Business Case Vorlage
- 1 Download Business Case Template
- 2 Purpose
- 3 How to best describe what you get from a project?
- 4 Different types of Business Case
- 5 The path to creating the Business Case
- 6 The Contents of a Business Case
- 7 Appraisal Techniques
- 8 Roles regarding the Business Case: Who is responsible for what?
Download Business Case Template
The Business Case gathers the information to allow the organisation management judge if a project is worthwhile to invest in and they can also compare with other requirements and ideas. The PRINCE2 Manual actually says "The Business Case gathers the information to allow the management judge if a project is desirable, viable and achievable"
Lets take a look at: desirable, viable and achievable.
- Desirable: Determine if this product is really needed. Compare the benefits against the dis-benefits.
- Viable: Is it possible to do? Are we capable of delivering?
- Achievable: Is it possible to deliver the benefit?
Business Justification: "Business Justification" is a popular term in a number of methods and is also used by PRINCE2. Business Justification means that there is a valid business reason for doing the project and it remains valid throughout the project so this should be one of the question the Project Board should be asking at the end of each stage: "Is the Business Case still valid?"
The Executive is responsible for creating the Business Case and usually gets assistance from the Project Manager. It is created at the start of the project and maintained during the project by the Project Manager (A good question to ask here is “Why is the Business Case maintained and what does this mean?”). The Business Case contains the following information:
- Reasons for doing the project as you would expect
- Estimate Costs and Timescale
- Benefits and dis-benefits (these are provided by the Senior User)
- Overview of project risks
- The outline Business Case is created by the Project Manager in the Starting up a Project process and refined in the Initiating a Project process.
- The Directing a Project process covers the approval of the Business Case.
- The Business Case is used by the Controlling a Stage process when assessing impacts of issues and risks. The question is asked: What impact will this issue have on the Business Case?
- The Business Case is reviewed and updated at the end of each management stage by the Managing a Stage Boundary process
- The Business Case is last updated in the Closing a Project process.
Advice The Business Case is derived from the: Project mandate and Project Brief – reasons; Project Plan - costs and timescales; The Senior User(s) - expected benefits; The Executive - value for money; Risk Register and Issue Register.
The Business Case can take a number of formats, including: Document, spreadsheet or presentation slides; Entry in a project management tool.
The following quality criteria should be observed:
- The reasons for the project must be consistent with the corporate or programme strategy
- The Project Plan and Business Case must be aligned
- The benefits should be clearly identified and justified
- It should be clear how the benefits will be realized
- It should be clear what will define a successful outcome
- It should be clear what the preferred business option is, and why
- Where external procurement is required, it should be clear what the preferred sourcing option is, and why
- It should be clear how any necessary funding will be obtained
- The Business Case includes non-financial, as well as financial, criteria
- The Business Case includes operations and maintenance costs and risks, as well as project costs and risks
- The Business Case conforms to organizational accounting standards (e.g. break-even analysis and cash flow conventions)
- The major risks faced by the project are explicitly stated, together with any proposed responses.
How to best describe what you get from a project?
PRINCE2 uses the terms “Output, Outcome and Benefits.” These terms help to describe what we get from a project. The objective here is to explain what these terms mean and, also, how they differ from one another.
As an alternative to definitions that may hang in the air, here are three focused question to help explain Output, Outcome and Benefits.
- Question to uncover Output: What is the product that will be delivered by the project?
- Question to uncover Outcome: What can the users do better with this product?
- Question to uncover Benefits: Can you list the measurable improvements of using this product?
Outputs: The Outputs of a project are the products that the users will use. These are also known as specialist products and the project is set up to create these products.
Outcome: You may have heard the expression “outcome is a result of change”. From a PRINCE2 project point of view, we say that an Outcome is the result of the change derived from using the project's outputs.
Benefits: PRINCE2 says that Benefits are the measurable improvement, resulting from an outcome that is perceived as an advantage by one of the stakeholders. Try to see Benefits as the measurable advantages of using the product. Benefits can be realized during the project, but most benefits are usually realized after the project has closed and sometimes a long time after.
Example: A company installs a new Sales (CRM) system. Output Question: What is the product that will be delivered by the project?
- This will be the Sales system.
Outcome Question: What can the users do better (different) with this product? Some answers could be:
- Sales orders are processed quicker and more accurately
- Client can access data online and track orders
- Easier for administration staff to track orders
- Easier to get reports from the system
Notice how all the answers are very vague, and there is no mention of percentage (%) faster. Benefits Question: What are the measurable benefits of using this product? Some answers could be:
- 40% cost-reduction in handling client data
- 15% increase in sales as users can order online
- Overall revenue increased by 12% annually
Different types of Business Case
We might assume that each Business Case has to show a big return on investment; this is not always the case. Nonetheless, each project should have a Business Case, as there could be many different reasons for doing the project.
Here are some reasons:
- A Compulsory project: The Company may have to unavoidably do this, for example, due to a change in legislation or because a software provider is pulling support for an application and the result is a need to migrate to another application.
- Not-for-profit project: Organize a charity event for a local hospital.
- Evolving project: This is where one or more persons may be working on an idea or issue as part of their standard job, such as Research. They wish to develop a prototype to test and to get market feedback. This requires a Project. Another more common example is a software project where all the requirements may not be known at the beginning, and each stage can deliver new functionality that will be put directly into production.
- Customer/supplier project: PRINCE2 is based on a customer/supplier environment. Therefore the customer and supplier can have their own Business Case. By default Business Case refers to the Business Case of the customer. The Business Case is owned by the Executive.
- Multi-organization project: Some examples are joint ventures, research and government projects.
Each of these project types will have their own output, outcome and benefits. What would be a good question to check the viability for each of these projects? This is where the focus on Benefits comes in. The question to ask is “Are the benefits achievable with this project or should we consider another option?” If, during the project, a better way presents itself to reach the same benefits at a lower cost, it should be considered.
The path to creating the Business Case
The Business Case is developed in the Initiation Stage and maintained during the project. The Business Case is first verified by the Project Board so that the project can start. It is then verified at key decision points during the project, such as at the end of each stage. There are 4 steps in creating the Business Case. They are:
- Confirm the Benefits
Step 1: Develop the Business Case
This is the same as Create the Business Case. The Business Case is created and first completed in the Initiation Stage, and it becomes part of the Project Initiation Documentation. The Executive is responsible for creating the Business Case, but it can be written by others or with help from others. For example, the Executive might involve a person from the financial department to assist with the financial information.
|Before the project starts||The project mandate document usually contains an outline of the Business Case and will explain the reason why the project is needed. Remember the project mandate is the trigger for the project.|
|Pre-Project (SU)||The Business Case information will be taken from the project mandate, if included, and will be what we call the outline Business Case, which will be part of the Project Brief.|
|Initiating a Project (IP)|| The Business Case document is usually written by the Executive with help from other people. The detailed Business Case document takes the following information from the costs, timescale and product information from the Project Plan. The Business Case can also take information from the Risk Register and Project Brief.
As the Business Case relies on information from the Project Plan, it cannot be completed until the Project Plan is ready and it is not completed until near the end of the Initiation stage. The Business Case document becomes part of the PID.
Stage 1: Develop the Business Case Figure 2. Develop the Business Case
Step 2: Verify the Business Case
What does verify the Business Case mean? It means to determine whether the Business Case is worthwhile. This verification is done at a number of points throughout the project. Where do you think would be good points in the project for the Project Board to Verify the Business Case or, in other words, to see if the Business Case is worthwhile? You will find it much easier to understand these if you have listened to the Process Model podcast.
Tip: Think about the Project Board decisions points.
- Verification Point 1: At the end of the “Starting Up a Project” process. This is the very first process and it plans the Initiation Stage. The Project Board must see the value before they will invest and allow the Initiation Stage to begin.
- Verification Point 2: At the end of the Initiation Stage (remember the Initiation Phase produces the PID, Project Plan etc…). The Project Board needs to decide whether to authorize the project to start so the first stage can begin.
- Verification Point 3: This is for the Project Manager during the Controlling a Stage process. Any new issue or risk or change to a risk can affect the Business Case. The Project Manager will always ask if this issue or risk affects the Business Case.
- Verification Point 4: The Project Manager updates the Business Case if there are changes in project costs, timescales, risks or benefits.
- Verification Point 5: At the end of each stage and before the next stage, the Project Board decides to release funds for the next stage to start.
- Verification Point 6: During the Closing a Project process, the Project Manager assesses the performance of the project in reaching its expected outcomes and benefits.
- Verification Point 7: After the project, a Benefits Review will be performed by someone from Corporate or Programme Management.
The 7 verification points listed are the most important ones and the easiest to remember. Nevertheless, it should be kept in mind that other points of verification exist beside those mentioned above.
Step 3: Maintain the Business Case
What is meant by Maintain the Business Case? Maintain the Business Case refers to keeping the Business Case up to date to reflect what is happening in the project. It may be done when assessing Risks or Issues, or at the end of a stage. For example some of the typical changes can be: increase or reduction of costs, new information on a risk and so on.
The Business Case is also referred to as a living document, meaning it is continually updated during the project to reflect reality. So when is a good time to update the Business Case during the project? A good time to update the Business Case is at the end of every stage, as you will have the true cost of the last stage, and perhaps the updated cost of the next stage, along with any information on issues and risk. In evolving projects, some deliverables may already be put into products and therefore the project will be receiving some of the expected benefits. This information also needs to be added to the Business Case. One final point to remember here is that the Executive has the responsibility to all project stakeholders for the project to remain desirable, viable and achievable at all times.
Step 4: Confirm the Benefits
The approach to confirm the benefits is in 4 steps: 1. Identification of the benefits by the Senior User. These are documented.
- These benefits are stored in the Business Case and the Benefits Review Plan.
2. Select objective measurements that reliably prove the benefits.
- Examples: x% reduction in costs, x% increase in process time, x% reduction of products failing quality tests, x% increase in sales.
- These measurements will enable you to determine if the benefits are realized or not.
3. Collect the baselined measures so that they can be used to compare the improvements. Baselined measures refer to recording the current status of the current day.
- For example, with the CRM application, it is possible to record the average amount of time for a client to order today, the cost of handling each order, customer satisfaction survey, and so on.
4. Decide how, when and by whom the benefit measures will be collected. I will explain this using the CRM application as example.
- Example 1: The Account Manager might be responsible for the client survey.
- Example 2: The Office Manager might provide the information to show the average time for each order.
As you can clearly see, these steps are all about ensuring that benefits are correctly measured.
When do you think most benefits are realized, during or after the project? Most project benefits are realized after the project has been shut down. Consequently, there has to be a process to continue to check the project benefits. The Benefits Review Plan is also used to determine this. It is created by the Project Manager during the Initiation Stage and it is one of the documents that the Project Board should look for before authorizing the project to start. The Benefits Review Plan may be updated at the end of each stage in the project, as some benefits can be realized during the project and/or new benefits can be identified Now you may ask who takes ownership of the Benefits Review Plan once the project has stopped, as the Project Manager is no longer available. Usually, it is someone in Corporate or Programme Management. They will ask the Senior User to provide information and evidence to confirm the benefits.
The Contents of a Business Case
The Business Case should describe the reasons for the project and includes information on the estimated costs, risks and expected benefits. Appendix A of the manual contains a product description for the Business Case. It should contain the following parts:
- Executive Summary
- Business Options
- Expected Benefits and expected dis-benefits
- Investment Appraisal
- Major Risks
(Highlight the key points in the Business Case, which should include important benefits and the return on investment (ROI))
(Defines the reasons for undertaking the project and explains how the project will enable the achievement of corporate strategies and objectives)
The Business Case should say why the project should be done, i.e., the reasons for doing the project. Remember the different types of projects that were discussed earlier.
For now there is no need to provide detailed information or figures. The Reasons information should already be included in the project mandate so that you could get the information from it. Note: The Reasons information can also be further expanded in the Initiation Phase.
(Analysis and reasoned recommendation for the base business options of: do nothing, do the minimal or do something)
PRINCE2 teaches that there are always three options to consider concerning any investment. These are:
- Do nothing
- Do the minimum
- Do something
“Do nothing” may seem a bit strange but look at this example. The “do nothing” option should always be the starting one, as the Project Board can compare the fact of doing nothing with other options put forward that would require investment. If you think about it, this is a good idea instead of rushing ahead into every project just to keep people busy. The “Do the minimum” and “Do something” options would normally require a detailed Business Analysis showing costs, benefits, desire and viability.
(The benefits that the project will deliver expressed in measurable terms against the situation as it exists prior to the project. Benefits should be both qualitative and quantitative. They should be aligned to corporate or programme benefits. Tolerances should be set for each benefit and for the aggregated benefit. Any benefits realization requirements should be stated)
The Business Case should list each benefit and provide information on how tangible and intangible benefits can be measured and when they can be measured.
- An example of an intangible benefit might be happier workers. This can be measured with the help of a survey.
- The Senior User will be responsible for supplying the list of benefits with the necessary information about benefits and the names of the persons who are responsible for each of them. These persons have the responsibility to monitor the benefits and report to the Senior User and Project Manager.
- Remember, the Benefits Review Plan will contain all the information on how to measure the benefits during and after the project.
(Outcomes perceived as negative by one or more stakeholders. Dis-benefits are actual consequences of an activity whereas, by definition, a risk has some uncertainty about whether it will materialize. For example, a decision to merge two elements of an organization onto a new site may have benefits (e.g. better joint working), costs (e.g. expanding one of the two sites) and dis-benefits (e.g. drop in productivity during the merger). Dis-benefits need to be valued and incorporated into the investment appraisal)
(The period over which the project will run (summary of the Project Plan) and the period over which the benefits will be realized. This information is subsequently used to help timing decisions when planning (Project Plan, Stage Plan and Benefits Review Plan))
The Timescales section deals with such matters as when the project is expected to start and end. It will also include when the benefits will be realized and when the project will pay for itself, so it is not just the time of the project.
(A summary of the project costs (taken from the Project Plan), the ongoing operations and maintenance costs and their funding arrangements)
This section provides detailed cost information for the project. It also includes information on ongoing costs in Operations and Maintenance that will start once the project is complete.
(Compares the aggregated benefits and dis-benefits to the project costs (extracted from the Project Plan) and ongoing incremental operations and maintenance costs. The analysis may use techniques such as cash flow statement, ROI, net present value, internal rate of return and payback period. The objective is to be able to define the value of a project as an investment. The investment appraisal should address how the project will be funded)
This section uses information from both the Costs and Benefits sections. It compares the benefits over a period of time (most likely in years) to the full cost of the project and ongoing maintenance. The Investment Appraisal shows the stakeholders the value of the project. There are many appraisal techniques that you can choose from such as: Net Benefits, Return on Investment, Payback Period, Net Present Value, etc. It is a good idea to use a technique that is used in your company.
(Gives a summary of the key risks associated with the project together with the likely impact and plans should they occur)
There are always risks in each project and the Business Case must contain an overview of these risks. Note that the Risk Register contains more detailed information about these risks. The Project Board will justify the Project based on cost, benefits and risks. The Business Case must contain a summary of the risks and highlight the more major ones.
Below are discussed two appraisal techniques. This type of information can be included in the Business Case document.
Simple Cash Flow Example
- This technique provides a simple year-by-year overview showing the money coming in the business versus the expenditures, which is the money going out.
- The Net Cash Flow is the difference year-on-year, and it always starts with year 0, i.e., when you start spending on the project.
- The table below is an example
|Year||Income||Expenditure||Net Cash Flow|
|0||0||€ 24,000||€ -24,000|
|1||€ 26,000||€ 4,000||€ 22,000|
|2||€ 28,000||€ 4,000||€ 24,000|
|3||€ 30,500||€ 4,500||€ 26,000|
- As you can see, it just compares year by year and does not show when the project has paid for itself.
Return on Investment (ROI)
- The Return on Investment appraisal method is a popular method and easy to create and understand.
- It calculates an average income over the life of the projects and compares it to the original investment so that you can clearly see when the project has paid for itself.
|Total income after 5 years||€ 76,000|
|Average Income per year (4 years)||€ 19,000|
|ROI (compare to original amount)||0.79%|
Again, this is just an example and you do not need to know these for the Prince2 Foundation exam or for the Prince2 Practitioner exam.
Roles regarding the Business Case: Who is responsible for what?
Corporate or Programme Management
- They provide the project mandate, which will most likely include some information on the Business Case.
- The Corporate or Programme Management is interested in hearing about the Benefits of the project.
- During the project, the Project Manager will report on the Benefits to the Programme Management and will update the Benefits Review Plan.
- And after the project is completed, the Corporate or Programme Management will be responsible for the Benefits Review Plan. They have the responsibility of following up to ensure that the benefits have been realized.
- The Executive is responsible for the Business Case and the Benefits Review Plan during the project.
- The Executive is also responsible to develop a viable Business Case, securing funding for the project and ensuring the project is aligned with corporate strategy.
- The Senior User is responsible for specifying the Benefits and then for ensuring that they are realized by the project.
- They are also responsible for ensuring that the products produced by the project deliver the desired outcomes, in other words, that they can be used as expected.
- The PRINCE2 manual says that the Project Manager prepares the Business Case on behalf of the Executive but this does not happen often in the real world. I prefer to say that the Project Manager can assist the Executive in preparing the Business Case.
- For each new or revised issue and risk, they will also carry out Impact Analysis of the Business Case to see if the issue or risk affects the Business Case.
- They also assess the Business Case at the end of each stage as this information is required by the Project Board and they also keep the Benefits Review Plan updated during the project.
- Remember that Project Assurance provides a kind of audit service on each project to check that it is progressing as planned.
- From a Business Case point of view, they can assist in the development of the Business Case and they will monitor the Business Case for external events. Remember, the Project Manager operates inside the project, so they only see internal events.
- Project Assurance also verifies and monitors the Benefits Review Plan.