PRINCE2 Business Case -  Executive summary

The executive summary is both a summary and a commentary that explains the balance of the business case.  As an example here, you may conclude that although the measurable benefits are limited, the non-quantifiable benefits are extremely important and that you can justify the project largely upon these.

The executive summary is useful to inform those reading the business case of key points and the overall balance of the case.  But the presence of an executive summary is dangerous in that it can give an impression to the project board members that they just need to skim read this section and not bother with the others.

This is clearly not the case and project board members must not only reads the whole business case, they have a fundamental responsibility to ensure that it is enough to justify the project.

PRINCE2 Business Case -  Reasons

The reasons section explains why you are running the project, or planning to.  This is where you may say that the project is compliance justified for example.

You can also include some background, for example a project may be one of several projects to upgrade production line machinery as set down within the corporate five year plan.

PRINCE2 Business Case -  Business options

The options give some further background information to set the project in context.  Several things may have been possible to satisfy a business need, but here you explain why this one was selected for the project.

Be careful of people and guidance, including the PRINCE2 Manual when it states that “doing nothing” is always an option.  Sometimes doing nothing simply isn’t an option as you have to do something.

An example of this is an office move project where the lease on the current building is going to expire and you cannot renew it, so you have to move.

Saying that one option is to do nothing and wait to be killed by falling Brit work as a machinery moves in to demolish the building is clearly nonsense and a waste of effort when stated within a business case.

PRINCE2 Business Case -  Expected benefits

Here you list the benefits you expect from the project together with the anticipated level of benefit.

You also say how you plan to measure each benefit at the end of the project or, if you can’t measure the benefits until sometime after that, at a benefits review after the project.  Remember that you may have some non-quantifiable benefits and by definition you cannot measure these in a meaningful way.

Although the project manager probably does a lot of the work in writing the business case, and the executive owns it and must make sure that the project is value for money, benefits are the domain of the senior users on the project board.

In PRINCE2 it is the senior user role that must determine the likely benefit of the project, and then he is responsible for delivering those benefits using the outputs of the project.

When setting down the benefits, it can be very helpful if you include an assessment of how reliable the benefits estimates are.

The project may offer savings of three million dollars and the senior user and project manager are very sure of that, 99% sure.  Or it may offer savings of five million dollars but you’re only 50% confident of this estimate is correct because by their nature, these particular savings are hard to predict.

PRINCE2 Business Case -  Expected dis-benefits

Dis-benefits are a negative outcome of the project.  An example could be that a project designed to make processes more efficient means that some staff will be made redundant.

That is a bad outcome for those staff in particular, but perhaps also for those remaining where well-established themes are broken up and there is likely to be a negative impact on rail, which may result in even more staff lost and also a drop in performance.

It is important not to confuse a dis-benefit with a statement of what will happen if the project does not go ahead.  A dis-benefit is a disadvantage of running the project, in at least one person’s opinion, and is not a statement of the negative consequences if you do not run the project.

PRINCE2 Business Case -  Timescale

Timescale is second of two key factors that form the primary concern of many corporate managers.  The first factor is cost, but if the cost does not sound too bad, their next question is almost always “when can we have it?”

The timescale is likely to have a ball park estimate in start-up and gets more and more precise as you discover exactly what the project involves.  As better and more precise information becomes available through the project, you update the timescales section of the business case.

PRINCE2 Business Case -  Costs

Like the timescale, the costs are a ball park figure at start-up that becomes more precise asked you to project planning in the initiation stage, and then even more exact as you do more work in the project stages and update the business case in the light of a better and better information.

With most projects, the time when you know exactly how much the project costs is when it is just finished, or sometimes not even then.

PRINCE2 Business Case -  Major risks

The risk section summarizes all of the risks in the project.  Arguably, you may find it better to focus this section on summarising risks that may affect the business case, because from start-up onward every time you update the business case and present it to help with decision-making, you also update the risk register.

But if the business case is to be circulated outside the project (perhaps to corporate managers), and without other project documentation such as the risk register then this section can be particularly helpful them.

Advice on stating benefits

Sometimes you just do not know exactly what the benefits may be because they depend on so many factors.  In such a situation, you can put forward a best case, the worst case, and a most likely case.

This is known as “three point estimating”.  Some prefer to use the average (the mean) rather than the most likely value (the mode) as the middle figure.

PRINCE2 Business Case -  Investment appraisal

This section of the business case looks back into earlier sections of expected benefits and costs, using techniques such as discounted cash flow, which shows the benefits, costs, and future benefits at today’s values.

Investment appraisal is about money – cost and benefits that you can quantify in financial terms.  This may only be part of the story, because of non-quantifiable benefits and things such as the demands of scarce staff resources, which an appraisal just showing hourly rates does not adequately reflect.

Although investment appraisal techniques are valuable, they are limited.

Discounted cash flow (DCF)

For investment appraisal many people use techniques such as discounted cash flow, or net present value, or return on investment, and internal rate of return which is based on the discounted cash flow.

The concept of discounted cash flow can be a bit strange if you have not come across it before, that she the technique it’s very straightforward.  Put simply, future money is not as valuable as today’s money.  Discounted cash flow “discounts” the value of future money and expresses it at today’s value.

This makes a lot of sense because you incur costs on the project now, but often only get the benefits in the future.  The further the benefit is into the future, the lower and lower its value, so the discount factor in the calculation increases year by year.