Project Business Case: How to Create the Perfect Project Proposal

Why should anyone sponsor and fund a project? It is your Business Case – or Project Proposal – that sets out the answer. Project proposals set out the case for investing in a project. So, we start work on them early on. And, when complete, they drive the essential decision: to invest in the project or not.

A Project Business Case is a part of Project Governance. It sets out why you should start your project. It gives an

‘analysis of the benefits and costs of making a change to the way things are done’.

Decode the Jargon of Project Management

Your Project Business Case is therefore a tool for senior people to make an informed decision. It is a vital part of your project governance.

What We’ll Cover

In this guide to the Project Business Case, we will cover:

• What is a Business Case – and the alternative term, Project Proposal
• Why do You Need a Project Business Case?
• The Role of a Project Business Case in Project Governance
• What your Project Business Case Should Contain
• How to Create and Use Your Project Business Case

So, let’s get started with the most fundamental question…

Before we Start: What is a Business Case?

Here’s a short video that answers the question, What is a Business Case?

Terminology: Business Case or Project Proposal?

The meaning of the term Business Case is clear.

All of the major bodies of Project Management knowledge define it…

Business Case:
Provides justification for undertaking a project, programme or portfolio. It evaluates the benefit, cost and risk of alternative options and provides a rationale for the preferred solution.

APM Body of Knowledge, 7th Edition
Association for Project Management, 2019

As is often the case, it’s the APMs definition that I like the best. The underlining for emphasis is mine. But the PRINCE2 definition is similar and introduces continuous testing of viability (again, my underline)…

Business Case:
The justification for an organizational activity (project), which typically contains timescales, costs, benefits and risks, and against which continuing viability is tested.

Managing Successful Projects with PRINCE2
Axelos, 2017

As usual, the PMI’s definition is effective, but worded with dreadful inelegance! It does emphasize the importance of authorization, which I like (and have underlined).

Business Case:
A documented economic feasibility study used to establish validity of the benefits of a selected component lacking sufficient definition and that is used as a basis for the authorization of further project management activities.

A Guide to the Project Management Body of Knowledge, 6th edition (PMBOK Guide)
The Project Management Institute, 2017

And, lest you think I am just being snarky about the language, let me say that I grew up speaking English as my first language. Indeed, I had to read this through several times before understanding this awful prose. Many, many users of the English-language edition of the PMBOK Guide do not have English as their first language. There is no excuse for this.

There is No Formal Definition of ‘Project Proposal’

None of the three organizations we just considered define the term ‘Project Proposal’. But, there is no doubt that it is in common use. So, I shall have to define it myself…

Project Proposal:
Sets out the value a project will deliver, as a way to win the stakeholder support and sponsor funding needed to allow the project to proceed.

The resulting distinction that this definition provides is that:

When we Use Business Cases and Project Proposals

Clearly, within an organization, the Project Business Case is the more appropriate tool. It leads to better, less biased, decision-making. However, there are plenty of organizations in which people use a Business Case to make a case – as a project proposal, rather than as a decision-making tool.

The Project Proposal is most obviously appropriate where an external agency, consultancy, or service provider is proposing a solution to a potential client. Here, the client expects advocacy and will (should) use competing project proposals to create an evaluation that meets its governance requirements.

What Does this Mean for this Article and for Your Knowledge?

First and foremost, the content will overlap a lot. The difference will be that:

• A Business Case will include alternative options and critical assessments
• A Project Proposal will include advocacy and downplay disadvantages

We have another article that looks at the science and craft of Influence. So, in this article, we shall focus on the Business Case. But we’ll also recognize that most of what we say about one will be equally valid for the other.

Why Do You Need a Project Business Case?

A project business case is a part of the overall set of project definition documents; sometimes known as:

• PMP: The Project Master Plan
• ToR: The Project’s Terms of Reference
• PID: The Project Initiation Document

This document (for a small project), or suite of documents (for a large project), needs to answer three questions:

1. What will the Project achieve?
   This is answered by the specifications and standards
2. How will we achieve the Project
   Which the plans and controls will address.
3. Why should we undertake the Project?
   This is the role of the Business Case and Investment Appraisal.

So you need a Project Business Case to set out the purpose of and justification for the project. It acts as the basis for the Go/No-go decision to invest or not in your project.

Quite simply: it puts the case.

Therefore, you need to compile your business case rigorously. First, gather information and data, and compile the costs, benefits, and risks. Next, you must use an acceptable methodology for conducting the analysis. And finally, present your conclusions clearly and objectively.

Additional Reasons for Creating a Project Business Case

Making a decision, and then justifying it, are clearly the primary purposes of your Project Business Case. But there are many other reasons why your organization should consider them to be a necessary part of Project Management and Governance.

1. Your Business Case is a communication tool.
   It will help you to win the commitment of your project stakeholders
2. Good governance requires transparency, accountability, due diligence, and auditability. These can each be internal and external to your organization.
   All big words and vital practices. But your business case will support you in meeting each of these needs.
3. Your Business Case will set out a clear definition of success.
   It therefore gives you one valuable foundation for all future evaluations of your project.
4. Perhaps most of all, never underestimate the value of structuring and documenting your thought processes.
   It will help with the rigor and objectivity of your own project evaluation.

The Role of a Project Business Case in Project Governance

Good governance is an essential part of rigorous Project Management. Principally, your business case must answer the questions the decision-makers will (should) ask. These include:

• How does this project align with our organization’s mission, vision, and strategy?
• What are the benefits, and how confident can we be that the project will achieve them?
• What are the costs? And how confident are we that the business case includes every cost?
• How will the organization fund and resource the project?
• What are the risks to our organization if we do this project? And if we don’t?
• How much can we manage, reduce, or avoid the risks?
• Does the business case consider a suitable range of viable options? And does it consider a ‘do nothing’ or ‘do minimum’ option?
• What roles will the project require decision-makers and other senior executives to take? And are they committed to those roles?
• Does this project represent a better use of limited funds and resources than competing projects?

The secondary governance role of your Project Business Case is to evaluate project success.

This will happen at the end of the project, and during it. External assessors, like a Gateway Review team, or Project Auditors, will use your Business Case. They will need to consider whether you are delivering the benefits you projected. And also, how well you are keeping to your budget, so the net benefit meets your plans.

Roles and Responsibilities for the Project Business Case

When was there ever a ‘typical project’? But on a typical project:

• The Project Manager is responsible for compiling the Project Business Case
• A Project Board has the responsibility for approving (or rejecting) the Project Business Case
• Your Project Sponsor is accountable for the delivery of the benefits that the business case projects, and for controlling the costs within the budget in the business case.

The Project Manager is responsible for maintaining the Project Business Case as a live, controlled document. You will do this in consultation with your Project Sponsor. This means that, if there are any significant changes, the team will need to update the business case. And if those changes are substantial, it would need to go back to the decision-making group.

Do you have a Gateway Review (or Stage-Gate) process? If so, then the Gateway Review Team will use the Project Business Case as part of the basis for their assessment.

What your Project Business Case Should Contain

The first place to start is this video…

The questions we saw in the section above need to dictate the contents of your Project Business Case. So too should its target audience:

• Primarily, this is your Decision-makers
  But it also includes:
• Decision-influencers
  The stakeholders who can influence or persuade your decision-makers.
• Project Team
  The people who will implement the project plans and deliver the benefits.

So, here is the content list from our Project Business Case Template.

Executive Summary

Your Executive Summary must cover the key issues and conclusions from your Project Business Case. This is valuable to decision-makers because they will want a quick overview, to help them understand what they will be reading. Sections are likely to include:

• Why undertake the project: the issue to resolve or the opportunity available
• The outcomes offered by the project
• Recommendations of this business case
• Headline reasons to justify the recommendations

Rationale

At the heart of your business case is the answer to the question:

Why do this project?’

So, the information you need will include:

• The strategic context of the project
  …and maybe the organization
• Drivers for change
• Goals and objectives for the project
• External comparisons
  Other projects and organizations – perhaps including formal benchmarking data.
• Options you consider within the Business Case
  …and maybe any options you have rejected, and why
• Proposed Solution

Analysis

Here is your Evaluation of the Pros and Cons of each option. This section gets to the nub of the case for your project. It sets out the value for money that each option represents. Therefore, you will document:

• Financial and non-financial benefits of the options
• How to realize and measure the benefits
  Benefits realization is a vital part of modern project management. We no longer simply dump deliverables on the organization in the hope that they will generate the revenue, service, or savings benefits we set out in our original Project Business Case.
• Financial and non-financial costs
• Affordability and achievability
  It is not enough to say that a project has a net financial benefit. We also need to answer the question of where the funding will come from.
• Risks and issues, dependencies and constraints
• Impact analysis
  We need to explore what impact the project will have on our organization, its day-to-day activities, and any other projects it has committed to.
• Investment Appraisal
  This is the formal financial evaluation of your project. Most organizations have a methodology that they approve (or even mandate) for assessing the net financial cost or benefit. For larger projects, which will take more than a year, many organizations require you to use a discounted cash flow (DCF) methodology. In it, they set either Net Present Value (NPV) or Internal Rate of Return (IRR) levels that your project must achieve. We explain these terms fully in our Project Manager’s Immersion Program; our premium core course.

Business Case Approval Process

This section is where you set out the governance process around the approval and maintenance of your Project Business Case. So, you will need:

• How and by whom the business case is to be approved
• Document control information
  The Project Business Case will be a ‘Controlled Document’ and subject to strict version control
• Approval status
  This is the status (draft, under review, approved, rejected, etc) of the current document

Appendices

Lastly, there are other things that you may want to include:

• Procurement options and selection
• Governance and expenditure authorization processes
• Relevant policy and strategy papers
• Cross-reference project definition and planning documents
• Change control (for the project and for the business case)
• Business case author and development team
• The project team

How to Create and Use Your Project Business Case

Next, you’ll need a simple process for building and using a robust Project Business Case. Ours consists of six steps.

Step 1: Stakeholder Engagement

The purpose of this step is to develop a prioritized list of project requirements:

1. Understand the organizational context
2. Identify your stakeholders
3. Gather requirements from your stakeholders
4. Make estimates of the costs and benefits of the different requirements
5. Work with stakeholders to prioritize your requirements
   Take a look at our article ‘How to Define Your Project Scope‘

You may like our videos on MoSCoW analysis, Design Thinking, and the Kano Model, to help you with requirements gathering.

Step 2: Document Your Project

Now you will take what you have learned and use the Project Business case structure to document it:

1. Create a definition in terms of Goal and Objectives
2. Set out the range of requirements (your potential project Scope)
3. Document the scope priorities, and the dissenting views
4. Create a shortlist of project options
   Include a ‘Do Nothing’ or ‘Do Minimum’ option

Step 3: Carry out Your Investment Appraisal

Use the options to create a formal evaluation of each one. This means your decision-makers will be able to compare them on a like-for-like basis.

1. Allocate costs and benefits against each option
2. Apply your Investment Appraisal methodology
   This is a method of calculating a net cost or benefit for each option. Most organizations have a preferred or required approach. You may need to call on the support of an accountant or other suitably skilled colleague.
3. Subject your investment appraisal to rigorous checking
   …or even an audit by a ‘red team’
4. Document the principal non-financial costs and benefits
5. Document the principal risks
   … and evaluate the scale of each in terms of likelihood and impact

Step 4: Draft Your Business Case Document

Now that you have done the hard work, pull together your Project Business Case document. To help you, our Project Management Template Kit contains a useful template.

Step 5: Seek a Go/No-go Decision

If you do not have a procedure for placing a Project Business Case before decision-makers in your organization, you’ll need to create one. When you get a decision, be sure to document it.

For this, I favor a process that not only has decision-makers signing off on your business case. Also, I like to have them, and other senior executives who need to contribute to your project, sign a printed copy of the business case they approved. This is a great way to focus minds on accountability and the role each has in delivering the project benefits.

Step 6: Ongoing Maintenance of Your Project Business Case

Once the decision-makers have approved your Project Business Case, it will become a live document. Therefore, you need to:

1. Monitor your project against it
2. Report expenditure and benefits realization against it
3. And finally… Keep it updated, and under strict version control

Do you have experience of creating and using a Project Business Case

If you do, we’d love to see your experience or thoughts about this article. Put them in the comments below. And do ask questions, if you have any.

Creating a Robust Project Definition

You may be interested in our Project Manager’s Project Definition Kit – an innovative course and resource kit, so you can take a jumble of ideas, needs, and requests and turn it into a well-defined project.