Do a business case and a business plan sound pretty similar to you? We think so, too! However, those two words don't mean the same thing at all. So it's vital to understand the distinction between a business case and a business plan.
What kind of entrepreneur would you be if you didn't know how to differentiate the two? The Business Plan Shop helps you get your facts right.
What is a business case?
A business case is a document that provides the necessary justification to invest time or money in a new project, generally within a company.
Commonly used in bigger companies, the business case helps the decision-making process in the prioritisation of one project over another.
Big companies often have a vast variety of teams, and with all of them likely believing that their project is top priority, the company's money needs to be used carefully.
The difference between a business case and a business plan here is that the business case will be used for decision making inside the company.
What is the business case's purpose?
The business case must answer 4 questions:
- What is the project?
- Why should this project get picked over another?
- Who will be involved?
- How much will it cost?
What is the project?
The business case presents the project in detail. Whether it's a product or a service, a business case demonstrates what the project will achieve for the company.
Why should this project get picked over another?
The business case highlights the project's benefits, and how valuable it is for the company.
It could be a business opportunity, such as adding a feature to an existing product to boost sales, or implementing an organisational improvement, such as changing the customer support software to gain in productivity and serve customers better.
Who will be involved?
The business case introduces the people involved in the project, whether they're in the company or not.
It also gives an approximative value of how much the project will cost from start to end, including which team will be in charge and if external support or a third party will be used.
The business case should also underline that the team has the required skills to complete the project.
How much will it cost?
The business case gives an accurate overall cost of the project, as well as how much profit or cost savings it will bring.
This section shows how long the project will last, and what equipment, financial, and human resources will be needed.
Business case sample
Here's a short sample version of what a business case should look like:
The management is looking at improving Coventry's factory production line. The project would involve replacing the equipment on production lines 3 and 4 which were installed in 2004 with more recent equipment.
The cost for this modernisation is estimated at £150k, and would reduce the production cost by 5%, along with reducing the yearly maintenance cost by £5k, which would result in a total gain of £175k, taking into account the expected production volume in the yearly budget.
The replacement should take 3 days and line 3 and 4 will have to cease production during this period. The rest of the lines should continue to run as normal.
Business plan vs business case: what's the difference ?
Business plans and business cases are not too dissimilar, but it's important to discern why they're not the same.
They both highlight an opportunity. The business case, however, is a short-term gain, whereas the business plan takes on a global and long-term approach.
The difference between a business case and a business plan also derives from the fact that the business case usually refers to a project and one aspect of the business, whereas the business plan presents a detailed plan of action for the entire organisation over several years.
The business plan cannot be completely accurate, as it cannot predict the future and will evolve regularly based on market trends and inflation.
The business plan is based on a series of hypothesis, action plans, and a long-term calendar. Contrastingly, a business case is concrete - mainly because it's aimed at creating a short-term gain for the business with a well defined return on investment.
To sum-up: a business plan is a strategic document, whereas a business plan is a tactical one.
We hope this article helped you in understand the difference between the two. Please do not hesitate to get in touch if you have any questions.
Also on The Business Plan Shop