012 What is involved in a business case

CONSTRUCTION MANAGEMENT

7 Apr 202102:09

Summary

TLDRThis video discusses the importance of a business case in project selection and portfolio management. It explains that a business case must convince the board of directors to allocate resources to a project by demonstrating its purpose, financial viability, and potential gains. Using a showroom example, the video emphasizes the need for detailed financial analysis, including costs, revenues, and other financial metrics. Once approved, the business case serves as the official sign-off to start the project. The next lesson will cover defining the project scope.

Takeaways

🎯 The goal of the project is important and must align with organizational objectives.
📝 The business case is essential to convince the board of directors to invest in the project.
🏢 The showroom example illustrates how a business case should be structured to prove its worth.
📈 The project's purpose includes increasing revenue and brand awareness.
💰 The business case must include detailed financial analysis, covering all costs and potential gains.
📊 Key financial elements to describe include revenues, expenses, expected inflation, discounted cash flow, interest rates, and taxes.
🔢 Important financial metrics such as net present value and payback methods are crucial for large projects.
👥 The project sponsor and senior leaders are responsible for preparing the business case.
✔️ Approval of the business case often serves as the official sign-off to start the project.
🔍 Understanding the project's scope is the next step after approval, to ensure all aspects are clear.

Q & A

What is the primary purpose of a business case in project management?
-The primary purpose of a business case is to convince the board of directors to invest the company's resources in a particular project, highlighting its potential benefits and financial viability.
Why is the board of directors involved in project selection?
-The board of directors is involved in project selection to ensure that the projects chosen are worth the organization's time and resources, aligning with the company's goals and strategic direction.
What are the key elements that must be included in a business case for a project?
-Key elements of a business case include the project's purpose, financial analysis with costs and potential gains, detailed estimates, and descriptions of financial elements such as revenues, expenses, expected inflation, and discounted cash flow.
How does a business case contribute to the decision-making process for project investment?
-A business case provides a comprehensive analysis of the project's feasibility, expected outcomes, and financial implications, which helps the board of directors make informed decisions on whether to invest in the project.
What financial methods might be applied in a business case for multi-million dollar projects?
-Financial methods such as net present value (NPV), payback period, and consideration of interest rates and taxes may be applied in a business case for large-scale projects.
What is the significance of the business case approval in the project management process?
-The approval of a business case often serves as the official sign-off to start the project, indicating that the project has been deemed worthy of the organization's resources and effort.
What is the role of the project sponsor and senior leaders in preparing a business case?
-The project sponsor and senior leaders are responsible for preparing the business case, ensuring it includes all necessary financial analysis and justifications for the project's investment.
How does the business case help in estimating the potential gains of a project?
-The business case helps in estimating potential gains by providing a detailed financial analysis, including projected revenues, expenses, and other financial elements that contribute to the project's profitability.
What is the relationship between the business case and the project's purpose for the business?
-The business case must clearly explain the project's purpose and how it aligns with the business's goals, such as increasing revenue or brand awareness, to justify the investment.
What is the next step in the project management process after the business case is approved?
-After the business case is approved, the next step is to define the scope of the project, which involves understanding the specific tasks, deliverables, and objectives involved in the project.
Why is it important to adhere to established standards when creating a business case?
-Adhering to established standards ensures that the business case is comprehensive, credible, and follows a format that is easily understood by the board of directors, increasing the chances of project approval.

Outlines

00:00

🚀 Project Selection and Business Case Development

The script introduces the importance of a business case in convincing the board of directors to invest in a project. It uses the example of a showroom to illustrate how a business case should detail the project's purpose, expected revenue increase, brand awareness, and financial analysis. The financial analysis includes costs, potential gains, revenues, expenses, expected inflation, and discounted cash flow. It also touches on the application of net present value and payback methods for evaluating multi-million dollar projects. The business case serves as the official sign-off to start the project if approved.

Mindmap

Keywords

💡Project Selection

Project Selection refers to the process by which organizations decide which projects to undertake based on strategic alignment and resource availability. In the video, project selection is crucial as it leads to the board of directors choosing projects that are worth the organization's time and resources, which is a key step in project portfolio management.

💡Project Portfolio Management

Project Portfolio Management (PPM) is the centralized management of projects to achieve strategic business objectives. In the context of the video, PPM is highlighted as the mechanism through which the board of directors evaluates and selects projects that align with the organization's goals, ensuring that resources are allocated effectively.

💡Business Case

A Business Case is a document that outlines the rationale for a project, including its objectives, costs, potential gains, and benefits. It is used to persuade stakeholders, such as the board of directors, to invest in the project. In the video, the business case is essential for convincing the board to invest company resources in the showroom project.

💡Board of Directors

The Board of Directors is a group of individuals elected by the shareholders of a company to represent their interests and make key decisions on their behalf. In the video, the board plays a critical role in the project selection process, choosing which projects to invest in based on the business case presented.

💡Revenue

Revenue refers to the income generated from the sale of goods or services. In the video, the new retail park is expected to increase revenue by becoming a landmark for consumers seeking high-end products, thus driving sales and income for the business.

💡Brand Awareness

Brand Awareness is the extent to which consumers are familiar with a brand. The video emphasizes that the showroom project will increase brand awareness by gaining significant exposure, which is important for attracting customers and enhancing the company's market presence.

💡Financial Analysis

Financial Analysis is the evaluation of financial data to make informed decisions. In the context of the video, a detailed financial analysis is necessary for the showroom project, including estimating all costs and potential gains, which is crucial for the business case and investment decision.

💡Net Present Value (NPV)

Net Present Value (NPV) is a financial metric used to determine the profitability of an investment. The video mentions NPV as a method that will be applied to evaluate the multi-million dollar projects, indicating its importance in assessing the long-term financial viability of the showroom project.

💡Payback Period

The Payback Period is the time it takes for an investment to generate an amount of income or cash equal to the cost of the investment. The video refers to this concept as a method for evaluating the showroom project, helping to understand when the project is expected to break even.

💡Project Sponsor

A Project Sponsor is a senior leader within an organization who supports and authorizes a project. In the video, the project sponsor is responsible for preparing the business case, including financial elements such as revenues, expenses, and interest rates, which is critical for getting the project approved.

💡Scope of the Project

The Scope of the Project defines the work that needs to be done to deliver a project and the boundaries within which the work is to be executed. The video mentions that understanding the scope is the next step after the project is approved, indicating the importance of defining the project's extent and requirements.

Highlights

The project selection process involves the board of directors choosing projects worth the organization's time and resources.

A business case is essential to convince the board of directors to invest in a project.

The business case for a showroom project aims to increase revenue and brand awareness.

Financial analysis in the business case includes detailed estimations of costs and potential gains.

All financial elements such as revenues, expenses, expected inflation, and discounted cash flow are described.

For multi-million dollar projects, financial analysis includes net present value and payback methods.

The preparation of the business case is a responsibility of the project sponsor and senior leaders.

Approval of the business case serves as the official sign-off to start the project.

Having a project requires understanding the scope and what is involved in the project.

The next lesson will focus on the project's scope to provide clarity on what it entails.

The importance of adhering to established standards in the business case is emphasized.

The business case must provide a compelling argument for why the project is worthy of investment.

The showroom example is used to illustrate the process of proving a project's worth through a business case.

Financial analysis is crucial for justifying the investment in a big investment like a showroom.

Interest rates and taxes are considered in the financial analysis for large-scale projects.

The business case is a key document for gaining approval and moving forward with a project.

The transcript suggests that the business case is a comprehensive document covering various financial aspects.

The transcript will continue to explore project management topics in the next lesson.