1. Writing an effective Business Case TELA Class Spring 2012

2. What is a Business Case? A way of presenting the reasoning or justification for approving a project or expenditure

3. Adoption The Breakthrough Timeline Time Impact Idea “What if we?” Innovation “Let’s try this”“Leverage the success” Getting Started

4. Business Case are used to: Present a proposal Communicate and enlighten Get a decision Commitment of resources

5. What’s in a Business Case? Information about: – What? – Why? – Where? – When? – Who? – How? – How much? – Risks & Alternatives In a format that works in your organization

6. Suggested Contents Executive Summary Statement of Problem or Opportunity Proposed solution Alternatives Justification – benefits of the solution Resources needed Risks Time frame anticipated

7. Tips for an Effective Business Case Executive summary - tell the story in 90 seconds Use the language of the intended audience Proposal should reflect input from stakeholders Have all financial analysis work pre-approved Be sure to consider “no action” as an alternative Well organized and as brief as possible Develop a visual version of your business case (Powerpoint, handout, posters, etc)

8. Business Case Exercise TBD: Serendipity Designs & The McDonald Paper Company Or Class based Business Cases

9. Business Case Exercise Teams will each write a business case Nancy is the CEO The class is her leadership team Each team will present their case The class will evaluate and provide feedback

10. Project:Project title goes hereDate: Year 0Year 1Year 2Year 3Year 4Year 5Total Expenditures Direct cost - new expenditures Initial investment #1 $0 Initial investment #2 $0 Future cost #1 $0 Future cost #2 $0 Future cost #3 $0 Total direct cost$0 Indirect cost - Allocation of overhead Overhead cost #1$0 Overhead cost #2$0 Total indirect cost:$0 Total cost: $0 Benefits Tangible benefits Tangible benefit #1Confidence factor100% $0 Tangible benefit #2Confidence factor100% $0 Tangible benefit #3Confidence factor100% $0 Tangible benefit #4Confidence factor100% $0 Tangible benefit #5Confidence factor100% $0 Total Tangible benefits$0 Intangible benefits Intangible benefit #1Confidence factor100% $0 Intangible benefit #2Confidence factor100% $0 Intangible benefit #3Confidence factor100% $0 Total Intangible benefits$0 Total benefits: $0 Financial Analysis Period 012345 Cash flow $0 Discount rate 4.0% Discounted cash flow $0 Cummulative discounted cash $0 Net Present Value $0 Internal rate of return #NUM!

11. Project:Implement a second paint lineDate: 4/22/11 Year 0Year 1Year 2Year 3Year 4Year 5Total Expenditures Direct cost - new expenditures Two Hatachi paint robots$2,000,000 Facility and system infrastructure mods$500,000 First and second shift operators (4) $400,000 $2,000,000 Maintenance contract $200,000 $1,000,000 Utilities $12,000 $60,000 Total direct cost$2,500,000$612,000 $5,560,000 Indirect cost - Allocation of overhead Two month setup and break-in$200,000 Project management$100,000 Total indirect cost:$0$300,000$0 $300,000 Total cost: $2,500,000$912,000$612,000 $5,860,000 Benefits Tangible benefits Double production throughput - netConfidence factor100% $1,750,000 $8,750,000 Recovered lost timeConfidence factor100% $500,000 $2,500,000 $0 Total Tangible benefits$2,250,000 $11,250,000 Intangible benefits Customer goodwill from improved dependabilityConfidence factor100% $100,000 $0 Total Intangible benefits$100,000$0 $100,000 Total benefits: $2,350,000$2,250,000 $11,350,000 Financial Analysis Period 012345 Cash flow -$2,500,000$1,438,000$1,638,000 $5,490,000 Discount rate 4.0% Discounted cash flow -$2,500,000$1,382,692$1,514,423$1,456,176$1,400,169$1,346,317$4,599,777 Cummulative discounted cash -$2,500,000-$1,117,308$397,115$1,853,291$3,253,461$4,599,777 Net Present Value $4,599,777 Internal rate of return 55%