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Definition

business case

A business case is an argument, usually documented, that is intended to convince a decision maker to approve some kind of action. The document itself is sometimes referred to as a business case.

As a rule, a business case has to articulate a clear path to an attractive return on investment (ROI). At its simplest, a business case could be a spoken suggestion. For example, if a restaurant’s manager notices that the business doesn’t make enough money on Sunday evenings to cover operational costs, presenting that fact to the owner may be compelling enough to make the business case for closing the restaurant at 5 p.m. on Sundays.

For more complex issues, a business case should be presented in a carefully constructed document. A business case document should examine benefits and risks involved with both taking the action and, conversely, not taking the action. The conclusion should be a compelling argument for implementation. 

Short-term actions leading to immediate, measurable and substantial benefits are generally the easiest to argue. However, even long-term projects with effects that are initially detrimental to the bottom line can be in a company’s best interests. Investments in employee health and wellbeing, for example, can be costly in the short term and, as such, may not be considered in times of economic stress. However, over the long term, such investments pay off in decreased absenteeism, better retention, greater engagement and productivity – all of which contribute positively to the enterprise’s bottom line.

Similarly, activities that can initially seem to have a positive effect on finances can be detrimental down the line. For example, encouraging salaried employees to work overtime rather than hiring more people or outsourcing work may be profitable in the short term. However, longer hours may lead to employee burn-out and, eventually, less productivity and more absenteeism. As a result, an approach that was originally profitable can end up costing money.

Because the business case for many projects is not immediately clear, documentation can be essential to their approval. A well-crafted business case explores all feasible approaches to a given problem and enables business owners to select the option that best serves the organization.

 

Continue reading about business cases:

> See our guide to business case preparation: How to write a business case document

> Preparing a business case is a compilation of tips, research and analysis assembled to help create a compelling business case for specific areas of information technology.

> Wikipedia has an entry about business cases.

> Marty Schmidt explains what a business case is. 

This was last updated in January 2012

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