Skip to content
Log in
← Glossary

business case

Also called: investment case

A short, numbers-backed argument for a decision: the options, the cash flows of each, the key assumptions, the risks and a recommendation.

A business case is a short, numbers-backed argument for a decision. It names the question and the realistic options (including doing nothing), shows the cash flows of each, states the key assumptions, gives NPV with IRR and payback beside it, tests how the answer moves when assumptions change, and ends with a recommendation and the conditions that would change it.

The core is the cash that differs between the options. Money already spent stays out (sunk), costs that continue either way stay out, and opportunity costs, such as the other project the same team would have built, are named. Cash is discounted at a rate that matches the bet's risk, and depreciation is not subtracted on top of the investment.

A good business case is honest about its weak points. A headline like "saves 4.6 million" usually hides undiscounted totals and optimistic volumes; the reader needs the value in today's money, the one or two assumptions the answer hangs on, and how far they can move before the decision flips. One page is usually enough; the spreadsheet goes in the appendix.

Example

Klasna pays a vendor for video lessons (18.90 UAH per lesson) and could build its own classroom for 2,000,000 now, then pay 4.20 per lesson for hosting and 600,000 a year for upkeep. The cash that differs grows from 576,000 in year 1 to 1,281,600 in year 5, with lessons rising from 80,000 to 128,000.

Measure
Value
Savings over 5 years, undiscounted
4,644,000 UAH
Same savings at 25%
2,290,526.21 UAH
NPV at 25% / at 30%
+290,526.21 / +43,175.71 UAH
IRR
30.97%
Payback / discounted payback
2.72 / 4.31 years
NPV if lessons stay flat
−450,974.72 UAH
NPV if the build costs 30% more
−309,473.79 UAH

The recommendation follows from the table: build, but only if the build cost is fixed at no more than 2,290,526.21 (a 14.53% overrun is the break-even) and lesson growth is likely. The 300,000 prototype from last year is sunk and stays out.

Common mistakes

  • Leading with an undiscounted total. "4.6 million saved" is 2.29 million in today's money.
  • Comparing against a straw man. Include doing nothing and the cheapest realistic alternative.
  • Counting sunk costs or depreciation. Past spend is gone either way; depreciation repeats the investment.
  • Hiding the assumptions the answer depends on. Show the break-even value of each key assumption.
  • Ending without a decision. A business case ends with a recommendation and the conditions that would change it.

Learn it in the course