Business case
A business case justifies investment in a proposed initiative by describing the problem or opportunity, options, expected benefits, costs, risks, and strategic alignment. It supports go/no-go and prioritization decisions and is revisited to confirm continued viability.
Key Points
- Prepared early to justify why the project should be funded and to compare alternatives.
- Owned by the sponsor or business owner; the project manager uses it but typically does not own it.
- Summarizes expected benefits, costs, risks, assumptions, constraints, and alignment to strategy.
- Includes option analysis and value measures such as NPV, IRR, payback, and nonfinancial benefits.
- Is a living document reviewed at stage gates to confirm the project still makes sense.
- Guides charter creation, prioritization, scope choices, and, if value erodes, termination decisions.
Purpose
- Provide a clear rationale for investment and link the initiative to strategic goals.
- Enable informed funding, selection, and prioritization decisions among competing proposals.
- Define expected benefits and success measures to support benefits realization planning.
- Communicate assumptions, uncertainties, and major risks that could affect value.
Source & Ownership
- Typically authored by the sponsor, business analyst, or portfolio team with input from subject matter experts.
- Approved by governance (e.g., steering committee, portfolio board) before funding is released.
- Owned and maintained by the sponsor or benefits owner; updated as conditions change.
- The project manager contributes data and analysis but does not unilaterally change the business case.
How to Use
- Use as an input to the project charter for problem statement, objectives, and high-level success criteria.
- Translate expected benefits into measurable objectives and KPIs for planning and tracking.
- Derive initial risks, assumptions, and constraints and feed them into the risk and planning baselines.
- Check proposed scope and changes against the value proposition to avoid gold plating and misalignment.
- Support gate reviews by comparing current forecasts to the business case to confirm continued justification.
- Inform transition and benefits realization plans for post-project ownership and measurement.
Example Usage
- Initiation: Sponsor presents the business case to governance to secure funding and authorization.
- Planning: Team derives measurable outcomes and benefits metrics and aligns scope to the value drivers.
- Execution: A cost increase triggers a review comparing updated forecasts to the business case targets.
- Closing: Benefits handover plan references the business case metrics for ongoing measurement by operations.
Caveats
- Do not confuse the business case with the project charter; the charter authorizes the project, while the business case justifies it.
- Keep it current; if expected value drops significantly, escalate for governance decision on continue, change, or stop.
- Challenge bias and optimism; use sensitivity and scenario analysis to test assumptions.
- Right-size the detail to the initiative’s complexity and risk; avoid excessive effort for low-value work.
- Maintain traceability from benefits in the business case to outcomes and operational metrics.
PMP Example Question
Midway through a project, a key assumption in the business case proves invalid, reducing expected benefits by 30%. What should the project manager do first?
- Update the business case and resubmit it to governance.
- Escalate to the sponsor to reassess the business case and determine whether to continue, change, or stop the project.
- Fast-track remaining work to recover the lost benefits.
- Wait until the next scheduled gate review to report the issue.
Correct Answer: B — Escalate to the sponsor to reassess the business case and determine whether to continue, change, or stop the project.
Explanation: The sponsor owns the business case and governance decides viability. The project manager provides analysis and recommendations but should not unilaterally change the business case.
HKSM