# Business Case > When to activate: business case, ROI, cost-benefit analysis, NPV, payback period, investment decision, executive approval, stakeholder analysis - Skill: `mattakushi432/business-case` (Agent Skill) - Install (CLI): `npx skillmds@latest add mattakushi432/business-case` - Raw SKILL.md: https://api.skillmd.com/api/skills/mattakushi432/business-case/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Product & Planning - Author: Mattakushi432 (https://skillmd.com/u/mattakushi432) - Updated: 2026-09-17 - Page: https://skillmd.com/skills/mattakushi432/business-case --- # Business Case ## Document Structure ``` 1. Executive Summary (1 page — decision + recommendation) 2. Problem Statement (current state + cost of inaction) 3. Proposed Solution (options considered + recommendation) 4. Financial Analysis (ROI, NPV, payback, sensitivity) 5. Risk Assessment (risks + mitigations) 6. Implementation Plan (phases, milestones, resources) 7. Stakeholder Analysis (who's affected, how) 8. Recommendation (clear ask) Appendix: Supporting data, assumptions, comparisons ``` --- ## Executive Summary Template ``` SITUATION [Company/team] currently [describe current state]. This results in [quantified pain: cost, time, risk, revenue lost]. PROPOSAL We recommend [specific solution] at a total investment of $[X] over [timeframe]. FINANCIAL IMPACT - Expected annual benefit: $[Y] - Payback period: [Z] months - 3-year NPV: $[W] at [r]% discount rate DECISION REQUIRED Approval of $[X] capital investment by [date] to begin [Phase 1] by [start date]. ``` --- ## ROI Calculation ### Simple ROI ``` ROI % = (Net Benefit / Total Investment) × 100 Net Benefit = Total Benefits - Total Costs (over analysis period) Example: Total Benefits (3yr): $450,000 Total Costs (3yr): $150,000 Net Benefit: $300,000 ROI: 300,000 / 150,000 × 100 = 200% ``` ### NPV (Net Present Value) ``` NPV = Σ [Cash Flow_t / (1 + r)^t] - Initial Investment Where: r = discount rate (WACC or hurdle rate, typically 8–15%) t = time period (year 1, 2, 3...) Decision rule: NPV > 0 → Project creates value; proceed NPV < 0 → Project destroys value; reject or renegotiate NPV = 0 → Breakeven; decision depends on strategic value Example: Year 0 investment: -$100,000 Year 1 net benefit: $40,000 Year 2 net benefit: $55,000 Year 3 net benefit: $65,000 Discount rate: 10% NPV = -100,000 + 40,000/1.10 + 55,000/1.21 + 65,000/1.331 = -100,000 + 36,364 + 45,455 + 48,834 = $30,653 (positive → proceed) ``` ### Payback Period ``` Simple Payback = Initial Investment / Annual Net Benefit Cumulative Payback (more accurate): Year | Investment | Benefit | Cumulative Net -----|------------|---------|--------------- 0 | -$100,000 | $0 | -$100,000 1 | $0 | $40,000 | -$60,000 2 | $0 | $55,000 | -$5,000 3 | $0 | $65,000 | +$60,000 Payback = between Year 2 and Year 3 Precise: 2 + (5,000/65,000) = 2.08 years ``` --- ## Cost-Benefit Analysis Framework ### Benefits (Quantify Each) ``` Hard Benefits (cash savings): - Labor reduction: [# FTEs] × [avg salary] × [% time saved] - Process cost reduction: [current cost per unit] × [volume] × [% saved] - Error reduction: [error rate] × [cost per error] × [# transactions] - Revenue increase: [new capacity] × [conversion rate] × [ACV] Soft Benefits (estimate conservatively): - Risk reduction (probability × impact) - Customer satisfaction improvement (NPS → retention → revenue) - Employee productivity (hours saved × hourly rate) - Regulatory compliance (fine avoidance probability × max fine) ``` ### Costs (Be Complete) ``` One-time Costs: - Software license / implementation fee - Hardware / infrastructure - Integration development - Training and change management - Data migration - Consulting fees Recurring Costs: - Annual subscription / maintenance (SaaS or vendor) - Ongoing support and administration - Incremental headcount - Compliance and audit costs ``` --- ## Risk Assessment Matrix ``` Risk | Probability | Impact | Score | Mitigation --------------------|-------------|--------|-------|--------------------------- Adoption failure | Medium | High | 6 | Change management plan Cost overrun | Low | Medium | 3 | Fixed-price contract Data migration loss | Low | High | 4 | Parallel run + rollback Key person leaves | Medium | Medium | 4 | Knowledge transfer docs Vendor goes bankrupt| Low | High | 4 | Escrow + exit clause Score = Probability × Impact (1–3 scale each) Red = 6–9, Yellow = 3–5, Green = 1–2 ``` --- ## Stakeholder Analysis ``` Stakeholder | Role | Interest | Influence | Stance | Action ----------------|-----------|----------|-----------|-----------|-------- CFO | Approver | ROI | High | Neutral | Present financials CTO | Approver | Tech fit | High | Positive | Leverage as champion Head of Ops | User | Time sav | Medium | Positive | Use as pilot lead IT Director | Gatekeeper| Security | Medium | Skeptical | Security review early Finance Team | Affected | Process | Low | Uncertain | Training plan Legal | Reviewer | Contracts| Low | Neutral | Early review ``` --- ## Sensitivity Analysis ### Key Variable Ranges ``` Variable | Pessimistic | Base | Optimistic ----------------------|-------------|------|---------- Adoption rate | 60% | 80% | 95% Benefits realization | 70% | 100% | 110% Implementation time | +6 months | Base | -2 months Cost overrun | +30% | 0% | -10% NPV at each scenario: Pessimistic: $[X] Base: $[Y] Optimistic: $[Z] Break-even adoption rate: [%] (below this, NPV goes negative) ``` --- ## Decision Criteria Checklist ``` Financial: [ ] Payback period < [company threshold, e.g., 24 months] [ ] NPV > 0 at [hurdle rate]% [ ] ROI > [threshold, e.g., 150%] [ ] Risk-adjusted NPV still positive in pessimistic scenario Strategic: [ ] Aligns with current year priorities [ ] Enables future capabilities (vs one-time fix) [ ] Competitive parity or advantage Operational: [ ] Resources available (people + budget) [ ] Timeline feasible [ ] Dependencies identified and managed [ ] Rollback plan exists ``` --- ## Common Business Case Mistakes 1. **Overstating benefits**: Use conservative estimates; state assumptions explicitly 2. **Ignoring soft costs**: Change management, training, and productivity dip during transition are real costs 3. **100% adoption assumption**: Model 70–80% adoption as base case 4. **No sensitivity analysis**: Single-point estimates look precise but aren't 5. **Missing the "do nothing" cost**: Status quo has a cost too — quantify it 6. **Burying the ask**: Put the specific decision request on page 1