sensitivity analysis to mitigate risk
  • Be rooted in transparency and aim to lead the reviewer through the assumptions and thought process that was used

Many organizations forget to consider the ongoing cost of maintaining a new product or service. These costs can truly make or break the business case. A TCO calculation will give a more honest view into the potential upside of the project, while providing forethought to the transition to operations.

While 96% of respondents said they develop business cases for most projects involving IT… (Source: APM, 2017)

…only 31% of respondents said they were satisfied with the effectiveness of the business case process (Source: APM, 2017)

Why are business cases important?

Neglecting to build business cases for large projects means:
  • Costly projects that don’t provide any significant return or benefit to the organization are completed
  • There is no easy way to hold the sponsor accountable for the project or of showcasing it as a success or failure
  • There will never be historical data to help with future forecasting efforts
  • There is a risk of starting the project without a clearly defined outcome and direction for the project team
  • Squeaky wheels will dominate the project portfolio prioritization process
  • We can’t credit projects for improving business goals

70% of respondents said they place a high priority on a culture that centers on delivering customer value. (Source: PMI, 2020)

Without a point-in-time analysis and a forecast of the business outcomes it becomes difficult to understand if project benefits are leading, lagging, or even realized at all.

38% of respondents believed their current approach led them to frequently overstate the benefits to obtain funding. (Source: MIS Quarterly Executive, 2008)

If a business case process is just a formality to secure funding and it neglects post-project reporting to obtain actual results, the structure is incentivizing a behavior to inflate proposed business benefits.

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?

Benefits may quickly be overshadowed by the project and ongoing maintenance costs.

Visualization of an iceberg with a large-looking portion above the water labelled 'What organizations need to focus on', but a larger portion of it under the water is labelled 'What organizations overlook'. What organizations focus on: 'Business Value - The projected business benefit from delivering the product or service', 'Increase Number of Customer Acquisitions', 'Improve Customer Loyalty', 'Increase Revenue', 'Reduce Competitive Risk', 'Avoid Non-Compliance Penalties'. What organizations overlook: 'Ongoing Maintenance Costs - The perpetual costs required to keep the product or service up and running', 'Training', 'Support', 'Ongoing Infrastructure Costs'; and further down: 'Project Costs - The initial capital outlay and other expenses associated with completing the project', 'Licensing Fees', 'Facilities', 'Salaries & Wages', 'Hardware & Software'.

The Info-Tech difference:

  1. Offer insight into the often-intimidating terminology used by executives.
  2. Help standardize the threshold and governance surrounding the comprehensive business case process.
  3. Provide templates to develop a strong financial analysis for your projects

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

Speak the Language of the Business Customize your Business Case Framework and Governance Leverage the Info-Tech Tools to Develop Your Comprehensive Business Case
Phase Steps
  1. Understand the terms and context to build a business case
  1. Determine your business case levels
  2. Define the business case governance
  3. Create the business case workflow
  1. Learn to use the Comprehensive Business Case Analysis Tool
  2. Craft your Executive Business Case Presentation
Phase Outcomes
  • Unpack the hype around Return on Investment (ROI)
  • Establish the payback period
  • Understand the gravity of the time value of money
  • Structuring a cash flow analysis
  • Accounting for risk
  • Establish business case levels
  • business case governance, and
  • business case workflow
  • Completed Business Case Analysis Tool
  • Executive Business Case Presentation

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.

Sample of Info-Tech's key deliverable, the Business Case Executive Presentation Deck.

Sample of Info-Tech's Business Case Classification Matrix deliverable.

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.

Sample of Info-Tech's Comprehensive Business Case Analysis Tool deliverable.

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

DIY Toolkit

Guided Implementation

Workshop

Consulting

"Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful." "Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track." "We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place." "Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project."

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?

Phase 1

Phase 2

Phase 3

Call #1: : Scope requirements, objectives, and your specific challenges.

Call #2: Review the language of the business and unpack the hype around ROI.

Call #3: Customize your business case framework and governance. Call #4: Learn to use the Comprehensive Business Case Analysis Tool.

Call #5: Craft your Executive Business Case Presentation.

Workshop Overview

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

Day 1 Day 2 Day 3 Day 4 Day 5
Activities
Define the current state
Develop business case framework and governance
Pilot the Comprehensive Business Case Analysis Tool
Develop an Executive Business Case Presentation
Next steps and wrap-up (offsite)

1.1 Review the business context.

1.2 Identify the current pain points around business case development.

1.3 Become familiar with business and finance terminology.

1.4 Understand the key elements of a business case.

2.1 Develop your Business Case Classification Matrix.

2.2 Determine responsibility and accountability for the business case as well as who should be consulted and informed.

2.3 Draft a workflow to detail the business case development and approval process.

3.1 Brainstorm a candidate to pilot.

3.2 Set-up the comprehensive business case analysis tool.

3.2 Populate the project costs.

3.3 Populate the ongoing maintenance costs.

3.4 Review the results of the analysis.

4.1 Determine the appropriate audience and forum for the business case presentation.

4.2 Craft a presentation using the Executive Business Case Presentation template and make the final recommendation.

4.3 Develop a roadmap to operationalize the process for business case development.

5.1 Complete in-progress deliverables from the previous four days.

5.2 Set-up review time for workshop deliverables and to discuss next steps.

Deliverables
  1. SWOT Analysis
  2. Business case process start-stop-continue
  3. Goals for the business case process
  1. Business Case Classification Matrix
  2. Business case process RACI
  3. Business case development workflow
  1. Comprehensive Business Case Analysis
  1. Executive Business Case Presentation
  1. Workshop summary deck


Phase 1

Speak the language of the business

Phase 1

1.1 Understand the terms and context to build a business case

Phase 2

2.1 Determine your business case levels

2.2 Define the business case governance

2.3 Create the business case workflow

Phase 3

3.1 Learn to use the Comprehensive business case Analysis Tool

3.2 Craft your Executive Business Case Presentation

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.

Usually, it’s made to sound like ROI should provide an apples-to-apples comparison among various projects. It implies that ROI will allow steering committees or governance groups to make the right decisions about what projects should be approved based on their value proposition.

But how true is that statement? At a surface level, the definition of ROI is quite simple. Typically expressed as a percentage, ROI is calculated as the following:

Formula to calculate ROI: [(Gain from Investment - Cost of Investment) / Cost of Investment] x 100.

Let’s look at a simple example:
An organization is looking to purchase a new CRM software that is expected to generate $350,000. The cost of the new system is $250,000. Following the formula, the ROI would be:

Example ROI calculation: [($350,000 - 250,000) / $250,000] x 100.

ROI = 40%

Case closed, right? This is perhaps the simplest way to look at an investment. However, there are many things we haven’t considered…

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.

Accounting for the Time Value of Money:
  • What if the $350,000 is realized in 20 years? If we take the cost of the investment ($250,000) using a conservative inflation rate estimate of 2.5% annually for 20 years, we’d end up with $409,654. The benefit from this investment can’t even outperform the cost of inflation, so there isn’t a true return on investment. In fact, we’d be losing money taking on this project.
Accounting for Opportunity Cost:
  • The opportunity cost can be explained as the highest valued alternative use of a resource, in this case, money. What if you could generate $450,000 by selecting a different CRM solution? What if you could take that $250,000 and invest it in a different project and generate an 8% annual return on your investment? Analyzing the results in isolation doesn’t give leadership a full enough picture to make a go/no-go decision.
Accounting for Risk and Sensitivity:
  • What if the $350,000 is the best case scenario and it hinges on being able to acquire 30 new accounts every year, but your historical data tells you that the organization’s acquisition count is between 20 and 30 new accounts every year? There is a high probability that you will in fact, not be able to generate the $350,000.
Accounting for Estimated Useful Life of the Asset:
  • Let’s say you could generate $350,000 over eight years, but the asset’s will be end of life in three years, after which another $250,000 will have to be invested to renew the licensing agreement? To calculate the ROI properly, you must analyze the appropriate time horizon; useful life is a good indicator for the forecasting period required.

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.

Stock photo of an old, rusted car.

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.

Stock photo of someone placing coins on a hexgrid.

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.

Stock photo of an old-timey weight scale.

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?

Through the Net Present Value calculation.
  • Net Present Value requires an understanding of these concepts and uses them to help compare the project costs to the present value of the project benefits. It is perhaps the best method to make an apples-to-apples comparison of different projects, or even just to understand whether there is merit in moving forward with a specific project.

How to calculate NPV:

Step 1: Calculate the Present Value (PV)

PV = FV / (1+i)n

Step 2: Calculate the Net Present Value by subtracting the project cost from the present value of the project benefits.

NPV = PV - Project Cost

You don’t need a pen and paper to do these calculations. You can ask someone from finance to help or you can leverage our Comprehensive Business Case Analysis Tool.

If your NPV is equal to or greater than zero, then the project is worth doing.

This means the return is meeting or surpassing the hurdle rate and therefore the project is worth considering.

Stock image of a clock face spiralling downward into itself.

If the NPV is less than zero, the project is not worth doing.

This means that project costs surpass the present value of the project benefits when discounted at the hurdle rate.

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.

In order to calculate the payback period, you need to figure out the expected annual cash flow (benefit) and divide that by the original cost of the project.

Let’s use an example:
A company buys 200 new desktop computers at a cost of $400 each. The estimated useful life of the desktops is five years. This investment will result in an annual cash flow of $15,000.

Project Cost=$80,000
Annual Cash Flow= $15,000

Payback Period = 5.3

Project Cost ($80,000) /
Annual Cash Flow ($15,000)

Since it takes 5.3 years to return the cash and the EUL is five, this investment should not be made. The assets will no longer be in service to achieve the break-even point.

Now let’s change up the scenario and say that the annual cash flow is $25,000

In this case the payback period is 3.2 years. This means that after 3.2 years we will start to make money beyond the cost of our original investment.

The big drawback of this method is that it does not consider the time value of money.

Breaking even should perhaps be viewed as a minimal threshold. Almost all organizations want to make investments into projects that will take them way above the breakeven point.

A quick note on Internal Rate of Return (IRR):

To calculate how much higher or lower than the hurdle rate any given project is returning, you can set the NPV to zero and solve for the rate. This is referred to as the internal rate of return.

IRR can be misleading because it favors quick payback projects, and it does not define the dollar amount of the return like NPV does. For example, you could have a 200% IRR, but perhaps the dollar amount is only $1,000.

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

Stock photo of a king chess piece. Cash is king and without it, your projections can be misleading. Neglecting cash flow may present a falsely optimistic view of the project. Stock image of a blackboard with a pie chart representing 'Cash Flow' drawn on in chalk.

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.

Stock photo of a decaying highway.
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.

Stock photo of a confident person.
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.

Stock image of wavy strands beginning and converging at two opposite points.

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

1 hour

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.
  2. 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
  3. Once these are written down, look for similarities between ideas to develop common themes for the goals.
  4. 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

Phase 1

1.1 Understand the terms and context to build a business case

Phase 2

2.1 Determine your business case levels

2.2 Define the business case governance

2.3 Create the business case workflow

Phase 3

3.1 Learn to use the Comprehensive business case Analysis Tool

3.2 Craft your Executive Business Case Presentation

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.

Stock photo of a casual work group sitting around a coffee table.

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

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: 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.

Stock image of little business people around a giant clipboard and suitcase.

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.

Stock image of a completed checklist.

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.

Stock photo of an employee presenting an idea in a meeting room.

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.

Stock photo of an impressed panel of decision makers.

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

Phase 1

1.1 Understand the terms and context to build a business case

Phase 2

2.1 Determine your business case levels

2.2 Define the business case governance

2.3 Create the business case workflow

Phase 3

3.1 Learn to use the Comprehensive business case Analysis Tool

3.2 Craft your Executive Business Case Presentation

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

Sample of 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. Screenshot of the 'Cell Shading Legend' from Info-Tech's Comprehensive Business Case Analysis Tool.

  3. 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.
  4. 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.
  5. 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
Screenshot of 'Table 1: Calendar Set-Up' from tab 1 of Info Tech's Comprehensive Business Case Analysis Tool. Row headers are 'Project Start Date', 'Cost/Benefit Allocation Cadence', 'Project End Date', and 'Total Business Case Forecast Horizon'.
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).

Screenshot of 'Table 2: Option/Solution Set-Up' from tab 1 of Info Tech's Comprehensive Business Case Analysis Tool. Column headers are '#', 'Options', 'Option Description', and 'Categorization'.

Input a hurdle rate

A “hurdle rate” is a term used for the required rate of return on an investment.

  • There is an option in the Comprehensive Business Case Analysis Tool to provide a WACC or hurdle rate. If one is provided, it will help calculate a Net Present Value (NPV) for the options that you are analyzing.
  • The organization can have varying hurdle rates based on the project risk. While you may not know or be able to determine the hurdle rate on your own, if you reach out to your colleagues in Finance, they should be able provide an appropriate rate that you can use for your business case.
  • Providing a hurdle rate is optional, but recommended. If you do not care to calculate NPV, you can leave this box blank — just disregard the NPV outputs on your results tabs.
Screenshot of table 3 on tab 1 of Info-Tech’s Comprehensive Business Case Analysis Tool Screenshot of 'Table 3' from tab 1 of Info Tech's Comprehensive Business Case Analysis Tool. There is a single value for 'Hurdle rate'.
Additional resources on the Weighted Cost of Capital and Hurdle Rates
  1. WACC vs. Hurdle Rate (Video, YouTube)
  2. Estimating Hurdle Rates (Video, YouTube)
  3. Weighted Average Cost of Capital (Blog post and video, Investopedia)
  4. Hurdle Rate (Blog post and video, Investopedia)

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.

Screenshot of 'Table 4: Cost Categories - Tier 1' from tab 1 of Info Tech's Comprehensive Business Case Analysis Tool.

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.

Screenshot of 'Table 5: Cost Categories - Tier 2' from tab 1 of Info Tech's Comprehensive Business Case Analysis Tool.

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.

Screenshot of 'Table 6: Cost Categories - Tier 3' from tab 1 of Info Tech's Comprehensive Business Case Analysis Tool.
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.
Screenshot of part 1 of tab 2 of Info Tech's Comprehensive Business Case Analysis Tool. Column headers are B) 'Option', C) 'Tier 1 Categorization', D) 'Tier 2 Categorization', E) 'Item', F) 'Tier 1 Categorization', and G) '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.
Screenshot of part 2 of tab 2 of Info Tech's Comprehensive Business Case Analysis Tool. Column headers are J) 'Certainty of Cost Containment: Best Case Scenario', K) 'Certainty of Cost Containment: Worst Case Scenario', and columns L-BG) 'Jan 2022 - PC1', 'Jan 2023 - PC2', etc.
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.
Screenshot of part 1 of tab 3 of Info Tech's Comprehensive Business Case Analysis Tool. Column headers are B) 'Option', C) 'Item', D) 'Benefit Category - Tier 1', and E) 'Benefit Category - Tier 2'.
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.
Screenshot of part 2 of tab 3 of Info Tech's Comprehensive Business Case Analysis Tool. Column headers are H) 'Certainty of Cost Containment: Best Case Scenario', I) 'Certainty of Cost Containment: Worst Case Scenario', and columns J-BE) 'Jan 2022 - PB1', 'Jan 2023 - PB2', etc.
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.

Screenshot of a chart from tab 5 of Info Tech's Comprehensive Business Case Analysis Tool.

A screenshot of one of the charts from tab 5, showing comparative results of all solutions being assessed.

Screenshot of a table from tab 5a of Info Tech's Comprehensive Business Case Analysis Tool.

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

Screenshot of a chart from tab 5a of Info Tech's Comprehensive Business Case Analysis Tool.

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

1

Assess

Take the time to make sense of the results in the Comprehensive Business Case Analysis Tool. Perform quality assurance on the numbers used to develop the cash flow projections. Review the hurdle rate and cost categories, and make sure nothing was mistyped or missed completely in the analysis.

2

Select

Consider what data will have the biggest impact on the audience and help tell the story for the proposed project. Think about what visuals and tables will resonate with the decision-making group.

3

Create

Use the Executive Business Case Presentation template as part of this blueprint (explained in the subsequent slides) to craft a compelling, clear, and concise message to your audience.

Define the scope and goals of the presentation

Icon for Time.

Time

How long do you have to present?

How much time do you need for discussion and questions?

Icon for Audience.

Audience

Who are you presenting to?

Who has the final decision-making authority?

Icon for Outcomes.

Outcomes

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

Icon for Content.

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 Sample of slide 2 from Info-Tech's 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 Sample of slide 3 from Info-Tech's Business Case Executive 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

Samples of the Alternatives Analysis slides from Info-Tech's Business Case Executive 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

Samples of the Final Recommendation slides from Info-Tech's Business Case Executive Presentation.

Hone presentation skills before meeting with key stakeholders

Icon of a lightbulb.

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?

Icon of a person at a podium.

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.

Icon of a central figure connected to surrounding ones.

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:

Comprehensive Business Case Analysis
  • Brainstorm a candidate to pilot.
  • Set-up the Comprehensive Business Case Analysis Tool.
  • Populate the project costs.
  • Populate the ongoing maintenance costs.
  • Review the results of the analysis.
Executive Business Case Presentation
  • Determine the appropriate audience and forum for the business case presentation.
  • Craft a presentation using the Executive Business Case Presentation template and make the final recommendation.
  • Develop a roadmap to operationalize the process for business case development.

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.

About Info-Tech

Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.

We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.

What Is a Blueprint?

A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.

Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.

Need Extra Help?
Speak With An Analyst

Get the help you need in this 3-phase advisory process. You'll receive 5 touchpoints with our researchers, all included in your membership.

Guided Implementation 1: Speak the language of the business
  • Call 1: Scope requirements, objectives, and your specific challenges.
  • Call 2: Review the language of the business and unpack the hype around ROI.

Guided Implementation 2: Customize business case framework and governance
  • Call 1: Customize your business case framework and governance.

Guided Implementation 3: Leverage the Info-Tech tools and templates to develop your comprehensive business case
  • Call 1: Learn to use the Comprehensive Business Case Analysis Tool.
  • Call 2: Craft your Executive Business Case Presentation. 

Authors

Travis Duncan

Teodora Siman

Barry Cousins

Contributors

  • 10 anonymous contributors
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