Business Case Development

Overview

A strong business case combines financial analysis, strategic alignment, and risk assessment to justify investment decisions and secure leadership approval.

When to Use

• Requesting budget approval
• Justifying technology investments
• Planning major initiatives
• Evaluating vendor solutions
• Resource allocation decisions
• Strategic priority setting
• Change management planning

Instructions

1. Business Case Framework

Business Case Template:

Project: Customer Portal Modernization
Date: January 2025
Prepared By: Product Manager
For: Finance & Executive Review

---

## Executive Summary

Proposal: Modernize customer portal with cloud-native architecture,
improve UX, and enable real-time features.

Investment Required: $800K (one-time)
Annual Operating Cost: $150K (vs $200K current)
Payback Period: 18 months
NPV (5-year): $2.1M
IRR: 45%

Recommendation: APPROVE - Strong financial case with strategic benefits

---

## Strategic Alignment

Corporate Goals:
  1. Increase customer lifetime value (align)
  2. Reduce operational costs (align)
  3. Improve competitive positioning (align)
  4. Digital transformation (align)

This project directly supports 4/4 strategic priorities.

---

## Benefits Analysis

Quantifiable Benefits (Annual):

  Benefit 1: Reduced Support Costs
    Current: 50 support hours/week at portal issues
    Future: 20 support hours/week (60% reduction)
    Calculation: 30 hours × 52 weeks × $75/hour = $117K savings
    Confidence: High (proven UI improvements reduce support)
    Timeline: Months 4-6 (ramp up to full savings)

  Benefit 2: Increased Conversion
    Current: 2.5% checkout completion rate
    Future: 3.2% estimated (28% improvement)
    Current Revenue: $10M annual, 100K users
    Additional Revenue: $280K annually (3.2% - 2.5%) = 12.5K × $22 ARPU
    Confidence: High (UX best practices proven in industry)
    Timeline: Months 3-4 (full realization)

  Benefit 3: Reduced Infrastructure Costs
    Current: $200K annual (on-premise)
    Future: $80K annual (cloud)
    Annual Savings: $120K
    Confidence: High (cloud cost data validated)
    Timeline: Month 12 (full migration)

  Benefit 4: Faster Time-to-Market
    Current: 8-week feature release cycle
    Future: 2-week cycle
    Value: Enable 2 additional features/quarter
    Estimated Revenue per Feature: $50K
    Annual Additional Revenue: $400K
    Confidence: Medium (dependent on product strategy)
    Timeline: Month 6 onwards

  Total Quantifiable Benefits: $917K annually (Year 1: $500K)

Intangible Benefits:
  - Improved brand perception
  - Better employee productivity
  - Competitive positioning
  - Customer satisfaction improvement
  - Data-driven decision making

---

## Cost Analysis

Capital Expenditure (One-Time):

  Development:
    Portal redesign & development: $300K
    Backend API development: $150K
    Data migration: $80K
    Infrastructure setup: $70K
    Subtotal: $600K

  Implementation:
    Testing & QA: $80K
    Deployment & training: $50K
    Contingency (15%): $120K
    Subtotal: $200K

  Total CapEx: $800K

Operating Expenditure (Annual):

  Cloud Services:
    Compute & Storage: $45K
    Database Services: $25K
    CDN & Analytics: $15K
    Subtotal: $85K

  Staffing:
    1 DevOps engineer (0.5 FTE): $35K
    Maintenance & support (0.5 FTE): $30K
    Subtotal: $65K

  Total OpEx: $150K (vs $200K current = $50K savings)

---

## Financial Summary

Investment: $800K (Year 0)
Annual Operating Cost Savings: $50K
Annual Revenue Increase: $450K (conservative Year 1)
Total Annual Benefit Year 1: $500K

Payback Period: 1.6 years
5-Year NPV (at 10% discount): $2.1M
IRR: 45%
Breakeven: Month 19

---

## Risk Assessment

Risk 1: Development Timeline Delay
  Probability: 30%
  Impact: 3-month delay = $100K additional cost
  Mitigation: Experienced team, proven architecture, 20% timeline buffer
  Contingency: Phased rollout approach

Risk 2: Lower Than Expected Adoption
  Probability: 20%
  Impact: 50% benefit realization = $250K loss
  Mitigation: Strong change management, user training, incentives
  Contingency: Alternative feature prioritization

Risk 3: Technical Challenges
  Probability: 25%
  Impact: 50% performance benefit = $150K loss
  Mitigation: Early POC, performance testing, expert architecture
  Contingency: Fallback to legacy system

---

## Alternatives Evaluation

Option 1: Status Quo (Recommended: No)
  Cost: $0 investment
  Benefit: $0
  Risk: Competitive disadvantage, customer churn
  Verdict: Unacceptable

Option 2: Minor Upgrades (Recommended: No)
  Cost: $200K
  Benefit: $150K annually
  Payback: 16 months
  Risk: Insufficient competitive response
  Verdict: Insufficient

Option 3: Cloud Migration + Modernization (Recommended: Yes)
  Cost: $800K
  Benefit: $500K annually (Year 1)
  Payback: 18 months
  Risk: Manageable
  Verdict: RECOMMENDED

---

## Implementation Plan

Phase 1: Setup & Planning (Weeks 1-4)
  - Infrastructure provisioning
  - Team onboarding
  - Architecture finalization

Phase 2: Development (Weeks 5-20)
  - Core features
  - Testing
  - Integration

Phase 3: Pilot & Validation (Weeks 21-24)
  - Beta testing with 10% users
  - Performance validation
  - Final optimizations

Phase 4: Production Launch (Weeks 25-28)
  - Phased rollout
  - Monitoring
  - Support

---

## Success Metrics

Measure 1: Time to Market
  Target: Reduce feature cycle from 8 weeks to 2 weeks
  Baseline: Currently 8 weeks
  Measurement: Track release dates

Measure 2: Customer Conversion
  Target: Improve from 2.5% to 3.2%
  Baseline: 2.5% (baseline)
  Measurement: Google Analytics, transaction data

Measure 3: Support Cost
  Target: Reduce from 50 to 20 hours/week
  Baseline: 50 hours/week
  Measurement: Support ticket system

Measure 4: System Performance
  Target: <2 second page load, 99.9% uptime
  Baseline: 4 seconds, 97% uptime
  Measurement: Monitoring tools

Measure 5: User Satisfaction
  Target: Improve NPS by 20 points
  Baseline: NPS 35
  Measurement: Quarterly surveys

---

## Recommendation & Approval

Financial Analysis: APPROVED
  Strong ROI, 18-month payback, $2.1M NPV

Strategic Alignment: APPROVED
  Supports all 4 strategic priorities

Risk Assessment: APPROVED
  Risks manageable with mitigation strategies

Recommendation: PROCEED with Customer Portal Modernization

Executive Approvals:
  CFO Signature: _________________  Date: _________
  COO Signature: _________________  Date: _________
  CTO Signature: _________________  Date: _________

2. Financial Analysis

# Business case financial calculations

class FinancialAnalysis:
    def calculate_npv(self, cash_flows, discount_rate=0.10):
        """Calculate Net Present Value"""
        npv = 0
        for year, cash_flow in enumerate(cash_flows):
            npv += cash_flow / ((1 + discount_rate) ** year)
        return round(npv, 2)

    def calculate_irr(self, cash_flows):
        """Calculate Internal Rate of Return"""
        # Approximate IRR calculation
        for irr_guess in range(0, 100):
            npv = self.calculate_npv(cash_flows, irr_guess / 100)
            if npv <= 0:
                return irr_guess / 100

    def calculate_payback_period(self, initial_investment, annual_cash_flows):
        """Calculate months to break even"""
        cumulative = 0
        for year, cash_flow in enumerate(annual_cash_flows):
            cumulative += cash_flow
            if cumulative >= initial_investment:
                remaining = initial_investment - (cumulative - cash_flow)
                months = (remaining / cash_flow) * 12
                return year + (months / 12)
        return None

    def create_financial_summary(self, investment, benefits, costs):
        """Create comprehensive financial analysis"""
        cash_flows = [-investment]  # Year 0

        for year in range(1, 6):  # 5-year projection
            annual_benefit = sum(benefits.values()) * (year / 2) if year < 2 else sum(benefits.values())
            annual_cost = costs['annual']
            cash_flows.append(annual_benefit - annual_cost)

        return {
            'investment': investment,
            'annual_benefit_year_1': cash_flows[1] + costs['annual'],
            'annual_cost': costs['annual'],
            'net_benefit_year_1': cash_flows[1],
            'payback_months': self.calculate_payback_period(investment, cash_flows[1:]),
            'npv_5_year': self.calculate_npv(cash_flows),
            'irr': self.calculate_irr(cash_flows),
            'roi_percent': ((sum(cash_flows[1:]) - investment) / investment) * 100
        }

3. Business Case Presentation

Presentation Structure:

Slide 1: Executive Summary (1 min)
  - What: Portal modernization
  - Why: Competitive advantage, cost reduction
  - How Much: $800K investment
  - Return: $500K annual benefit, 18-month payback

Slide 2: Strategic Context (2 min)
  - Business goals alignment
  - Market trends
  - Competitive pressure
  - Customer feedback

Slide 3: Current State (2 min)
  - Current system limitations
  - Operational costs
  - User experience gaps
  - Support burden

Slide 4: Proposed Solution (2 min)
  - Cloud-native architecture
  - Feature improvements
  - Timeline overview
  - Team approach

Slide 5: Financial Analysis (3 min)
  - Investment required
  - Benefits quantified
  - Cost-benefit summary
  - Payback period

Slide 6: Risk Management (2 min)
  - Key risks identified
  - Mitigation strategies
  - Contingency plans
  - Executive sponsorship

Slide 7: Implementation Timeline (2 min)
  - Phased approach
  - Key milestones
  - Go-live plan
  - Post-launch support

Slide 8: Recommendation & Next Steps (1 min)
  - Clear recommendation
  - Next steps
  - Timeline to decision
  - Questions?

---

Key Messages to Emphasize:
  1. Strong financial case (45% IRR)
  2. Strategic necessity (competitive pressure)
  3. Manageable risk (experienced team)
  4. Phased approach (reduce execution risk)
  5. Customer focus (improved experience)

Best Practices

✅ DO

• Tie business case to strategic goals
• Quantify benefits wherever possible
• Be realistic about timelines and costs
• Include detailed risk assessment
• Show multiple scenarios/alternatives
• Get stakeholder input early
• Executive sponsor support
• Use professional presentation
• Address tough questions proactively
• Define success metrics upfront

❌ DON'T

• Over-promise benefits
• Underestimate costs
• Ignore alternative solutions
• Skip risk assessment
• Rely solely on intangible benefits
• Present without executive support
• Use overly optimistic assumptions
• Forget to include contingency
• Present incomplete financial analysis
• Ignore competitive pressures

Business Case Tips

• Conservative assumptions perform better
• 20% cost and timeline contingency standard
• Always present best/worst case scenarios
• Link to strategic priorities explicitly
• Include experienced project leaders