So often, in my experience, the case for a project has been made well before the business case has been written – in which case the business case is written entirely to confirm some managers whim that his pet project is a good idea. I once had to write a long, in depth business case, knowing full well that the project was already underway, it had been approved without any actual proof that it was a good idea. I don’t know how it fared, I left that company soon afterwards!
So, if a firm actually want to know if their great idea is really a great idea then the time spent on a realistic business case will pay dividends.
I used the word realistic there, and that is where most (in my opinion) business cases fall short.
I once saw (only the summary, I admit) a business case that worked out how profitable business men would be on a train and costed that as a benefit to the project. However, for a three hour train journey, they calculated benefits of three hours. How realistic is that? How much work would someone realistically do on a train? Two hours? An hour and a half perhaps? The premise behind that business case was not realistic.
And of course that is not a cashable benefit anyway, it’s non cashable and could never be measured accurately.
The biggest problem with business cases
So you’ve got your benefits all sorted and you are slotting them into your business case.
Did you know that realising even 60-70% of the benefits claimed would be amazing?
Therefore, to be realistic, at this point, the cash value of the benefits has to be reduced to reflect this.
So your project will cost £60K over 2 years and your project manager calculates benefits cashable and non-cashable of £20k pa for the foreseeable future. (When those benefits actually kick in is another consideration of course). Brilliant, by year four, the project will be saving £20k pa.
But will it really? If you use the figure above about expected actuals then the £60k project will at best result in benefits of £14k pa, meaning it will take a further year and four months to be in credit. That could break a project. (And that assumes that the project didn’t overspend too – that, not surprisingly, can be down to some realistic planning as well).
And that would be for a good project that was well managed where the business owned the benefits realisation process and really saw it through.
Next time, the benefits realisation plan….