Business Case Summary

6,518 views

Published on

Business case approach summary

Published in: Business, Technology
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
6,518
On SlideShare
0
From Embeds
0
Number of Embeds
28
Actions
Shares
0
Downloads
231
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Business Case Summary

  1. 1. Business Cases Juan Arangote, CMA
  2. 2. Misconceptions about Business Cases • Excel spreadsheets that show financial aspects of projects (i.e. revenues, costs, investments ROI, payback, etc. • Required by Finance for presentation to decision body • Convoluted documentation and approvals that can be frustrating J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  3. 3. Why do a business cases analysis? $ Time FTE ROI J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  4. 4. Define and differentiate Excel spreadsheets highlighting the Financial models financials of the project (i.e. revenues, costs and investments ROI, payback, etc.) Working description of a business Business models (i.e. strategy, SWOT, functions such as sales, marketing, production, financ e). Business cases Persuasive argument for a particular action / decision J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  5. 5. Align Business Cases to Strategy J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  6. 6. Sample Strategy Map Shareholder Wealth Customer Financial Defend & grow “Stars” Revitalize “weak links” Acquisition New product Rationalize product line Strategic Partners Best Value Customer Partnership Image Business Emerging mkt Customer Strategic Reputable Process expansion Support Alliances Partners Rewards Operational & Performance People & Culture System Technical Skills Measurement •Consistent •Nurture innovation •Congruent and relevant J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  7. 7. Benefits • Positive outcomes/impact of business case • Derived from business objective • Each must be validated J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  8. 8. Types of Benefits • Financial vs Non-Financial • Immediate vs Long-term • Hard vs Soft Benefits • Direct vs Indirect (Societal) J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  9. 9. Costs • Resources or activities needed to achieve benefits • Derived from action • “Fleshed-out” through a cost-influence diagram J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  10. 10. Categories of Costs • Financial vs non-financial • Cash vs non-cash (i.e. accounting/accrual) • Direct vs indirect • Start-up vs ongoing J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  11. 11. Are there soft costs? • Risks absorbed • Employee morale • Societal costs (cascaded costs) J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  12. 12. Cost Derivation Perspectives Resource-based Identifies resources that cause cost Activity-based Activities drive use of resources. Suited for projects where major costs are personnel. J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  13. 13. Business case drivers • Drivers are KEY assumptions • Influence success/failure of business case • May comprise of several assumptions • Must be stress-tested • NOT ALL ASSUMPTIONS ARE DRIVERS J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  14. 14. Metrics • Measures to indicate success • Specified at the start of the business case • Clearly understand • Elements • Formula • When to measure J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  15. 15. Common Financial Measures • Net present value (NPV) • Internal rate of return (IRR) • Payback period J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  16. 16. Special measures • Important measures of companies • Industry standards J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  17. 17. Definition of Risks • All Business Cases face risk • The chance of an event that impedes realization of objectives • What can go wrong! • Risk profile can be unique for each company J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  18. 18. Risks Perspective • Internal • External Financial Customer Operation Employee • Controllable • Non- controllable J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases
  19. 19. Sensitivity Analysis vs Simulation Sensitivity Analysis Simulation • Change one variable • Change variables at the • Hold others constant same time • Determine impact to • Determine impact to metrics metrics • Tedious for multiple • Use software (Crystal Ball variables or @Risk) • Masks critical • Statistically identifies assumptions critical assumptions J. Arangote Financial Models Copyright © 2009. All Rights Reserved. Consulting Business Cases

×