What is Business Case Analysis? How Do I Write a Business Case?
Businesspeople define business case analysis as a decision support and planning tool that projects the likely financial results and other business consequences of an action or investment. The BCA study essentially asks:
“What happens if we take this or that action?"
The BCA answers in business terms—business costs, business benefits, and business risks.
Note especially the word "case" in the term. The presence of "case" signals that business people often use BCA results to support proposals and arguments. BCA makes a case for taking action or choosing one option over another, in business terms. Thus, the shorter term business case refers to a recommendation for action using BCA results. A compelling business case gives decision makers understanding and confidence they need to take action.
BCA Terms Lack Universal Standards
Business people sometimes call BCA by other names, probably to highlight the particular focus of the study. They may call it financial justification, cost-benefit analysis, a total cost of ownership analysis, or even return on investment analysis. In any case, what they mean with these terms usually fits the BCA definition above. Everyone involved should know, however, that none of these terms has a universally agreed definition. None are subject to widely-agreed standards. Consequently, some organizations write rules for case content and the case-building process. Note especially, however, that cases written elsewhere, under other local standards, can be entirely different.
Business Case Results Serve Different Business Needs
Business case analysis is best known for its role in business decision support and planning. However, BCA also serves other purposes.
- The business case provides practical guidance for managing projects, programs, and the asset lifecycle. Here, the BCA reveals critical success factors and contingencies to watch and manage to target levels.
- The BCA sends an early warning to project managers when the risks of schedule slip or cost overruns threaten. (For examples, see Project Schedule Monitoring).
- Also, BCA provides robust accountability for decision makers and managers. It shows that decisions were made responsibly, in accord with regulations and policies.
Business Case Results Follow From Scenarios and Assumptions
The real analysis in BCA centers on case scenarios. Scenarios are stories, scenes, or pictures, showing business outcomes that follow from actions. Cases usually include several scenarios representing different action choices. Ultimately, the analyst estimates likely cost and benefits results for each scene.
Scenarios built for this purpose, however, require information beyond existing budgets, reports, and business plans. Scenario building also calls for assumptions, judgments, and new data created explicitly for the BCA. As a result, different analysts can evaluate the same proposal and return entirely different case results. The business case writer, therefore, should always take care to reveal, entirely, methods and assumptions underlying case results.
Following sections explain the nature and role of business case analysis in more depth. Explanations appear, moreover, in context with an overview of business case structure, content, and use. This article is an adaptation of Chapter 1 of Business Case Essentials, 4th Edition ISBN 978-1-929500-03-1.
- What is a "business case analysis BCA?"
- Who builds the business case?
- When do you need a business case? Who requires a business case?
- What are the essentials in business case structure and content?
- How do the subject and purpose statements define the case?
- What does business case success mean?
- Business case proof: How do scenarios "make the case?"
- Busines Case vs. Business Plan. What are the differences? How are they related?
- Business case-building resources
Case Building Resources
- Business case-focused books, software, and templates: The Master Case Builder Shop.
- Professional training seminars: Building the Business Case Master Class.