…this post relates to the previous one on the Ultimate Business Case.
Also spend some time on the strategic component, illustrate why the investment should be made and how this will provide a key advantage over competition. One strategic assessment is a sensitivity analysis: how does the final outcome behave when one of the main parameters grows or shrinks by 5/10%? Another option is to calculate the break even point: at which point does the cumulative contribution exceed the fixed costs? Eventually, seek to establish the base line against which to benchmark the incremental earnings.
Indicate the start and end point of the opportunity you want to address. It should be clear that a certain “window of opportunity” is out there and there is an end date after which that is gone. Describe what has changed vs last quarter that makes this a good business opportunity.
Finally, it will add to the robustness of the BC if it shows the project team has thought of ‘the bigger picture’. It is good to show what the company stands to lose if the BC does not take place. But…what does the company commit to if it agrees to take on this opportunity? Are there any economies of scale/scope to be realised, does the company need to make additional investments, or does it have big repercussions on manufacturing?
So, before I share with you my standard excel sheet with a business case, I would like to summarize like this:
A good BC….
1. Works out the assumptions
2. Describes the strategic component & description of window of opportunity
3. If substantial, thinks about the bigger company
1. Always contains expected product volumes for the next 5 years and their prices
2. Works out the P&L down to EBITDA
3. Works out a cash flow and payback calculation
1. Compares the outcome with the ‘baseline’
2. Sensitivity/breakeven analysis
3. Market share analysis and evolution
And here you’ll find the Generic Business Case.