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The preparation of a business case is one of the first steps of deciding whether or not a project is worth the investment. It, however, doesn’t authorize a project to proceed.
After reading this article, you’ll be able to:
- understand the processes needed to develop the business case
- discuss the difference between preparation of a business case and approval of a project.
What Does a Business Case Contain?
The PMBOK® Guide, Fifth Edition, describes a business case as “A documented economic feasibility study used to establish validity of the benefits of a selected component lacking sufficient definition.” It further explains that a business case “is used as a basis for the authorization of further project management activities.”1
Even if business cases can vary quite a lot, depending on what an individual organization requires to assess if a project should go ahead, they most typically contain the following information:
- business need, issue, or opportunity
- critical assumptions and constraints
- financial benefit of completing the project
- budget estimate
- schedule estimate
- potential risks.
This project management internal deliverable is usually completed by a business analyst or, in case of extensive business cases where the organization might lack the necessary internal competencies, by external consultants.2
Business Case Preparation Vs. Project Approval
A business case development is part of the pre-initiation tasks that lay the foundation for a project before its formal beginning.
15 main activities are involved in the process:3
- Identify stakeholders.
- Investigate the problem or opportunity.
- Gather relevant data to evaluate the situation.
- Draft the situation statement.
- Obtain stakeholder approval for the situation statement.
- Assess the current state of the organization.
- Determine the required capabilities needed to address the situation.
- Assess the current capabilities of the organization.
- Identify gaps in organizational capabilities.
- Recommend action(s) to address business needs.
- Identify constraints, assumptions, and risks for each option.
- Assess the feasibility and organizational impacts of each option.
- Recommend the most viable option.
- Conduct cost-benefit analysis for the recommended option.
- Assemble and value the business case.
All projects that have been authorized have had a business case completed and approved during the feasibility phase of a project life cycle.
Appropriate stakeholders consider the information contained within the business case and then a decision is made.
All projects that have been authorized have had a business case completed and approved.
Because such outcome can also consist in declining projects or giving a lower priority, developing a business case sets an approval milestone for moving on to further planning, but it neither guarantees nor authorizes the project to proceed.
A project is authorized by the project charter.
A business case documents the justification for the undertaking of a project, but it doesn’t officially authorize its existence.
1 Project Management Institute (2013). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). 5th ed. Newtown Square: Project Management Institute, P. 530.
2 Nielsen, K. (2017). The Business Case, Product and Process. Retrieved from https://www.projectmanagement.com/articles/381819/The-Business-Case–Product-and–i-Process–i-
3 Nielsen, K. (2015). Achieve Business Analyst Certification. Plantation, FL: J. Ross Publications.