Business Case Development
Building the case
A business case justifies investment by connecting a proposed initiative to expected value, cost, risk, and strategic fit. Candidates should know the core components: problem/opportunity statement, proposed solution, market and customer rationale, financial analysis, risks and assumptions, and a recommendation. Financial literacy is essential - ROI, payback period, NPV, and break-even are commonly tested.
Concepts to know
- ROI = (benefit − cost) / cost; payback = time to recover investment.
- NPV discounts future cash flows to present value; a positive NPV supports investment.
- Assumptions must be explicit and tested; sensitivity analysis shows how results change.
- Risk assessment: technical, market, financial, and execution risk.
- Opportunity cost and comparison against alternatives, including "do nothing."
- Qualitative value (strategic positioning, capability building) alongside numbers.
Traps in questions
Common traps: presenting a single-point forecast as certainty (ignoring sensitivity), omitting the "do nothing" baseline, or conflating sunk costs with relevant future costs - sunk costs should not drive the decision. Another trap is treating a high ROI as sufficient when strategic fit or risk is poor. Watch for questions that confuse payback (liquidity/speed) with NPV (value creation); a project can pay back quickly yet destroy value, or vice versa.
Rule of thumb
A credible case answers four questions: What problem? What value (with assumptions)? What could go wrong? Why now versus alternatives? If a number lacks a stated assumption, treat it as a red flag.
Worked example
A proposal costs $200k and returns $80k/year for four years. Payback = 2.5 years. Simple ROI over the period = (320k − 200k)/200k = 60%. But if the discount rate is high and cash flows are back-loaded, NPV may be marginal - so the team runs a sensitivity analysis on adoption rate before recommending approval.