A Business Case is essential for small and medium-sized business owners because it helps them communicate their ideas, plans and strategies to investors. In addition, Business Cases usually are used by banks, other financial institutions, and investors to decide whether they should lend money to the business. Therefore, the business owner or an external professional usually writes the Business Case. This blog post also highlights some critical components and common mistakes made in writing a Business Case.
What is a Business Case?
A business case is a professional document that contains information about why or how an idea, product, service, or other change will make money for the company. It also includes strategies and methods to achieve desired goals and the benefits of those changes. In it, one can find a description of the business, product, or service and how they meet customer needs. The financial analysis and implementation plan are also essential parts of a Business Case. Finally, one must include a section on risk assessment that includes what could go wrong and how you will mitigate those problems.
8 Reasons Why a Business Case is Important for Small and Medium-Sized Businesses
Reason 1: A Business Case communicates your ideas and plans to investors.
Suppose you are looking for investment or access to any form of capital (loan, credit, or equity) in your business. In that case, a Business Case is an essential document that will help convince potential investors and financiers of the viability of your idea. The Business Case outlines all aspects of the proposed business, from the product or service offering to the financials and how the investment will be used. Business Cases are often required to raise equity funding from venture capital funds or angel investors.
Venture capitalists provide funding to start-up businesses in exchange for equity ownership. They usually invest between $50K and $500 million into a new company looking to expand or develop its product/service offering.
Angel Investors are professional individuals who invest small amounts of money into new businesses with growth potential. The Business Case allows both parties to compare their plans and expectations before deciding whether they want to invest in the company or not.
Reason 2: A Business Case helps you get a loan from financial institutions
Financial institutions such as banks generally require detailed Business Plans before approving any business loan or credit. The Business Loan Application process can take one to six months, depending on your bank.
Reason 3: Business Cases helps businesses apply for government grants
Government grants are an excellent way for small businesses to get started or grow their business. However, to be eligible for grants, you must submit a Business Case that details the financial projections of your business. In addition, the Business Case will need to outline the benefits of receiving the grant and how you will use the money to help your company achieve its goals.
Reason 4: A Business Case is essential for expanding a business
Growth introduces complexity. There are new factors to consider, such as additional staff, new products or services, expanded distribution and hiring new staff. A well-prepared Business Case can help you assess all the risks and opportunities presented by the expansion of your business.
Reason 5: A Business Case helps you get employees on board
Employees are an essential part of any business. It is crucial to have a clear understanding of how the company plans to retain them. When outlining your Business Plan, include specific information about how the business will grow and what opportunities it will create for employees.
Reason 6: ABusiness Case helps you get suppliers on board
Suppliers are essential to any business. By outlining your supplier plans in the Business Case, you can ensure that your suppliers are a good fit for your company. It helps develop a mutual understanding between both parties.
Reason 7: A Business Case helps you get customers on board
Customers are the lifeblood of a business. It is essential to have a plan for acquiring them. The Business Case should include a detailed marketing plan that outlines how you will attract new customers and the sales and marketing channels you will use.
Reason 8: A Business Case helps you stay organised
A Business Case is a great way to keep track of your business goals and how you plan to achieve them. It is a reference document for future planning purposes. Everything in one place makes it easier to stay on track and progress towards your goals.
What are some critical components of a Business Case?
Several vital components make up a Business Case.
- Executive Summary: Business Cases must include an executive summary which is the first part of the document and outlines all pertinent information in about one or two pages.
- Market Analysis: This must detail what customers want, how to address their needs and strategies for differentiation from competitors.
- Options Analysis: This section should describe and evaluate the various options you have considered and the selected option for your Business Case. A SWOT analysis for each option will provide the information you require to choose your preferred option.
- Business Plan: The Business plan must detail how you will achieve your objectives and goals of the preferred option. It should address the products and services to be delivered, what they will do, how and when they will be provided, and who is responsible. It should also detail the business and resource requirements.
- Implementation Plan: This is essential and must outline the steps you will take to implement your business plan, and marketing and sales strategy for the preferred option.
- Financial Analysis: A detailed financial analysis of the projected revenue, costs, and the return on investment (ROI) for the preferred option is essential.
- Risk Assessment: Lastly, one must assess business, operational and financial risk and identify potential problems and solutions.
By including these key components, one can create a comprehensive business case for your business.
Common mistakes made when writing a business case
These are several common mistakes small and medium enterprises make when writing a business case.
Mistake #1: Not including a clear objective
Without a clear objective, your chances of success are minimal. Businesses must articulate their vision, mission, and goals in clear terms that the entire organisation understands. Business Cases should not focus on financial gain alone but include market research to understand better what drives your target audience’s buying decisions.
Mistake #2: Lack of market research
This common mistake often leads to Business Case failure. A business case should include an in-depth analysis of your target market, what your customer wants and how you plan to deliver it. It is essential to have realistic data on industry trends and customer needs so you can make well-informed decisions about your product or service.
Mistake #3: Focusing on the wrong metrics
Business Cases should include an analysis that shows how your product or service will meet the needs of customers and stakeholders. The metric you focus on is critical as it determines a successful project.
Mistake #4: Lack of Clarity
A business case should not be overly complex but clear and concise, so those involved in the decision-making process can easily understand all essential parts.
Mistake #5: Unrealistic financial forecasts
Another common mistake made in a Business Case is unrealistic financial forecasts caused by inaccurate data or assumptions not supported by market research. Financial projections should always be reasonable and achievable, so you do not set your business up for failure.
Mistake #6: Not including an implementation plan
Business cases should include an implementation plan with detailed tasks, timelines, budget allocations and responsibility for each task. In addition, an implementation plan will make it easier to monitor progress against objectives.
Mistake #7: Inadequate risk assessment and mitigation plans
Inadequate risk assessment and mitigation plans are a common mistake made during Business Case writing. Business cases must outline all foreseeable risks associated with your product or service and provide possible solutions to mitigate the problem should it occur. This is one of the most critical aspects of creating a Business Case as it can determine if you go forward with an idea.
By avoiding these common mistakes, you can create a Business Case that is more likely to succeed. By taking the time to include all the necessary components, you can make a well-informed decision about your business and increase your chances of success.
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