How to Develop a Business Case

How to Develop a Business Case
- Approach, Risk and Success Factors
Date

3
Developing the business case involves eight steps.
Determine
Approach
Develop
Assumptions
Determine
Benefits
Determine
Costs
Calculate
Financial
Impact
Determine
Non-Financial
Impact
Perform
Sensitivity and
Risk Analysis
Summarize
Findings
Desired
Outcomes
Structure
Scope
Predict
Simplify
Clarify
Revenue Uplift
Cost Reduction
Increased
Capital
Efficiency
Operating
Expenses
Capital
Expenditures
Cash Flows
NPV
IRR
Payback
Changes in
assumptions
Risk of not
achieving
targets
1
2
3
4
5
6
7 8
Decision matrix
Qualitative
descriptions
Conclusions
Recommendations
Business Case Development Process
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6
Non-financial impacts must be included in the business case to provide a more
complete view of the benefits
A useful technique for reflecting the non-financial benefits of an investment is to
develop a decision matrix
The summary should include conclusions and recommendations
The business case must consider the non-financial
impacts and provide conclusions and recommendations.
Steps 7 and 8:
Non-Financial Impact and Summarizing Findings

9
Contents
Executive Summary
Business Case Overview
Lessons Learned – Risks and Success Factors
Business Case Template Overview
Glossary
Appendix
Example Slides

12
The business case provides an understanding of which
initiatives create the greatest value, supports decision-
making, and helps track program performance.
Demonstrates how a major investment creates value
Supports business decisions by weighing choices or options
Creates a way to track performance and measure success after a decision has been made
Gains alignment for a project
Why have a
business case?
Evaluate options
Test a decision
Justify a decision
Support
decisions
Assess value
Quantify value
Understand
value
Track
performance
Measure success
Adjust actions
Why Have a Business Case?

15
Executive Summary
Glossary
Appendix
Example Slides
Contents

18
An understanding of the desired outcomes is required in
order to determine the most appropriate approach and
structure for the business case.
Determine Approach – Desired Outcomes
What is the overall purpose of the business case?
Justify an investment
Determine the optimal course of action or decision
Support a case for change
Provide input into a budget or financial plan
What critical pieces of information must the business case convey to support the
overall purpose?
Timing of the benefits
Timing of the investments / costs
Magnitude of the net benefits in terms of key financial metrics
—Net Present Value (NPV)
—Internal Rate of Return (IRR)
—Payback Period
—Return on investment
Determine
Approach
1

21
When comparing scenarios against the baseline, either the
Full Value or Incremental Value approach can be used, but
care must be taken to avoid mixing data between the two
methods.
Need to show impact on entire co. (e.g.,
shareholder value)
When business case needs to support
business planning or budgeting
Costs and benefits are calculated as “full
values” of total cash outflows and total cash
inflows of each scenario and the baseline
Determine Approach – Methods of Comparison
Incremental Value ApproachFull Value Approach
Costs and benefits are calculated as
“incremental values” of the difference in cash
outflows and inflows between each scenario
and the baseline
Used when proposed action is viewed as an
investment or when incremental costs and
benefits are small relative to the full value
Description
Example Impact Baseline Scenario 1 Scenario 2
Total Benefits
(Cash Inflow)
$200 M $350M $400 M
Total Costs
(Cash Outflow)
($100 M) ($175 M) ($200 M)
Net Benefit $100 M $175 M $200 M
Impact Scenario 1 Scenario 2
Incremental Benefits
(Cash Inflow)
$150M $200 M
Incremental Costs
(Cash Outflow)
($75 M) ($100 M)
Incremental Net
Benefit
$75 M $100 M
Caution Avoid mixing Full Value and Incremental Value approaches or combining the data from different approaches
when performing the calculation of cash flows
Source: Solution Matrix
Determine
Approach
1

24
Additionally, assumptions are used to predict, simplify or
clarify business case elements, and, therefore, must be
explicitly called out.
Assumptions must be explicitly called out since they generally require business judgment and/or may not be
obvious to the audience
When an assumption may be in doubt or controversial, utilize a conservative approach to defuse debate
Assumptions are made for three main reasons:
Develop Assumptions
Predict
Simplify
Clarify
To forecast business case inputs that could
change
Changes to inputs may occur over time or
result from new circumstances
To simplify business case inputs so that
they are easier to manage
Simplification should not be to the point
of the loss of accuracy
To explain any other inputs that are used to
calculate the results of the business case
Clarification applies to “obvious” inputs or
assumptions
Reasons Description Examples
Future sales volume
Future prices or costs
Performance improvements
Average values (e.g., average
salary of employees instead of the
actual itemized salaries of each
individual employee)
Baseline costs
Corporate tax rate
Depreciation rate of hardware
or software
Source: Solution Matrix
Develop
Assumptions
2

27
Three primary sources of benefits come from actions that
lead to revenue increases, cost reductions, or better asset
utilization.
Determine Benefits
Revenue
Uplift
Cost
Reduction
Increase
Capital
Efficiency
Cash inflows from increased
revenues relative to the
baseline
Cash inflows from reduced
operating expenses
Benefit Sources Description Components
Higher volume
Higher unit price
Higher market share
COGS
SG&A (Selling, marketing, customer service, logistics,
finance, HR, IT)
R&D
Other
Cash inflows from improved
assets utilization levels
Accounts receivable
Inventory
Other Current Assets
Net Plant, Property and Equipment (PP&E)
Other Assets
Determine
Benefits
3

30
A common source of confusion in estimating cost
reduction is the treatment of out-of-pocket expense
reduction (hard savings) versus cost-avoidance (soft
savings).
Determine Benefits – Hard Savings versus Soft Savings
Cost reduction can be viewed as either:
Out-of-pocket expense reduction (hard savings) or
— Examples: Headcount reduction from the current workforce, freight cost savings by renegotiating
contract rates
Cost-avoidance (soft savings)
— Examples: Headcount savings from not having to hire additional personnel or freed up time of
existing personnel to perform higher value added work, freight cost savings by choosing a new
vendor to avoid rate hikes from old vendor
Verify client receptiveness to benefit categories – will the client accept revenue, market share or
increased margins as hard savings?
Verify client receptiveness to soft savings in general (e.g., “unless you give me the badge
numbers of the employees you recommend be laid off, the savings won’t be counted”)
The business case should include BOTH types of costs, but should keep them separate in order
to maintain visibility of the elements that are expected to contribute expense reduction against
the current budget
Attempt to quantify all benefits even if they are perceived as “soft” benefits
Count benefits only once - ensure benefits have not been claimed for other programs
Example: Personnel cost savings due to multiple workstreams or initiatives
Determine
Benefits
3

33
Determine Costs
Costs should include a detailed itemization of all hardware,
software, labor, and other investments to implement and
sustain the future-state scenario.
Hardware
Software
Investment Areas Sub Categories
Determine
Costs
4
Servers
PCs/workstations
Storage
License Fees (Original and Maintenance) and Warranty Fees for:
Labor1
Project management
Project planning
Technical architecture, Tool/IT
installation, design, development,
customization, testing, data conversion
Other
Travel
Supplies
Note 1: Labor includes Internal “opportunity cost” labor (e.g., current employees that must be redirected from
their current jobs to perform implementation work), Internal additional “out-of-pocket” labor (e.g., new employees
that must be hired for implementation work or for the future-state scenario, and Third Party labor (e.g., consulting
services)
Networking/Communications
Maintenance (Non-Labor)
XYZ Asset
Development / Middleware / Integration software
Systems management software
XYZ software
Application software
Database software
Process redesign
Project maintenance / support
General IT / help desk support
Training

36
Calculate Financial Impact – The Financial Model
A cash-flow based financial model is the core of the
business case.
Key Principles
In most cases, the incremental value approach is
preferred
All costs and benefits must be measured or estimated
relative to a baseline
Incremental costs and benefits must be exhaustive
Incremental costs and benefits must be accounted for
once and only once
Structuring Benefits and Costs into Cash Flows
Convert the scenario’s benefits and costs into
incremental cash inflows and cash outflows
Lay out cash inflows and cash outflows over time
Determine the net cash flows over time
Calculate key metrics such as Net Present Value
(NPV), Internal Rate of Return (IRR) and Payback
Period
When “Full Value” analyses are performed, then Return
on Invested Capital and EVA can be calculated
Baseline
Expenses
Revenues
Cash Flows
Cash Outflows
Cash Inflows
Net Cash Flows
Costs
Benefits
Scenario 1
Revenue
Uplift
Cost
Reduction
NPV, IRR, Payback
Improved
Capital
Efficiency
Calculate
Financial
Impact
5
Expenses
Revenues
Incremental
Impact
Operating
Expenses
Capital
Expenditures
+ +
+
Depreciation
Tax
Shield
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39
-$50
-$25
$0
$25
$50
0% 20% 40% 60% 80% 100%
Calculate Financial Impact – Metrics: Internal Rate of Return (IRR)
Several metrics are commonly used to summarize cash
flow comparisons among different scenarios.
Internal Rate of Return (IRR)
The discount rate for which the NPV equals zero
IRR demonstrates how high the discount rate has to be in order for the project to have a positive NPV
Used to compare the financial impact of two or more options against each other and against company’s
internal Hurdle Rate: in general, the option with a higher IRR is preferred and projects should be
undertaken if the IRR is greater than the Hurdle Rate
NPV =
NPV
($ million)
Σ
NCFn
(1 + IRR)n
n = 0
N
= 0
Where:
N = Time Periods
IRR = 40%
Illustration:
Calculate
Financial
Impact
5

42
Depreciation and taxes must be considered since they
affect the cash flow analysis.
Calculate Financial Impact – Depreciation and Taxes
Calculate
Financial
Impact
5
Depreciation
Capital Expenditure $300,000
Annual Depreciation
Expense
$100,000
Depreciation Period 3 Years
Marginal Tax Rate 40%
Depreciation Tax Shield $100,000 * 40% = $40,000
Capital expenditures typically result in
depreciation expenses over the useful life of
the asset
Depreciation expense does not affect cash
outflow
However, the tax savings (or tax shield) that
depreciation expense provides does affect
cash flows
Comments / Issues ExamplesItem
Taxes Net cash flows that increase operating income
should be taxed at the marginal corporate tax
rate, thus reducing the cash flows on an after-
tax basis
Net cash flows that create an operating loss
provide a tax savings, thus increasing the cash
flows on an after-tax basis
Operating Income Increase $100
After-Tax Cash Flow $100 * 40% = $40
Operating Loss ($200)
After-Tax Cash Flow ($200) * (1 - 40%) = ($120)

45
Perform Risk Analysis
A risk analysis provides additional insights to the
probability of achieving the desired financial results.
Perform
Sensitivity and
Risk Analysis
6
Risk analysis involves evaluating the likelihood of achieving the predicted financial
results
Several types of risks could affect the financial results, depending upon the client
situation and the type of investment being considered:
Cash flow risk
Competitive reaction risk
Technology risk
Market risk
Inflationary risk
Regulatory risk
Two high level methods for factoring in these risks is to increase the discount rate or
reduce expected cash flows by a scaling factor
Reduced Expected Cash Flows =
Net Cash Flow * Scale Factor
(where 0 < Scale Factor < 1)
Original Discount Rate = 10%
Increased Discount Rate = 15%
(to factor in additional risks of implementation)

48
Determine Non-Financial Impacts
Non-financial impacts must be included in the business
case to provide a more complete view of the benefits.
Determine
Non-Financial
Impact
7
Items client did not allow in financial impact section (e.g., revenue uplift)
Non-financial benefits or “soft” benefits include items that cannot be evaluated directly in
terms of cash flows because they may be too difficult or controversial to quantify
However, they may be very important because they represent some of the desired
outcomes of the investment or help achieve the company’s strategic objectives and
must be included in the business case
Examples:
Improving customer satisfaction
Enhancing employee morale
Strengthening corporate brand image
Non-financial benefits can be included in the business case by:
Describing them after identifying the financial impacts and reiterating them in the
conclusion and recommendations
Making the non-financial benefits as tangible as possible by describing how the
benefits can be observed and measured in means other than financial

51
Summarize Findings
A summary should include conclusions and
recommendations.
Summarize
Findings
8
Conclusions and recommendations need to tie back to the overall purpose of the
business case
Recommendations must clearly identify and explain which scenario best achieves the
business objectives
Articulate the critical success factors and how they can be managed in order to achieve
the estimated benefits (e.g., required behavior changes, process and technology
changes, controls)
Use the sensitivity and risk analysis to support the recommendations by:
Highlighting how changes in the assumptions would alter the business case results
Identifying highly sensitive assumptions that management must monitor closely
(and influence if possible) throughout implementation since they have the greatest
effect on the financial outcome

54
Lessons Learned – Key Success Factors
Several success factors lead to a strong business case.
Use the client’s business case framework, assumptions, projections, and terminology (where
appropriate)
Consider your client’s accounting procedures and standards so that business case results
can be easily reconciled with the client’s business plans or operating budgets
Account for the client’s current initiatives and understand the relationship of those initiatives
to the business case
A cash flow analysis showing the timing of costs and benefits needs to be the focus of the
business case
Consider using ranges rather than point estimates – for example, present conservative,
moderate, and aggressive benefit scenarios
Present all benefits, including non-financial benefits, as these may be equally important to
decision-makers
Business Case Content & Structure

57
Executive Summary
Glossary
Appendix
Example Slides
Contents

60
In the Business Case Template, the Input Variables
worksheet highlights a few of the general assumptions that
are often needed.
Business Case Template – Step 1. Input Variables
Input Description
Marginal Tax Rate The company’s marginal corporate tax rate; this rate is used to calculate after tax cash flows; for US
companies, the standard marginal corporate tax rate is 40%
It is used to estimate the positive cash flow from tax benefits associated with capitalization of assets
Inventory Carrying
Cost
It is the sum total of the cost of capital, and rates based on inventory related storage and handling costs,
inventory related service costs (insurance and tax expenses), and inventory risks (obsolescence,
shrinkage, damage, and repositioning expenses)
Rates are computed by dividing inventory related expenses by the Cost of Goods Sold
Develop
Assumptions
2
In the example business case, the “Step 1. Input Variables” worksheet highlights
the assumptions typically used to define the boundaries of the analysis and inputs
that will be needed later for calculations:
Expected Revenue
Growth
The company’s forecasted revenue growth rate during the analysis period; is not necessary if the
company has actual forecasted revenues over the analysis period
It is used to generate the “baseline” case for the financial model

63
Benefits are based on assumptions of increased revenue,
reduced costs, and increased capital efficiency relative to the
baseline scenario and the timing of the when these benefits
begin; a detailed benefits analysis with more detailed categories
needs to be executed before this step.
Business Case Template – Step 3. Input Benefits EstimateDetermine
Benefits
3
Input estimated increase in
revenues
Input estimated reduction in
costs
Input estimated improvement
in capital efficiency
Input estimated year when
benefits are expected to begin
Input estimated percent of
benefits that are “hard” (e.g.,
out of pocket) versus “soft”
(e.g., cost avoidance)
Note: All estimates should be
based on a detailed analysis of
the cost and benefit drivers
(see the Appendix for more
details)

66
The tax shield benefits of capital expenditure depreciation
are also calculated.
Determine
Costs
4
Business Case Template – Step 6. Review Capital Expenditures
The template uses a standard
5 year straight line
depreciation for all capitalized
assets. Manual changes can
be made to the depreciation
schedule in the Green Cells.

69
Executive Summary
Glossary
Appendix
Example Slides
Contents

72
Net Present Value (NPV), which
incorporates Discounted Cash Flow
(DCF)
Metric Rationale for Recommendation
Determines overall value of project; incorporates
time value of money to show absolute value of
project; forward looking; multi-period
Measures time required to cover initial
investment
Assesses relative attractiveness of
project investments compared to other
investments and cost of capital
Time to Break Even (with and without Time Value of Money)
Pre-Tax Operating Income (EBIT )
Measures relative return in a single period for
a capital intensive business
Internal Rate of Return (IRR)
Return On Invested Capital (ROIC)
Economic Value Added (EVA)
Assesses profitability in a single
period before contributing to rent of
capital and taxes; historic metric;
incorporated into DCF
Assesses value creation in a single period;
evaluates absolute profitability of business
units, products, etc.
Earnings Per Share (EPS) - Incremental only Shows impact on total company
earnings from a shareholder’s/Wall
Street perspective
Glossary of Investment Analysis Metrics

75
Advantages:
Easily calculated and understood
Widely used and understood
Often there is a correlation in simple, low investment projects
between low payback periods and value creation
Bias toward short term projects may be beneficial for cash-restricted
firms
Arguably, cash flows after payback period are riskier and should be
significantly discounted (though this method ignores them entirely)
Potential beneficial behavioral effects – may incent managers to:
Undertake basic level of go, no-go analysis rather than none at all
Undertake analysis required to create a schedule of cash flows
How Calculated
Significance
Advantages and
Disadvantages
Management
Behavior
Payback Period Rule
The measure calculates the amount of time required to recover a project’s initial investment. An investment would be accepted if the
payback period is less than a specified period of time.
This measure is a simple, and popular alternative to NPV. There are, however, several disadvantages
that make other project measures more attractive.
Disadvantages:
Does not take the time value of money into account
Does not account for cash flows after the payback period
Can return multiple answers if cash flows are negative after the
initial investment period
Timing threshold of whether to initiate project is arbitrary (go,
no-go)
Does not account for the riskiness of the project
Potential adverse behavioral effects – may incent managers to:
Reject value-creating projects, as measured by NPV
Accept value-eroding projects, as measured by NPV
Bias managers toward short-term projects
Example of cash flows:
Year
0
1
2
3
Cash flows
- $100
$50
$50
$50
• Payback period is two years

78
Advantages
Easily calculated and understood
Readily available, widely used and published
Easily compared across firms
Potential beneficial behavioral effects – may incent managers to:
Maximize profitability
Minimize stock dilution of earnings
Extraordinary events such as mergers or acquisitions
Changes in accounting practices
Changes in capital structure
Disadvantages
Cannot be applied to BU’s within a firm
Net income component
• single period--little relation to value as one
period of earnings does not necessarily reflect
future cash flows
• subject to timing of earnings
Subject to capital structure
Subject to accounting practices
Potential adverse behavioral effects – may incent managers to:
Net income component
• overemphasize short-term earnings
• make decisions based on timing of earnings
Use accounting techniques to maximize measure
Over rely on debt as opposed to equity
Increase EPS by investing in projects with earnings
higher than cost of debt but lower than WACC
Establish policies based to affect capital structure
Earnings (Net Income)
Number of Shares of Common Stock Outstanding
EPS is easily calculated, and serves as a “quick look” at profitability. The measure, however, does not reflect future value, and is
susceptible to extraordinary earnings gains and accounting practices.
Earnings Per Share
How Calculated
Significance
Advantages and
Disadvantages
Management
Behavior
Non-Operating
Performance
Influences
Earnings per Share =

81
Determine Benefits – Revenue Uplift
Revenue Uplift estimates can be derived in several ways.
Top-Down Approach Example (primarily for rough
order of magnitude estimates)
Estimate percent increase to current market
share
Use benchmark or survey data (if available) to
estimate percent increase in revenues
Bottoms-Up Approach Example
Estimate percent increases to unit volume
increase and/or unit price
Estimate impact to both through changing the
product mix
70%
30%
60%
40%
Old Market Share New Market Share
10 15 20
30
Year 0 Year 1 Year 2 Year 3
Unit Volume Increase
$2.0
$3.0 $3.0 $3.0
Unit Price Increase
Revenue Increase
$20
$45 $60
$90
Determine
Benefits
3

84
Determining Benefits – Increase Capital Efficiency
Increasing Capital Efficiency requires making assumptions
on what likely improvements are possible in working
capital and other assets.
Determine
Benefits
3
Cash
Accounts receivable
Inventory
Accounts payable
Components Possible ImprovementsAsset
Working Capital Processes to segment and tier customers based
on credit risk
Automated tools to help track aging receivables
Tools and processes to improve demand planning
Network optimization to reduce safety stock
Manufacturing and logistics facilities and
equipment
Call center facilities and equipment
Plant, Property and
Equipment
Outsourcing manufacturing
Outsourcing logistics
Outsourcing call center operations

87
This section contains example slides that correspond to
the major business case development process steps
outlined in the first part of the presentation.
Determine
Approach
Develop
Assumptions
Determine
Benefits
Determine
Costs
Calculate
Financial
Impact
Determine
Non-Financial
Impact
Perform
Sensitivity and
Risk Analysis
Summarize
Findings
Desired
Outcomes
Structure
Scope
Predict
Simplify
Clarify
Revenue Uplift
Cost Reduction
Increased
Capital
Efficiency
Operating
Expenses
Capital
Expenditures
Cash Flows
NPV
IRR
Payback
Changes in
assumptions
Risk of not
achieving
targets
1
2
3
4
5
6
7 8
Decision matrix
Qualitative
descriptions
Conclusions
Recommendations

90
# of Captured
Opportunities1,2
Associated
Capture Rate
Baseline
142
(of 289)
5 Year
Bookings
Value ($M)3
5 Year Operating
Profit Before
Investments4
49.1 %
$ 41,400 M
$4,968 M
Conservative
+ 3
50.2%
+ $ 871 M
(+2.1%)
+ $ 104 M
Potential Benefit Scenarios
(Large ES and C3I Domestic Opportunities between 2003-2007)
Moderate
+ 4
50.5%
+ $ 1,161 M
(+2.8%)
+ $ 139 M
Aggressive
+ 2
49.8%
+ $ 581 M
(+1.4%)
+ $ 69 M
When there is a large degree of uncertainty in
the business case it is desirable to develop a
range of scenarios.
Determine
Approach
1
EXAMPLE DELIVERABLE

93
Increased
Modal Shifting
Increased
Rate Reduction
Total Savings
• Negotiate rates with
existing carriers
• Select new carriers
which may have more
attractive rates
• Select the lowest cost
service option for the
required service level
Clearly define the approach that will be taken to
estimate the benefits.
Concept:
Estimation
Approach:
• Understand current
volume and spend by
carrier and service
level for major freight
lanes
policies and process
for selecting carriers
and service levels
• Identify achievable
target modal split
• Evaluate and quantify
savings opportunities
for target modal split
rate structures and
contract terms with
major carriers for
each major lane
• Research
comparable rates
from available XYZ
sources
• Estimate achievable
rate reductions for
each service
InFocus Freight
Initiatives +
• InFocus has already
begun to implement
some freight
reduction initiatives ;
need to estimate
these savings
• Understand pricing
arrangements and
modal mix in 2001
• Predict 2002 modal
mix based upon
implementation of
current InFocus
initiatives
for each initiative
• Quantify percentage
savings relative to
2001 and absolute
savings in annualized
2002 dollars
• Determine baseline
2002 spend based
upon 2001 policies,
pricing, and shipment
profiles
• Apply savings
opportunities from
InFocus freight
initiatives, increased
modal shifting, and
increased rate
reductions to
calculate total
savings
Savings Estimation Approach
+ =
EXAMPLE DELIVERABLE
Determine
Benefits
3

96
Calculation Detail Bottom line impact
Previously we have measured the benefitPreviously we have measured the benefitss from the NPIfrom the NPI
cycle time reduction (8,75 days on average), in thiscycle time reduction (8,75 days on average), in this
calculation we measure the bottom line impact of directcalculation we measure the bottom line impact of direct
material and manpower savingsmaterial and manpower savings
Cost reduction calculationCost reduction calculation -- annualannual
Total material & manpower cost for one prototype : 3000€
Median number of boards in one spin: 15
Total number of spins per year: 150 / 2 (CO Only)
Reduction in the number of spins : 25%
Bottom line impactBottom line impact
Op. inc. improvement = Total cost for one prototype (material +
manpower) x number of spins x number of boards per spin x
reduction in number of spins
Operating income improvement:Operating income improvement:
Op. inc. improvement = Total cost for one prototype
(material + manpower) x number of spins x number
of boards per spin x reduction in number of spins
3000€ x 15 x 150/2 x 25%
Oper. Inc. improvement = 0,85 m€
Issue
The feedback from testing is
not always properly used by
engineering
No formal decision analysis is
done to review the feedback
from prototyping
Impact Solution
Formal workflow to share all the
feedback from prototype testing
Workflow communication and
validation of check lists that includes
all necessary improvement for next
prototype configuration
On-line availability of all the
information related to prototype
testing
Some extra prototype spins
might be required thus,
duplicating tests for the same
functionality
This initial analysis revealed
25% of the prototype spins
could be saved with a better
feedback loop
The benefit calculation should be clear and easily
understandable.
Determine
Benefits
3
EXAMPLE DELIVERABLE

99
• Increase product revenue through
increased certification levels
• Increase training certification
revenue
• Approximately 250K annual benefit
due to increased product and
certification revenue
• Currently low level of partner
certification to support
networking software product
sales (2 partner locations – 31
individuals certified)
BUSINESS ISSUESBUSINESS ISSUES TARGET BENEFITSTARGET BENEFITS PROJECTED QUANTIFIEDPROJECTED QUANTIFIED
OUTCOMESOUTCOMES
BUSINESSBUSINESS
OpportunityOpportunity
Education
Lead Management
Customer Service
Call Reduction
Order Transaction
Volume Reduction
• Lead process monitoring is
administratively burdensome,
sporadic and does not
consistently high win/loss ratio
• Significant percentage of calls
are routine customer service
calls that can be addressed by a
lower cost channel and create
increased customer service
capacity
• 40% of order transactions are
coming from sub-$1million
resellers
• Increase lead follow-through and
improved close rates
• Reduce partner service costs by
promoting on-line self service
• Reduce order maintenance and
improved information accuracy
PROJECTED 1 YEAR BENEFITS
$900K
PROJECTED 3 YEAR BENEFITS
$3.8M
• Approximately $175K annual benefit
due to improved lead close ratio
• $100K annual cost avoidance in
future customer service costs
• $310K annual cost avoidance due to
on-line order processing of lower tier
resellers
It is important to describe how the quantified
benefits will be achieved.
Determine
Benefits
3
EXAMPLE DELIVERABLE

102
10.0
11.77.8
11.7
6.0
5.9
7.0
4.7
5.6
2.8
27.2
46.0
6.2 10.4
7.6
12.3
43.9
64.7
9.4
18.8
27.6
2.8
2.3
5.7
£0
£20
£40
£60
£80
£100
70.7
104.5
Source: ERP Strategy team analysis
IT implementation
Hardware
Software
Business
implementation
— One-time Investment —
Low High
Software
support
Hardware
support
Help
desk
Low High
Reduced IT
maintenance
Low High
— Recurring Annual Costs — — Recurring Annual Benefits —
Reduced IT
operations
Back office
consolidation
Reduced IT
development
Improved Finance
productivity
A graphical summary of the major costs and
benefits can be more effective in communicating
the results of the business case.
EXAMPLE DELIVERABLE
Calculate
Financial
Impact
5

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