Business Case Template

Transcription

1 of Business Case: Business Case Template Created by Sequent Learning Networks, Inc. 99 Wall Street, 13 th Floor New York, NY Sequent Learning Networks provides this business case template in the interest of supporting product management, product marketing, and product development professional education. This business case template can be used to support a decision for a new or enhanced product or service, new innovations, a new market expansion, or other investments. Its format and flow can be adapted to multiple industries. The depth of data collected and presented is up to the preparers and decision makers. For further information and guidance, or if your company needs assistance in product planning, product strategy, or in overall training for product managers or product marketing managers, please call Sequent Learning Networks at. Product Team Project Title Business Unit or Division Date PREPARED BY APPROVALS Page 1

2 of Business Case: EXECUTIVE SUMMARY Introduction Brief overview of the purpose of this case and the desired outcome or decision Description Describe the project and the reason for this investment and the major issues that will be addressed Industry, Market and Customer Attributes What are the major customer or market needs that are addressed through this case. State the market size, revenue potential, targeted segments, etc. Assumptions and Risks What are the major assumptions, including financial, operational, technological that are discussed in detail and which could impact the probability of success. Key Financial Indicators Revenue Cost of Goods Sold GM GM% Expenses EBIT-DA Net Present Value Headcount Ests. Capital Purchases Payback period Cum. cash flow Year 1 Year 2 Year 3 TOTAL [End of executive summary] Page 2

3 of Business Case: HISTORY AND CHRONOLOGY or CURRENT SITUATION This section discusses the factors that led to the creation of this case. Is it a new product idea or innovation? A new market to exploit? Meeting a competitive challenge? A customer suggestion? What problem are you proposing to solve? Describe the proposed solution? Summarize any technical or scientific findings that solve the problem. Make sure to identify the goals of this case: What is it that you want to have happen? What decision are you looking for? BUSINESS NEED AND FIT In this section, you can expand on the business issues being addressed and on the proposed initiative. With this set up, you ll describe how this solution is aligned with the corporate mission, strategy, and goals. You ll also discuss the fit with other products or services in the portfolio, especially cross-elasticities or overlaps. INDUSTRY and MARKET ASSESSMENT The Industry: How attractive is the industry and why? Describe the characteristics of the industry. Describe the nature of demand for the product or service. What are the potential problems within the industry landscape? What particular trends can you point to that validate your assumptions about the industry? The Market What is the market size? The revenue potential? What is the willingness to pay? What segments are being proposed? Which targets within those segments? How would the products or services described in this case fit within the targeted industry? Why? What are the key success factors? On what basis would customers choose you vs. others? What resources and capabilities are needed to be competitively successful? What do you need to have to offer a sustainable competitive advantage? Finally, describe the market window of opportunity. When do you need to be in market and what is the consequence for missing the window? COMPETITIVE ANALYSIS Who are the competitors? What products or services do they sell? Who are their buyers? In what segments would you find their targeted buyers? How would you characterize their buyers? Who are their suppliers? How important are those suppliers and what risks could they impose on a particular competitor? What are the substitute products available to the targeted segments? What are the short-term and long-term impacts on price and volume? How do you think the competition will respond? What makes this an attractive landscape for other entrants? Who are their partners and what competencies do partners provide? Page 3

4 of Business Case: PRODUCT DESCRIPTION This section conveys the description and characteristics of the product or service. You may describe the main wants and needs of customers within each segment, and the targets within those segments so that you can show how are those needs will be met. What are the main features, functions, or capabilities of this product? How does this product or project solve the identified problems? What technologies, scientific foundations or platforms will be used? What are the performance characteristics of the product? You ll also need to discuss lifecycle implications, including a validation of the market window, how to move from early adopter to mass-market uptake, and post-launch life cycle considerations. PROJECT PROPOSAL When products or services are developed, a project plan is created to show how multiple organizations will participate, with what deliverables and dates. You ll need to show those deliverables, dates, and dependencies. Define critical path items and make sure you ve suggested a way to mitigate risks of delays, or how to fill slack time. RESOURCES REQUIRED Describe the number of people needed across all functional organizations. If there are special skills and experience required, describe these here. Describe any timing for hiring and make sure not to underestimate how long it takes to find the right people to staff a project, especially if it is new or requires a specific skill set. FINANCIALS In this section you ll be preparing estimates and forecasts with a series of assumptions. The assumptions should be clearly stated and include rationale for choosing a specific forecast. Make sure to include best case, worst case, and most likely case. The following major categories are included: 1. Profit and loss estimates a. Unit prices and volumes (sales mix) b. Cost of Goods: standard costs or cost targets (including material, labor & overhead) c. Expenses by function d. Allocated expenses for uncontrollable expenses or overheads 2. Cash Flow a. Timing of inflows and outflows b. Capital expenditures needed (amount and timing) c. Discounted cash flow (and NPV) 3. Balance Sheet Impacts to Consider a. Asset additions, retirements, depletion or write-offs b. Facilities added or taken off line c. Cash needed to fund the project or notes/debt to finance the project d. Depreciation 4. Cost of capital (the discount rate) for discounting cash flows Page 4

5 of Business Case: 5. Financing alternatives (make/buy, lease/buy) for capital equipment (if needed) 6. Depreciation and amortization factors 7. Study period (number of months or years that this case covers) 8. Break-even point 9. Tax rates, if appropriate 10. Sensitivity analysis (price, cost, volume) and impact on profitability 11. Cost/benefit analysis for specific projects (including goals of cost savings, avoidance, or increased revenue) IMPLEMENTATION AND OPERATIONAL Where would the product be produced or where would the project be completed? Are there adequate facilities available? Do you need to expand plant capacity? Do you need to purchase additional machinery? Are adequate materials or resources available? Make sure that each department s functional support plans are considered (e.g., manufacturing, supply chain, logistics, IT systems for ordering and billing and inventory, accounting systems, financial reporting, etc. Also, make sure that there is a customer service plan, a marketing plan, a sales plan, etc. These inputs from functional organizations provide the ability for you to execute on the business of this case. RISKS What are the specific risks involved. You may look at any dimension of this case, or any functional area and ask the question: What if? Here are some examples: - What if we miss the market window? - What if we can t source the material at the price we originally thought? - What if we can t secure all the resources for the project? - What if a competitor hits the market first? - What if our prices are too high? By understanding what can go wrong, you ll have a better understanding of how to mitigate those risks, or to have a tactical plan to counter the situation if it arises. RECOMMENDATIONS In this section, you ll draw appropriate conclusions and include your recommendation for go/no-go. It is important to remember that the positive outcome you might envision as you begin to assemble this case may indeed be different from what the facts, data, and assumptions reveal. Page 5

6 of Business Case: Appendix to the Business Case Template A context for the business case A business case prepared from within the product team environment is a tool that supports planning and decision making including decisions about whether to create a new product or service or whether to enter a new market. Certainly, business cases can be used for other investment decision, including vendor selection, in make vs. buy analysis, etc. Business cases are generally designed to answer the question: What are the economic outcomes if we choose X or do Y? A good business case shows expected cash flow consequences of the decision, over time, and it includes the rationale for quantifying benefits and costs. Critical success factors and significant risks will be discussed, if relevant. The case also describes the overall impact of your proposal in terms that every financially astute manager looks for: net cash flow, discounted cash flow, payback period, and internal rate of return. Need to Increase Gains + Accelerate Gains Cash Flow - Need to Reduce or Avoid Costs Time The organizing backbone of the case is a time line extending across months or years, as the figure suggests. This gives you a framework for showing management how they can work with you to implement financial tactics: reduce costs, avoid costs, increase gains, or accelerate gains. The business case is not a budget, not a management accounting report, and not a financial reporting statement. This distinction is important for deciding which kind of cost and benefit data go into the business case: incremental values or total cost and benefit figures. Incremental values are probably the right choice in decision support situations, especially where both costs and benefits will enter the case. A good business case in a complex environment requires assumptions, arbitrary judgments, and the development of new data new information that goes beyond existing budgets and business plans. This means that two people working independently can evaluate the same proposed scenario, use correct financial arithmetic and still produce quite different business case results. Page 6