Captain’s Log, Entry 7542.1—Business Case Analysis is center stage almost everywhere for business planning and decision support. Nevertheless, few really know how to analyze and build convincing business case proof. Learn why business case results are trustworthy only when they include: Cash flow forecasts, Quantitative risk analysis, and Reasoning that “makes the case” for action. Cash flow forecasts alone are not a business case.
Decision makers rely on business case analysis to build the understanding and confidence they need to take action. You know this already if you have recently submitted a funding request or project proposal. You know this also if you serve on committees for budgetary planning, capital spending, or strategy.
Why is the Business Case Mandatory Almost Everywhere?
Deploy and deliver business case cash flow forecasts, financial metrics, risk analysis, and tactical advice for actions and investments. Build a compelling rationale that turns business case results into convincing business case proof.
At least three ongoing trends in the current business climate drive organizations of all kinds to make the business case mandatory.
- First, the business climate today has a low tolerance for management error.
- Second, the need for rock-solid accountability is increasing.
- Third, the competition for scarce funds is intense.
- Finally, managers must now show why the course they choose is the best course. And, they must show this in business terms.
As a result, everyone talks about the business case these days. However, surprisingly few really know what that means.
Prepare for All the Questions.
Most do know do know that the business case is an analysis meant to address this question: “What happens if we take this, or that action?” The internet today is awash with books, training, templates, and consultants promising to help you answer the “What happens?” question.
For credibility, accuracy, and practical value in real-world business, however, your case must address also questions like these: Is funding your proposal a good business decision? Will we really see these results? Can we expect significant non-financial impacts? And, which risks should we know about?
Business case proof is compelling and defensible only when case builders address all the questions. That means decision makers need business case results with:
- Trustworthy forecasts for the timing and magnitudes of cash inflows and outflows that result from an action.
- Quantitative risk and sensitivity analysis, identifying likely risk factors that can have significant impact.
- Reasoning and evidence that make the case for choosing one action over another, or for choosing “Action” over “No Action.”
Most case-building resources available today are blind to this need and cannot answer credibly. Most provide little more than a few cost and revenue forecasts for a proposed action or investment. Know that forecasts alone are not a business case! In business today, real-world managers ask all the questions, and they expect answers they can trust.
Business Case Analysis: Who Needs It?
Senior managers are acutely aware that solid case-building skills are in demand, but rare. Consequently, those who master case-building skills have a real advantage over their professional colleagues. As a result, they have the advantage in business areas such as the following:
- Project management and product management.
- Acquiring assets and asset management.
- Finance and financial control.
- Strategic decision and strategic planning.
- Budget planning.
- Corporate governance and accountability.
- And, they have a special advantage in the job search.
By popular demand, our feature article Business Case Analysis is now online. Find here a complete guide to business case analysis. And, find here answers to questions like these:
- How do I show that my proposal is a good business decision? And, can I prove this in compelling terms?
- Can I convince the skeptics we will really see the results I project?
- Are there methods for valuing important non-financial business benefits? And, how do I show that the case includes all relevant costs?
- How do I measure risk for proposal outcomes? And, how can we reduce risk? Also, which risks must we be especially alert for.
- What is the best way to show critical success factors we must manage to target levels?
- How do I show what happens if we do not take action? And, how do I show what happens if we choose other proposals instead? Also, which alternatives should my case compare?
- Finally, what is the best practical advice I can give with case results?
Where to Go From Here: Take Action!
For new and veteran case builders alike, see our article Business Case Analysis.
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By Marty Schmidt. Copyright © 2004-2020.
Solution Matrix Limited, Publisher.