Compute The Rate Of Return For The Following Cash Flow The Nuts and Bolts of Preparing a Business Case

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The Nuts and Bolts of Preparing a Business Case

Change is a challenging prospect, especially when it is aimed at business improvement. There is a lot at stake and project proponents need to secure stakeholder buy-in to make effective business change. However, stakeholders won’t just turn around and say “OK”. They want everything in black and white. The first document they want to see before buying is a business case.

A business case is therefore a very powerful and crucial document. This is what will be used to communicate and convince that key group of people, the stakeholders. It is a logical argument that clearly explains why the project should be supported.

This document provides answers to the financial and other consequences if one or the other action is taken. Supports:

• Planning

• Decision making

• Selection of suppliers

• Implementation

An effective business case indicates:

• Expected cash flow as a result of the action over time.

• Methods and reasoning used to quantify benefits and costs.

• Overall performance of the proposal in terms of discounted cash flow, payback period and internal rate of return.

ENSURING AN EFFECTIVE BUSINESS CASE

Now you have decided to take the proverbial “bull by the horns” and write your business case. However, you ask, “how can I make it powerful?” “How can I make sure he’s okay?”

To make a good case you must be:

• thoroughly (ensure you have investigated all possible impacts, costs and benefits).

• clear and logical in your presentation (clearly write the cause-and-effect chain which

leads to any impact of costs and benefits).

• objective (it will be to your detriment if your presentation is subjective. Ensure that

good and bad issues are included in your finished product).

• systematicity (it is important to be consistent and methodical in your presentation

findings and your summary).

BEGINNING

Writing a business case is not a one-person effort. It’s a team event, so get your team together to “roll”. While one or two people usually write, it takes a whole team to provide the necessary information. The team over a period of about 4-5 meetings can provide you with invaluable information that you can use.

How the team works

There are many benefits to having a team behind your efforts. For example, the team will:

1. Help with information on cost benefit models with items and ideas.

2. Spread a sense of ownership for the business case. After all, they are included.

3. Act as a buffer for critics of the proposal.

IT Managers: Provide information on the cost and value impact on IT operations.

Financial experts: Provide information useful for determining the size of the contribution to expected business benefits.

Human Resources Staffing: Determine People Costs.

Senior managers: Help prioritize, legitimize and assign value to each contribution to the company’s strategic business goals.

Structure and content

There is no set template for writing business cases; however, there are certain pieces that should be included to ensure a well-rounded proposal. These are:

• Overview/Introduction

• Methodology

• Business impacts

• Risks and contingencies

• Conclusion and recommendations

by Carole Peterson

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