Business Case
Financial frameworks for investment justification and decision support.
When to Use Each Framework
Framework Use When
ROI Quick sanity check; time value of money doesn't matter much
NPV Multi-year investments; gold standard for GO/NO-GO
IRR Comparing projects competing for the same budget
Payback Period Leadership asks "how fast do we break even?"
TCO Build vs. buy; total cost including hidden/ongoing costs
Sensitivity Analysis High uncertainty; need to stress-test assumptions
Decision Tree
Is the investment multi-year? YES → Use NPV (+ IRR to compare alternatives) NO → ROI is sufficient
Is this a build vs. buy decision? YES → TCO comparison across all three options NO → Skip TCO, use NPV/ROI
Are assumptions uncertain? YES → Add sensitivity analysis (3 scenarios) NO → Base case only
Quick Reference Formulas
ROI = (Net Benefits - Total Costs) / Total Costs × 100%
NPV = Sum(Cash Flow_t / (1 + r)^t) - Initial Investment r = discount rate (10% enterprise, 15-20% growth, 25-40% startup) Decision: Accept if NPV > 0
IRR = discount rate where NPV = 0 Decision: Accept if IRR > hurdle rate
Payback Period = Initial Investment / Annual Cash Flow Benchmarks: SaaS 6-12 mo, Enterprise platform 12-24 mo, Infra 24-36 mo
TCO = CAPEX + (OPEX × years) + Opportunity Cost + Hidden Costs
Business Case Template
Business Case: [Project Name]
Executive Summary
[2-3 sentences: what we're investing in and expected return]
Financial Analysis
Investment Required
| Item | One-Time | Annual |
|---|---|---|
| Development | $X | |
| License / SaaS | $X | |
| Implementation | $X | |
| Training | $X | |
| Maintenance | $X | |
| Total | $X | $X |
Expected Benefits
| Benefit | Annual Value | Confidence |
|---|---|---|
| Time savings (X hrs × $Y/hr) | $X | High |
| Error reduction | $X | Medium |
| Revenue uplift | $X | Low |
| Total | $X |
Key Metrics
| Metric | Value |
|---|---|
| 3-Year TCO | $X |
| NPV (10% discount) | $X |
| IRR | X% |
| Payback Period | X months |
| ROI | X% |
Sensitivity Analysis
| Scenario | Discount Rate | Year 1 Benefits | NPV |
|---|---|---|---|
| Base case | 10% | $X | $X |
| Conservative | 15% | $X × 0.75 | $X |
| Optimistic | 8% | $X × 1.25 | $X |
Risk Analysis
| Risk | Probability | Impact | Mitigation |
|---|---|---|---|
Recommendation
[GO / NO-GO] — [one-sentence rationale]
TCO: Build vs. Buy vs. Partner
See rules/business-cost-benefit.md for the full 3-year TCO template and hidden cost checklist.
Key hidden costs to never omit:
Category Build Buy
Opportunity cost Yes — team blocked from other work No
Switching costs N/A Yes — vendor lock-in
Downtime risk You own uptime Partial SLA coverage
Security/compliance Your responsibility Shared
Common Pitfalls
Pitfall Mitigation
Simple ROI without time value Always use NPV for multi-year decisions
Ignoring soft costs (training, change mgmt) Add 30% buffer to implementation estimates
Optimistic benefit estimates Use conservative estimates, document assumptions
Sunk cost included in forward analysis Evaluate future costs/benefits only
No sensitivity analysis Always test conservative + optimistic scenarios
References
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ROI & Financial Metrics — NPV, IRR, payback period formulas with code examples
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Cost-Benefit & TCO — Build vs. buy TCO template, hidden costs, sensitivity analysis
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ROI Calculation Guide — Detailed cost breakdown (CAPEX/OPEX/opportunity cost)
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Build-Buy-Partner Decision — Scoring matrix across 5 dimensions
Related Skills
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ork:market-sizing — Size the opportunity before building the business case
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ork:competitive-analysis — Assess competitive context and moat for the investment
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ork:product-frameworks — Full product strategy toolkit (prioritization, OKRs, personas)
Version: 1.0.0