Why do you need a Business Case?
Having a hard time understanding why some VCs don’t believe in your business plan? And this after you’ve done all the analysis: “<Insert favorite analyst> predicts that the market will be 1B$ by 2012”, “if we only get 1% of the market, we will be rich”, “no one has ever thought of doing such product – we have no competitors”.
We are great in developing technologies and having fantastic ideas – but do we have a business case for this product idea? Do we really need a business case? Contrary to what you might think, you need a lot more the business case for your own good than to just to please a potential investor. The better the case, the better your chances of actually being successful.
So let’s look at what goes in a business case. I like to breakdown a business into 5 categories:
- Market Analysis: Market Segments, Buyer Personas, Market Problems, Reason to Buy/Barriers to Purchase, Current Solutions, Complements and Conflicts with Existing Company Products, Our Current Position, Competitive Landscape
- Product Concept: Positioning, Compelling Advantage
- Business Justification: Business Objectives, Forecasted Revenue, Cost Estimates, Profit Analysis, Pricing, Installed Base Opportunity and Impact
- Product Feasibility: Technology Assessment, “Buy, Build, or Partner”, Development Feasibility, Services Feasibility
- Risks: Mitigation Strategy
The challenge in building a business case is that you cannot cram this over a few weekends; this takes time and requires more effort that just compiling a few spreadsheets together. The actual first step is to have a Product Manager that can actually drive this process forward. A great place to start is to follow the best practices of Pragmatic Marketing. I actually believe that any Product Management, Marketing as well as the Development leads should follow the Practical Product Management and Effective Product Marketing courses
The better you do your job at building your business case, the better your overall business plan will be and will achieve credibility with your Board and Investors. So if you are planning any round of funding in the next 12 months, you better start this process now …