Creating a business case is a systematic process designed to justify a proposed project, investment, or decision within a business context.
A strong business case typically includes an introduction with background information, a clear problem or opportunity statement, a detailed analysis of options, a risk assessment, a financial analysis, a proposed solution, and a high-level implementation plan.
But validating your business case is just as important as creating it.
The validation process is essential for confirming that the proposed initiative is likely to achieve its intended outcomes and align with organizational goals.
I have validated many business cases, both for my clients and as an active angel investor, and if there is one thing I have learned, it is the critical importance of ensuring that a business case is both robust and realistic before committing significant resources.
1) Review the Problem Statement or Opportunity
Clarity and Accuracy: Ensure the problem or opportunity is clearly articulated and well understood. Question whether the impact of not addressing the problem or missing the opportunity is accurately presented.
See my article «Understanding Your Problem Is Half the Solution (Actually the Most Important Half)» for some further reading on this topic.
2) Scrutinize Assumptions
Identify and Test Assumptions: List and validate assumptions related to market conditions, customer behavior, cost estimates, and revenue projections. Compare them with historical data and industry benchmarks to ensure they are realistic.
Scenario Analysis: Conduct best-case, worst-case, and most likely scenarios to test the sensitivity of the business case to changes in key assumptions.
3) Evaluate the Analysis of Options
Comprehensive Consideration: Ensure all reasonable options, including doing nothing, have been considered.
Verify Estimates and Projections: Ensure cost estimates are accurate and comprehensive, and validate revenue projections against market data and trends. Recalculate ROI and perform sensitivity analyses to assess the impact of changes in key variables.
Focus on Economic Benefits: In my opinion ALL benefits of a technology project should be expressed in dollars (or any other currency). To make estimating the benefits of a project easier and more realistic, I use a simple model to assess the economic benefits of a project. It consists of five benefit types (or buckets); Increased Revenue, Protected Revenue, Reduced Costs, Avoided Costs, and Positive Impacts.
Total Cost of Ownership (TCO): TCO is an analysis meant to uncover all the lifetime costs that follow from owning a solution. As a result, TCO is sometimes called ‚life cycle cost analysis.‘ Never just look at the implementation or acquisition costs. Always consider TCO when looking at the costs of a solution.
Time Value of Money: The time to value (TTV) measures the length of time necessary to finish a project and start the realization of the benefits of the project. One project valuation method incorporating this concept is the payback period (PB). There is one problem with the payback period: It ignores the time value of money (TVM). That is why some project valuation methods include the TVM aspect. For example, internal rate of return (IRR) and net present value (NPV).
Unbiased Evaluation: Check if the criteria for evaluating options are relevant and unbiased, and consider whether alternative criteria might lead to different recommendations.
For more details on the financial valuations of your options have a look at my eBook The Project Valuation Model ™. You can download it for free here.
4) Examine the Proposed Solution
Feasibility: Assess whether the proposed solution is technically, financially, and operationally feasible, with realistic timelines.
Strategic Alignment: Verify that the solution aligns with the organization’s broader strategic goals and represents the best value.
See my article «Do Your Projects and Initiatives Support Your Strategy?» for some further reading on the topic.
5) Engage Stakeholders
Involvement and Feedback: Engage key stakeholders, including executives and subject matter experts, to gather feedback and address concerns. Their support is critical to the project’s success.
See my article «10 Principles of Stakeholder Engagement» for some further reading on the topic.
6) Perform a Risk Assessment
Comprehensive Risk Analysis: Review the risk assessment to ensure all significant risks are identified and properly analyzed. Evaluate the feasibility of risk mitigation strategies and ensure contingency plans are in place.
See my article «Risk Management Is Project Management for Adults» for some further reading on the topic.
7) Review Legal, Regulatory, and Ethical Considerations
Compliance and Ethics: Ensure the project complies with all relevant laws, regulations, and industry standards. Consider any environmental, social, and ethical implications.
8) Assess Market and Competitive Analysis
Market and Competitive Validation: Reassess market conditions and competitive responses to ensure the business case remains relevant and viable in the current environment.
9) Evaluate Implementation Feasibility
Resource and Timeline Viability: Confirm that the necessary resources are available and that the proposed timeline is realistic. Consider conducting a pilot to validate key aspects of the business case.
Opportunity Cost: If you implement the proposed solution, what other initiatives can’t you do? Is it still worth it?
Cost of Delay: What does it cost me if I do the project slower or later? Is there urgency?
For more details on the opportunity costs, and cost of delay of your initiative have a look at my eBook The Project Valuation Model ™. You can download it for free here.
10) Seek Third-Party Review
External Validation: Cons
ider an independent review by a third-party expert to provide objective insights and increase the credibility of the business case.
See for example my Independent Business Case Review service.
11) Final Review
Final Review: Ensure all sections of the business case are complete, coherent, and consistent. Revise as necessary based on the validation process.
Best Practices
Documentation: Keep a detailed record of validation steps, findings, and any revisions made to create a clear audit trail.
Stakeholder Engagement: Maintain clarity and avoid jargon to ensure understanding and buy-in from all stakeholders.
Data-Driven Analysis: Base your analysis and recommendations on solid data and evidence.
Constructive Approach: Focus on strengthening the business case rather than undermining it, using challenges to ensure the best possible outcome.
In a nutshell: Effective validation ensures that any weaknesses in the business case are addressed before committing significant resources, thereby reducing the risk of failure and increasing the likelihood of success.
If you are an executive sponsor, steering committee member, or a non-executive board member and want an unbiased expert view on your business case? Then my Independent Business Case Review is what you are looking for.
