A business case for new projects and ideas is an incredibly valuable tool. Approximately 70% of the Australian workforce are either work for or own Small and Medium businesses. A very significant amount which shows the value of SMB in the economy. Despite this, SMB’s all too often don’t follow some simple and highly valuable business practices.
A business case is quite often thought to be a large business formality that doesn’t need to happen on the smaller scale. What is often ignored is that a business case doesn’t need to be massive multi-page novel, it can be a simple one-page document to ensure staff, contractors and most importantly yourself, all maintain the right direction forward. A project in small and medium business is very often run by internal staff or the business owner – which is completely acceptable – however, there are many pitfalls that need to be safeguarded. We won’t list all of these here, but a common issue is maintaining the right outcome.
When there is a clear goal and outcome in sight managers and staff will always be more productive. So why do small businesses neglect to create simple and effective outcomes for their staff? Effective being the keyword. The common practice seen is that a business owner or manager states an arbitrary and non-specific outcome. They give little to no boundaries, budgets or measurable outcomes, believing that they can control and steer the project closer to their chest. After all, they are running a business, surely they can manage a project. Some business owners learn from experience after the first project goes over budget, over time and still doesn’t quite get the outcome you’re expecting. A big part of this is communication and a large part of this can be quite easily addressed with a simple and concise Business Case.
The following are the key items to have in any business case:
- Purpose: Justify why you’re proceeding with this project. Does the estimated cost to create the changes versus the expected business benefits weigh up? As the project progresses this is a key reference point to make sure your project should continue.
- Reasons: A brief statement of why this project is needed. EG: New customer demands; facilitate growth; competitive advantage; operations unable to keep up with sales.
- Options: Do you know what the options are to achieve the outcome? Quite often there is more than one way to achieve something. List them so that as the project progresses you can continue to evaluate and justify the correct course.
- Benefits Expected: These must be measurable. Leave nothing to interpretation. The common analogy I use is for a new website. You want a new website that is easier to navigate. What I think is easy versus what you think is easier can be very different but both correct. So think in measurables – only two clicks to get to the shopping cart as an example.
- Risks: List in simple points the risks being introduced by your project. Know that risks are not definite, just maybes and cover what could happen during the project, if the project fails to deliver and if the project is successful. Risk assessment is its own subject and we’ll dig deeper into that later on.
- Cost: The cost of the project. List financial outlay as well as human resources and asset use. Don’t be cheap, be realistic and set the expectations early.
- Timescales: List the significant milestones for the project. Expected Start, expected finish, and any significant handover events that may occur during the project. It’s also critical to list when the expected value of the project is going to be realised, which isn’t always the as soon as the project is finished.
- Appraisal: This takes all the information gathered and measures the cost, time and risk against the expected value to show why this project is necessary. Make this simple and clear because this will be revisited if there are any changes to the project in the future. The appraisal should be used as the standard to assess the projects viability in the face of any changes, or if any risks turn into issues.
Less is more
– Ludwig Mies Van Der Rohe
Optional Formalities for Business Case
There are other items that can be included in these business cases. I often encourage it in the larger sized companies where the distribution of the document needs to be monitored and tracked, or if there are strict compliance requirements for the organisation. The following items will be common to most organisations that need it but should be considered by those who don’t use them on a day to day basis.
- Revision History: Follow existing company guidelines or use the simple v1, v2, etc. Ensure you include the date and author
- Approvals: Put in a table and list the name, title, signature and date. The document is only valid when all signatures are present
- Distribution: Who will this document be sent to officially. These people can send on to others, but this is a list of those who must receive a copy of the document.
- Document Location: Where it is stored physically (for signatures) and electronically.
There are quite a few points to cover in a business case, but they are all equally as important to be able to make proper business decisions and to ensure everyone is on target. The document itself can be a single page with some good formatting a layout. The point is, it doesn’t need to be novel. Keep it short, simple and easy to read and reference. This document can become part a standardised process whenever any new investment is being made. Think about using it for new staff hires, car/fleet upgrades, technology changes and when moving premises.