012 What is involved in a business case

Summary

This 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.