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The purpose of the business case (sometimes called a business plan) is to assist the executive team and Board of Directors make an informed decision. A business case is a detailed analysis of a new plan of action: proposing a merger or acquisition, developing a new product, or adding a new business unit to the company. It is generally a collaborative effort between several functional areas of the company, i.e., accounting, marketing, engineering, etc. In the technical or engineering world, it may be called a feasibility study, but the concepts are the same.

What is contained in a business case and why do we need one? Before a company invests millions of dollars into a product, merger, etc., it needs assurance that the venture will be profitable, makes sense from a strategic “fit” standpoint, and will enhance a company’s competitive position. Table 2.4 summarizes key topics usually included in (but not limited to) a business case.

Table 2.4 Business Case Contents.

Summary and IntroductionObjectivesDescription of new product/projectWhy should the company do this (what is driving this effort)?Cost-benefit analysis (ROI, NPV)

Legal and regulatory issuesEstimate costs and timelineResources neededSocial implicationsAlternatives consideredRecommendations

Table developed by David Tennant

A note of caution: business cases usually have best case timelines and cost estimates. Many times, budgets, and schedules are assigned based on these estimates. However, these sometimes turn out to be unrealistic. Budgets and schedules should be refined with greater detail after formal approval during the project planning phase.

It is appropriate to note that investors and shareholders are generally risk averse. The business case is intended to provide a comfort level to decision makers; and to show that significant thought and research has been conducted to ensure the venture will be profitable. Companies that do not perform a business case for new ventures are taking unnecessary risks.