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Project Business Case

As with any project, projects must also generate benefits. Before a project is approved, it must therefore be clarified: how promising or risky is the planned project?

What is the concrete benefit of the project? Is the benefit in reasonable relation to the planned costs? The central question is therefore: Is it worthwhile to carry out this project at all?

This sentence may be irritating. How can a successful project be dangerous for a company? But when exactly is a project successful?

When is a project successful?

When it submits to the standardized rules and regulations, achieves its goals precisely and does not exceed its time and cost budget? From the perspective of a project manager, this statement can hardly be shaken.

Project clients and management, on the other hand, see the evaluation of success in a more differentiated light, because for them a project is only successful if the project benefit achieved is higher than the costs incurred.

The evaluation of the project benefit is therefore carried out in a sensible way by creating a project business case that describes the benefit effects of a project quantitatively and verifiably.

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„Projects without benefits are a dangerous undertaking for any company, even if they are completed successfully“.


What is a Project Business Case?

Basis for Project Approval

Often, decisions on the approval of a project are made from the gut. The economic consequences for a company often remain unconsidered. In times of high cost pressure, however, this procedure can have devastating consequences for the company. The project business case provides a remedy and becomes an important decision-making tool for management.

Decision for a project

A project business case considers the economic impact of a concrete project. If, for example, an innovative product is to be developed, costs are incurred in the development phase.

These costs must be approved by the management. If this requires a business case for approval, it is usually not enough to win a few mentors for the project idea. The opposite is the case, because then it must be convincingly and demonstrably demonstrated that savings or productivity increases and profits can be achieved through project implementation.

The Project Benefit – Return on Investment

The overall project must generate a sufficiently good return on investment. It is therefore wrong for the project manager to commit himself only to the project and not to the business case.

The project benefit does not always necessarily have to be of a financial nature, but can also be reflected in image gains, improved working conditions, strategic measures or the fulfilment of legal requirements.


Benefits of the Project Business Case

  • Guaranteed increased decision-making reliability
  • Creates more overview, transparency, commitment and traceability
  • Serves as a filter for the pre-selection of project ideas
  • Creates an economic planning basis
  • Promotes early risk identification
  • Supports project controlling during project implementation as a basis for later project evaluation

Advantages of using the Project Business Case

Decision certainty before the start of the project

Evaluation of whether the benefits defined in the business case can be achieved with the chosen solution approaches in the project.

The owner of the project business case is the management or the project client. For them, the contents of the business case are an important basis for decision-making over the entire (product) life cycle – from the idea to the „end of life“.

The business case generates a higher level of decision security, provides a better overview and transparency, and makes decisions made comprehensible and comparable. If there are several ideas at the start of the project, the business case can be used to identify the optimal one and make a preliminary decision.

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Project implementation and project controlling

The development in the project is checked for changes at defined points in time with the Business Case project.

The defined benefit must be achievable. Otherwise, a decision must be made on the continuation or termination of the project.

During project implementation, the business case significantly supports operational project controlling, as it is very easy to determine whether the project is still worth the money or not at every stage of implementation. The management can thus make a well-founded decision on continuation or termination.

Evaluation of project success

At the end of a project, the benefits of the project are often not measurable. An evaluation plan must therefore be drawn up on the basis of the project business case. At the end of the project, this evaluation plan forms the basis for assessing the success of the project and confirming the results achieved.

Since the project no longer exists at the time the benefits are evaluated, it must be determined who will be responsible for the evaluation in the future and whether the expected benefits have materialised.

Content of a Project Business Case?

The scope and content of a business case depends on the size and complexity of the project. For small projects, it is often enough to just state the reasons for the project, while for larger projects a cost-benefit analysis is required. The business case should be available after completion of the planning phase and before the start of the actual project implementation and should be known to the management or project client.

The project business case is usually divided into the following areas:

Motives for project implementation

Description of the reasons for the project implementation or what the project result is needed for.

Possible options and alternatives for action

Description of which options or alternative solutions have been reviewed and why a particular approach has been chosen.

Expected benefits

Every benefit that is to be achieved through project implementation must be presented. Ideal is the definition of time windows at which a benefit can be measured. The verification whether the total benefit has been achieved takes place in the course of a project re-evaluation.

Alternatively, the benefit of a project can also be evaluated by checking the consequences if the project would not be realized. Possible consequences could be, for example, the loss of market share or rising costs.

Risk assessment

Analysis and documentation of the most important risks in the project.

Cost and time frame

The cost and time schedules are worked out in the course of project planning and are mapped in the business case.

Investment calculation

Development, operating, maintenance and support costs are offset against the financial value of the expected benefits. The period can cover the entire utilization phase of the project life cycle.

Again, the starting point is the alternative assessment: What are the figures if the project is not initiated? If possible, the benefits should be described in a financially measurable way. Various development controlling methods support this, e.g. ROI (Return on Investment): How much profit does an investment bring?

Evaluation

Check whether the business case is heavily dependent on a specific benefit. If the entire business case for a project lapses if a certain benefit is not achieved, this should be taken into account during planning and implementation.


An important tip for all project managers

„Quick Wins“ in the course of the project should always be presented to the client and the management with regard to the project benefit, never with regard to the objectives, as these are less interesting for the client or the management.


Conclusion

What is the benefit of excellent project management and a precise landing if the profit is ultimately not right?

Nowadays, the calculation of the economic benefit is not only an important basis for deciding whether a project should be carried out or not, but also ensures greater decision-making reliability for those responsible throughout the entire project life cycle.

The business case is an important source of information regarding the achievement of the expected benefit. An indispensable navigation tool for every major project.

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