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 …

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5 responses to “Why do you need a Business Case?”

  1. David McFarlane says :

    As always, cogent stuff Michel. I’m interested in what you see as potential risk mitigation strategies. Do you have any examples in mind?

    • michelbesner says :

      Thanks David, as far as risk mitigation strategies – there is no cookie cutter on this one. Each situation differs … best trick is to always think of the worse possibilities and evaluate what are your best options if it happens. For example, if you are trying to buy a small company but are low balling them on the offer – what if they went and sold the business to your biggest competitor – would that change your plans and affect your competitive advantage ? Can you afford that risk vs. giving a fair price to the seller ? If the concern is legitimate, you might be compelled to be less aggressive on your term sheet in order to get the deal to happen in your favor …

      If you have any on-going situations that you would like me to explore, I would be more than happy to help you …

      Cheers !

      Michel

  2. Abhay says :

    how about including exit plan in business case (get acquired, go for IPO, merge / integrate, shut down the service etc).

    • michelbesner says :

      Exit plans would be more prevalent as part of a business plan – which includes a business case. But you could have parameters about market validity and valuation as part of the business case …

      Michel

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