Preparing an Effective Business Case -- A Guide to Planning and Funding Municipal and Community Projects

Agdex#:	880
Publication Date:	March 2002
Order#:	02-023
Last Reviewed:
History:
Written by:	W.J. (Bill) Baxter - Program Lead, Feasibility Analysis/OMAFRA

Table of Contents

1. Introduction to Business Case Writing
2. Elements of a Business Case

Introduction To Business Case Writing

Preparing a business case is an integral part of the planning and fundraising process for any municipal or community project. It becomes more important as the cost and complexity of the project increases.

This Factsheet will help municipalities and not-for-profit organizations prepare an effective business case for raising funds — both within the community and through government programs.

A business case is similar to a business plan prepared for private business. Its purpose is to outline the business rationale for undertaking the project and to define the parameters and management factors involved in the project itself. It provides the project manager with a tool to guide the design, management and evaluation of the project.

Information on preparing business plans is available from OMAFRA, local Business Enterprise Centres and private consultants. Business planning software is available wherever business books and computer programs are sold. The OMAFRA Factsheet Preparing Business Plans, Order No. 99-011 is available from the Government Information Centre at 1-888-466-2372.

The business case provides evidence that the project is a good investment for both the funding partner and the community. Funding partners and government funding programs usually require a business case before committing to the project.

The grant application is separate from the business case. It merely conveys the basic information required by the granting body. The business case accompanies the grant application. Its purpose is to sell the idea or concept to the funding administration. Therefore write in clear, plain language, avoiding technical jargon. This helps the program administrator and the potential partner to understand the need to help fund the project.

If specific forms are requested as part of a program application, complete the information in full, using the format provided. Make sure you thoroughly understand both the terms of reference of the program, and the nature of the project, both the wording and the intent, before beginning to prepare the application form. The business case is attached to the application form, along with letters of commitment and support from potential partners.

The business case serves four purposes:

• It helps the applicant think through the project in a systematic, step-by-step manner.
• It explains to program administrators, funding partners and other interested parties why the project should be undertaken.
• It helps potential funding partners understand the economic value of the project.
• It provides a framework for completion of the project on time and on budget.

An effective business case is one that matches the purpose and parameters of the funding program that it seeks to attract. In short, an effective business case justifies:

• why a project should be undertaken,
• why a private or public partner should invest in it, and
• why the project represents a worthy expenditure of public funds.

While the business case may be presented in various formats, there are certain elements to include in any written document. The description that follows is a logical sequence for the final business case. This format can be adapted to almost any project, but be sure to present the business case in a manner that will create a favourable impression on the funding partner or program administrator.

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Elements Of A Business Case

Title Page

The title page is the first impression a reader gets of a business case. Make sure it is neat and orderly, simple, balanced and easy to read. It contains the:

• title of project
• project designation (number, location, etc.)
• name of organization
• date of approval by organization.

Table of Contents

The table of contents lists the major headings in the business case, and the page on which each is found. Remember to number the pages in the document. While it is the last section completed, it is placed immediately following the title page.

Executive or Project Summary

This is your first and most important selling tool. It is where you create the critical first impression of the project, so it is important to summarize the most important elements of the project in a concise and compelling manner.

Guidelines for writing the executive summary are listed below.

• Describe the project precisely and concisely, avoiding excess descriptive words.
• Tell why the project is necessary, and why it is the best solution.
• Outline the most important benefits of the project to the community.
• Outline the costs and major disadvantages, if any.
• Summarize the most important reasons for recommending the project.
• Limit to one to two pages in length only.
• Write after the business case is completed.

Keep the executive summary to two pages or less. Do not include technical descriptions. Concentrate on explaining your reasons for undertaking the project, and what the benefits will be.

It may help to do a point form first draft before writing your business case; this could clarify the important elements of the plan. Write the final draft after completing the plan details.

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Mission Statement

This is a concise, general statement of what the municipality intends to achieve by completing the project. It explains what is to be done, for whom, and why. If possible, do not exceed one sentence.

For example:

Objectives of the Project

What, precisely, will be achieved by completing the project? State the objectives clearly; one short statement for each, without accompanying arguments or documentation. These appear in the body of the report and in the project summary. It should be clear to the reviewer, however, how these objectives relate to the objectives of the funding program.

Objectives are Specific, Measurable, Achievable, Realistic and Timely (S.M.A.R.T.). These define the results expected as a direct consequence of the project’s completion. Such hard data verifies the value of the project, and makes it saleable to the community as well as the funding program. They include such items as:

• jobs created, upgraded or retained. Job quality may be listed
• new or retained investment in the community
• new partnerships or linkages created
• problems or issues resolved
• increased tax revenue
• increased volume of domestic or export sales
• new products, services or technologies to be developed or utilized
• barriers to growth that will be overcome.

Some projects have long- and short-term objectives. Identify these as such if it adds to the understanding of the program. For example, the short-term objective of building a new bridge may be to replace an aging structure soon to be condemned. In the long term, a multi-lane bridge near the industrial park may help to attract industry to the municipality, if this is a significant rationale.

Sample objectives:

• to replace the existing bridge by (date)
• to reduce travel time required to reach the main highway by 5 minutes
• to accommodate heavy truck traffic to the industrial park
• to reduce traffic flow using other routes by 25%
• to attract new industry that will provide 150 new jobs by (date)

The discussion following each objective clarifies the analysis or rationale for arriving at the objective. For example: A 2001 traffic study indicated that 60,000 cars and 6,000 heavy trucks would use the new route annually, each saving 2.4 miles per trip. This would create an annual savings of $300,000 in maintenance on other roads.

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Performance Measures

Performance measures evaluate the success of the project. They indicate how the project will meet the objectives listed at the beginning of the business case. The business case will:

• list the plan objectives
• state the evaluation criteria for each objective
• outline how or by whom each will be evaluated.

Needs Assessment

The needs assessment analyses the problem and explains why the problem needs to be corrected. It provides the information as to whether the project should be undertaken at all. The report, in abbreviated form, becomes part of the business case.

The Problem

• What is it?
• Why does it exist?
• Who is affected?
• What is the extent of the problem?
• What is the damage (liability) if the problem is not fixed?

Environmental Assessment (if applicable)

• Expert or firm providing assessment
• Result of assessment
• Environmental approval (Ministry of Environment)

Benefits from Correcting the Problem?

• Physical and environmental
• Financial: Added Returns

Reduced costs

Technical Analysis

The technical analysis outlines the technical information used to make the decision, and tells why the proposal represents the best or most cost-effective solution. It describes:

• technical problems encountered in existing situation
• what alternative solutions were considered
• why this is the best course of action to choose
• why this is the most cost-effective solution, or if not, why it was chosen
• what innovative technologies are being used.

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Project Work Plan

The work plan spells out the terms that will form the basis of any contracts, including the jobs to be done, the time frames and milestones. It could help the project manager if you include the evaluation criteria for each step or milestone here. Name those responsible for managing the project and contracts as soon as they are known.

• Describe key activities and locations.
• Outline milestones and timelines for completion. A Gantt Chart may be helpful in describing the timelines. It illustrates the timeframe for beginning and completing each task in the project. There are many illustrations of Gantt Charts on the internet
• Identify risks to project completion and contingencies.
• List project staff and consultants if known, and their responsibilities.

While you will use a detailed work plan listing subcontractors, detailed processes and reporting mechanisms to manage the project, it is not necessary to include this in the business case.

Financial Plan

The financial plan shows how the project will be financed and how returns, if any, will be credited. Give an explanation of why program funding is necessary and how funds will be used in the introductory paragraph. This will show up again in the project budget. Elements of a financial plan include:

• detailed budget
• sources of funding (donations, partners, grants, etc.)
• funds expected from targeted program
• in-kind (non-cash) contributions
• returns from project performance (with time)
• operating and administrative costs
• cash flow statement.

Capital Asset Management Plan

• It is important to clarify how the asset will be managed.
• State the plan for managing and monitoring the resulting capital assets.
• State how funds will be raised for operating, maintenance and replacement.

Partner Profile

Partners may be any parties with a vested interest in the project who are contributing significantly to its success. The most effective partners are those that contribute financially to the project.

The partner profile includes:

• names, addresses and contact information for all participating partners
• each partner's interest in the project
• each partner's contribution (financial and in-kind)
• each partner's experience and capabilities in contributing to the completion of the project.

Letters of support from interested parties may help in supporting a grant application, but they are not considered part of the business case. Organizations or writers of such letters may not considered to be "partners" by the funding program administration.

Appendix

Appendices are pertinent documents that show support for or give validity to the project. They include:

• municipal council resolutions or minutes showing authority to proceed with the project
• documents (assessments, etc.) showing the need
• copies of permits and approvals
• copies of recently reviewed or audited financial statements for all partners.

By creating a complete business case such as the one described here, the sponsoring organization will know that it’s management has thought through the entire project thoroughly. The managers will be confident the right decision has been made, and that designated people are in charge of each step of the process. Funding organizations will be confident the project has been well planned, will provide the expected return and is in the best interests of the community.

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