The document outlines a business case development framework that emphasizes the necessity of a robust business case for projects requiring significant investments. It details objectives, components, and processes for creating a business case, including quantitative analysis elements and modeling techniques. Additionally, it includes guidance on common pitfalls and success factors essential for effective implementation and validation of the business case.

1. Business Framework
Business Case Development
Framework
Any project requiring a non-trivial investment must
be supported by a robust business case to justify the
economics of this pursuit. This toolkit outlines the
objectives, components, and processes involved with
business case development. Furthermore, it includes a
working, consulting quality capital budgeting business
case model (Excel financial model).
Bottoms-
up
Benefits
Case
Business
Modeling
Top-down
Business
Case
Financial
Analysis
BUSINESS
CASE
ELEMENTS
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2. 3
Contents
• Overview
- Executive Summary
- Objectives
- Business Case Stream Charter
• Quantitative Analysis Elements
• Business Case Modeling
• Sample Business Case Model (Excel document)
• Final Words
- Dos and Don’ts
- Common Pitfalls
- Rules of Thumb

3. 5
You will find that all business cases have the same core objectives
Objectives – Core Objectives of Business Case
 Quantify major improvement opportunities
 Ensure project resources are allocated to the areas of highest leverage
 Establish the range of benefits to be achieved through implementation activities

Provide the basis for assessing the return on investment and tracking benefits to the
bottom line during the implementation phase
 Develop the rational basis for making change necessary

4. 7
Identify major areas of revenue and cost assets and their
key drivers
Identify true value (i.e. revenue and costs):
By function/activity
By process
By product/client type
Quantify the financial impact of improvement opportunities
from streams
Validate business case and gain sign-off
The business case stream identifies areas of opportunity and quantifies the
improvement potential
OBJECTIVES CRITICAL SUCCESS FACTORS
Understanding of the business case within the project
Access to key data and knowledge holders within client
Availability of key resources to validate findings
Timely input from streams
SCOPE
Summary analysis of costs and revenues
Detailed analysis of operating costs
DELIVERABLES
Detailed breakdown of current costs and revenues
Quantification of financial impact of early wins
Benefits case estimate for improvement potential in costs
and revenues:
Including payback periods
Input to design of benefits-tracking mechanism
ACTIVITIES
Conduct focus interview
Analyze financials
Build business model
Build top-down business case
Analyze benefits from team
Build bottoms-up benefits case
Prepare business case for benefits-tracking
Business Case Stream Charter

5. 9
The structure of a business case is built on a combination of four
separate, yet interlinked, quantitative analysis elements
The extent of each element varies from case to case—but, they are always there.
Bottoms-up
Benefits
Case
Business
Modeling
Top-down
Business
Case
Financial
Analysis
BUSINESS
CASE
ELEMENTS
Enabling Element
Core Deliverables
Quantitative Analysis Elements

6. 11
Top-down Business Case
Bottoms-up Benefits Case
• Builds common understanding of
the basics
• Enables us to define
framework for business case
• Indicates levers that
can deliver benefits
• Is about “what
if” not “how”
• Mainly
financial
• Is about
“how” not
“what if”
• Quantifies
identified
opportunities
• Strong operational focus
• Defines critical success
factors and key performance
indicators for implementation
• Fully validated
Business Modeling
(Enabling element)
Financial Analysis
(Enabling element)
Regardless of its focus, all business cases encapsulate both a top-down
and bottoms-up approach
Quantitative Analysis Elements – Top-down & Bottoms-up Approaches (1 of 3)

7. 13
The combined top-down and bottoms-up approaches triangulate to form
the final business case
Final
Top-down
Business
case
Final
Bottoms-up
Benefits
Case
Aspiration
Hypotheses
Benchmarks
Baseline
Implementation
Prioritization
Leveraging the
Opportunities
Analysis
Preliminary
Top-down
Benefit
Evaluation
Benefit
Scope by
Area
Final
Business
Case
Realized
Benefits
Focus on
Major Benefit
Levers
$$$
Bottoms-up
Approach
Top-down
Approach
Proposed
Issues
Quantitative Analysis Elements – Top-down & Bottoms-up Approaches (3 of 3)

8. 15
Financial
Decomposition
Opportunity
Identification
Opportunity
Quantification
Benefit
Validation
Business Case
Finalization
1 2 3 4 5
 Decompose the
organization’s
financial situation by
understanding
economic drivers of
the business
 Understand the
financial projections
and historical trends
 Based on the
financial analyses in
the first phase,
conduct studies
around the key
levers identified
 Develop a financial
baseline
 Quantify the
opportunities
identified and
develop benefit logic
 Create opportunity
charts for each
opportunity
 Define financial and
operational
assumptions
 Validate the benefit
logic with key
process owners in
the business
 Obtain sign-off from
key stakeholders in
the organization
 Design a cohesive
project with clear
linkages to the
benefits identified
 Define payback
assumptions
Business Case Development Approach
The business case development process begins with a financial
decomposition of the organization to search for opportunities

9. 17
Financial
Decomposition
Opportunity
Identification
Opportunity
Quantification
Benefit
Validation
Business Case
Finalization
Those benefits identified as both financial and quantifiable may eventually
be captured in the business case financial model
Financial Non-financial
Examples
 Increased sales
 Increased delivery time
 Reduced operating costs
Examples
 Customer satisfaction
 Service quality
 More stable field force
team
 Increased employee
morale
Examples
 Customer retention
 Retail alignment with
strategy
 Effective work processes
Examples
 Improved
communication
 Increased teamwork
 Enhanced reputation
with suppliers
QuantifiableNon-quantifiable
Financial Non-financial
These benefits
can be captured
quantitatively in a
financial model
Capture qualitatively
Capture qualitatively Capture qualitatively
QuantifiableNon-quantifiable
Only those benefits that are both Financial and Quantifiable can be modeled
into the final financial model.
Phase 1, 2 – Financial Decomposition &
Opportunity Identification

10. 19
Financial
Decomposition
Opportunity
Identification
Opportunity
Quantification
Benefit
Validation
Business Case
Finalization
Phase 3 – Opportunity Quantification
These benefits must then be quantified and translating into specific
financial impacts
Categorize the financial, quantifiable benefits into the 5 benefit categories for
structure in the financial model.
PROFIT & LOSS IMPACTS
BALANCE SHEET IMPACTS
CASHFLOW IMPLICATIONS
Gross benefit
Investments
Net
benefit
Financial Non-financial
Capture
qualitatively
Capture
qualitatively
Capture
qualitatively
QuantifiableNon-quantifiable
Revenue Enhancement
Cost Reduction
Cost Avoidance
Capital Reduction
Capital Avoidance
• Ultimately, benefits must be
quantified and translated
into impact on the
company’s financials
• P&L impacts
• Balance Sheet impacts
• Cash Flow implications
• Analyses should be
presented within the context
of investment required and
timeframe for benefits
realization (e.g. payback
period)

11. 21
Financial
Decomposition
Opportunity
Identification
Opportunity
Quantification
Benefit
Validation
Business Case
Finalization
Phase 5 – Business Case Finalization
The financial modeling process involves calculating key financial metrics,
such as ROI and Payback Period
Define key assumptions and financial metrics to drive financial modeling
COMMONLY USED FINANCIAL BUSINESS CASE METRICS
Timeframe Most business case for capital budgeting models have a 5-year timeframe.
Discount / Hurdle Rate By definition, this is the minimum acceptable rate of report for any internal project
that the company takes on. This is defined by Corporate Finance and for most
companies, it is 10% (annually). This value is crucial, as it drives all the key
financial calculations (e.g. NPV, ROI).
Net Present Value (NPV) NPV is a concept used to measure present value of future cash flow. This is done
by discounting the cash flow by the discount rate. E.g. with a discount rate of 10%,
the NPV of $5MM in year 2 is $5MM/(1 + 10%)2
Return on Investment
(ROI)
ROI is a performance measurement of how profitable the project or investment was.
It is a percentage symbolizing the profit as a percentage of total investment.
Usually, we calculate the ROI for the snapshot at the end of the 5-year timeframe.
Payback Period This is the time it takes for a project to recover its initial costs and start generating a
positive return for the company. Since most models are set at a 5-year horizon, the
payback period should occur within 5 years.
Source: Investopedia (for more information)
If these
concepts are
new to you
and unclear,
examine the
calculations
used in the
embedded
Excel model
(on slide 25).

12. 23
Contents
• Overview
- Executive Summary
- Objectives
- Business Case Stream Charter
• Quantitative Analysis Elements
• Business Case Modeling
• Sample Business Case Model (Excel document)
• Final Words
- Dos and Don’ts
- Common Pitfalls
- Rules of Thumb

13. 25
Sample Business Case Model – Documentation (1 of 4)
The included Capital Budgeting Business Case model contains 5 tabs
Overview Tab
The ―Overview‖ tab, in orange,
provides a 5-year financial
summary of both the benefit
case, cost of investment,
resulting cash flow analysis, and
key financial metrics to drive
business decisions.
It contains very few inputs, as
values are pulled from the next 4
tabs.
Benefits Tabs
The next 3 tabs, in green, comprise the identified
financial, quantifiable benefits, divided into the
sections of ―Revenue Enhancements, ―Costs
Benefits,‖ and Capital Benefits.‖
The benefits and associated assumptions are
clearly defined and calculated in these tabs. For
each benefit, values are calculated over the 5-
year time frame and are pulled into the ―Overview‖
tab.
Cost of Investment Tab
The ―Cost of Investment‖ tab, in
red, delineates the identified
costs associated with
undertaking this project/initiative.
In the example model, it has
been structured similar to the
benefit tabs, though this does not
need to be the case. The
structure is dependent entirely
and how the cost structure of this
investment.
Costs are also calculated over 5
years and summarized in the
―Overview‖ tab.

14. 27
Sample Business Case Model – Documentation (3 of 4)
Your benefits should be clearly defined—both in terms of definitions and
calculations—remember, these need to be validated
BENEFIT TABS
• There are 3 Benefit Tabs:
• Revenue Enhancements – includes all
identified revenue enhancements
• Cost Benefits – includes both Cost
Reductions and Cost Avoidances
• Capital Benefits – includes both Capital
Reductions and Capital Avoidances
• Each of these 3 tabs is structure the same
• At the top, tabulate all your assumptions
• Your assumption values are indicated by
yellow cells and should be clearly defined
• Below the assumptions are your actual
benefits
• Each benefit has its own section in blue,
which contains 4 sub-sections: the name of
the benefit (darker blue), benefit description
(light blue), calculation details (gray),
calculated values over 5 years (white)
• The Excel formulas for the calculations
should not contain any numbers—only
references to assumption values identified in
the top section

15. 29
Contents
• Overview
- Executive Summary
- Objectives
- Business Case Stream Charter
• Quantitative Analysis Elements
• Business Case Modeling
• Sample Business Case Model (Excel document)
• Final Words
- Dos and Don’ts
- Common Pitfalls
- Rules of Thumb

16. 31
… and avoid the common pitfalls!
 “Oh data, you wanted me to get data!”
– Lots of war stories but no data
 “There is no data”
– Sadly, too often this means the speaker is too lazy to plug through reams of paper to get at the data
 Staying in data gathering and analysis mode
 Stating the obvious
– ―Increasing margins will improve profits.‖
– We are looking for the ―So-Whats‖—keep on digging until you find them.
 Finding a gold mine and quantifying the value of the shack built on it
– Too often we get bogged down in the detail and forget the bigger picture
 “Validate, validate, validate—oh, does that mean I should have validated my analysis?”
– People are validation—averse because they do not understand the process or are afraid it will be
abused
 Letting the team dictate where the benefits will end up
 Not plugging in to the authorisation network and selling strategy discussions
 Staying holed up and not understanding each study’s findings and opportunities
COMMON PITFALLS
Common Pitfalls