Crafting Effective Business Case Documents

A key responsibility of lab managers is to successfully advocate for investments in people, space, and equipment to deliver on the lab’s mission. Creating an effective business case is critical to demonstrate to line management the importance of approving the investment. The business case needs to clearly and concisely communicate the benefits, costs, and return on investment (ROI) of the proposal. The best business case documents are simple and straightforward, providing direct arguments supporting the investment.

As Albert Einstein said, “If you can’t explain it simply, you don’t understand it well enough.” A complex, long, and overly detailed business case signals that the benefits of the investment are not sufficiently understood.

An effective business case can often be developed with two different documents, one telling the story in words and the second demonstrating the case with numbers.

Developing a business case in words

The written business case is a short document, often only one to three pages. The content will tell the approver the story behind why the investment is needed and how that need can be addressed. It is important to focus the business case on the perspective of the approver and not dive too deeply into the technical details of the proposed solution. The document will cover the business aspects of the approval. Business leaders rarely show the same excitement and passion for the tools used to deliver science that the lab scientists do. They need to objectively review multiple proposals competing for limited investment funds.

Describe why

As Simon Sinek teaches us, “Start with why.” The first paragraph needs to explain why the investment is needed. It will introduce the approver to the importance of the need and connect it to important stakeholders of the lab. The why will establish this investment as a critical need and clearly distinguish it from wants. In general, needs solve problems, and wants solve inconveniences. When many budgets are constrained, needs have a much better chance of approval. The why paragraph will establish how the proposed investment connects to key values of the organization, like safety, quality, innovation, and delivery for stakeholders.

It is important to focus the business case on the perspective of the approver and not dive too deeply into the technical details of the proposed solution.

How to solve the problem

The second paragraph describes how the problem can be solved. It provides insight into practical solutions that are available and consistent with the budgetary limitations of the organization. It is important to be realistic in the scope of the proposal. Unrealistic proposals tend to be declined at this stage.

After potential solutions are defined, this paragraph concludes with the preferred solution. It will only include sufficient detail to make the argument for this investment. It should also mention the criteria for the preference, which also needs to be consistent with the organization’s values around cost, total value, and effectiveness.

What are the benefits?

The third paragraph will describe the benefits of the proposed solution. These benefits will demonstrate how this solution solves the problem and serves the lab and the key stakeholders. Ideally, the proposed solution covers all the issues established as the problem. Including the ROI and an expected cost make-good will strengthen the business case.

Describe the risks

The last paragraph will describe the risks associated with the investment. These risks might include descriptions of technical risks involved in the proposed experiments, issues with timing, delivery, and/or training, or potential issues with vendors, collaborators, or colleagues. Broad statements can cover how these risks will be mitigated or eliminated.

Also include in this paragraph the risks expected if the proposal is declined. Describe how the existing situation will fail to meet the needs or expectations of stakeholders and staff. Include the negative outcomes associated with failing to address this need. It is sometimes difficult for line management to appreciate the difficulties the lab is facing. This is an opportunity to clearly explain the downsides of inaction.

Developing a business case in numbers

The second document that makes up the business case is a spreadsheet that clearly shows all the costs and benefits anticipated if the proposal is approved. This document needs to be complete. Approvers expect that all the associated costs are accounted for, and all the benefits are estimated. It can be very difficult to go back to line management to ask for additional funding if costs are not accurately documented in the original business case.

Currency, not technical details, are the language of the businesspeople who will be making the final investment decisions.

Collecting the costs

Clearly communicate all the costs associated with the investment. This will include the primary costs associated with the person, space, or equipment and any secondary costs that might include things like additional hires, installation, construction, lab modification, delivery, or training that will be incurred before, during, or immediately following the implementation of the proposal. It may be disheartening to see all these additional costs, but an effective business case includes an honest assessment of costs.

The costs should also include the options presented in the text portion of the business case. This shows a direct comparison of the costs associated with different options to address the issue. Listing them in this spreadsheet enables line management to form their own opinion about the preferred option.

It’s not always clear that the least expensive option is the best option. Sometimes options with higher initial cost include high value contributions that would have to be purchased separately or are not available from other sources.

Estimating the benefits

For most investment proposals, collecting the true costs is relatively straightforward. The more difficult part of the business case is understanding the benefits and converting them to units of currency. Currency, not technical details, are the language of the businesspeople who will be making the final investment decisions. Benefits that are important to the lab staff like collecting data faster, providing greater resolution, or enabling new kinds of experiments are hard to communicate effectively to non-technical management. As lab professionals, we need to consider the impact of these technical benefits and do our best to estimate the financial impact on the lab.

Doing faster, better, and new experiments can all have a direct impact on the revenue of the lab. Work with stakeholders to understand how much more money they would pay if these different scenarios became reality. Doing these currency conversions is difficult. It’s hard to be objective and to have sufficient information to make good estimates. It is often appreciated by approvers to be conservative in these benefits calculations and to provide some testimonials from stakeholders that support the estimates.

Calculate the ROI

Once all the costs and benefits are gathered, the ROI can be calculated and included in the spreadsheet. One of the reasons that ROI is important to approvers is that it helps to normalize across different proposals under consideration for approval. The ROI provides a very brief way to compare very different options for the organization to invest.