How to write a business case. Feasibility study of the project

The economic justification is the reason that motivates an organization to undertake a specific project. This concept includes consideration of the benefits that the enterprise will receive as a result of the project. In addition, the business case examines various alternatives and also analyzes the project from a financial and economic point of view. The latter allows you to assess the investment attractiveness of the project. How to write a business case? An example is in this material.

The essence of the concept

The economic justification is reminiscent of the analysis that we conduct when planning some kind of serious purchase. For example, your own car. Let us assume that for this acquisition we can allocate from family budget 35 thousand US dollars. The first step is to find out which automobile concerns produce cars of the class we are interested in. Then we determine the main technical characteristics and agree on the final price with the company that sells this product. But that's not all. How to write a business case? An example in the matter of choosing a payment scheme.

At the same time, there may be another situation when the buyer is primarily interested in the total amount that will have to be paid for a new car. This is especially true in a situation where the final price is affected by the amount of interest if we are talking about buying on credit. In this case, it is advisable to choose the option that provides the lowest interest rate. Another way is to look for an offer with the lowest monthly payment. Such an acquisition will allow you to stretch out payments for as long as possible. At the same time, the monthly amount of such a payment will not hit your pocket too much. When carrying out a financial and economic feasibility study, attention is paid to similar aspects.

Components of a business case

There are no clear rules documentation economic justification. Its main task, as in the case of a feasibility study of a project, is to determine the material or intangible results of its implementation. Tangible results mean those that can be measured.

Below is a list that gives an idea of ​​those material components that are important in the process of preparing the financial and economic feasibility study of the project. It would be useful to say that not all of them require mandatory documentation. The need to record them on paper depends on the complexity of the project, cost and number of risks for the enterprise.

Material elements of the business case

So, the main material components of the business case include savings, cost reduction, the likelihood of generating ancillary income, an increase in the enterprise's market share, customer satisfaction and flow assessment Money. In addition to the material components of the business case, it must also contain intangible components.

Intangible elements of the business case

These may include probable, but not pre-planned, company costs. Among the main intangible elements of the business case are transition costs, operating costs, transformation of business processes, as well as reorganization affecting company employees. In addition, the intangible components of the business case include recurring benefits. How else can you write a business case? Example below.

Other components of the business case

It should be emphasized that along with the benefits and assessment of cash flow in the EO, it is necessary to pay attention to alternative approaches and methods for implementing a specific project in practice. How to write a business case? An example in the following situation.

It is known that the market offers a large number of manufacturers of various goods. However, each of them sets its own price for its own products. What to choose? An option that is ready-made solution worth 2 million US dollars. Or an alternative solution that involves partial purchasing from a third-party manufacturer and, to some extent, using its own resources?

In fact, aspects of precisely this nature often have to be considered when drawing up an economic feasibility study for an enterprise. Any of the proposed options must include the previously listed tangible and intangible components. At the end of the business case, proposals and conclusions must be stated. In addition, you can add additional materials to it.

A feasibility study is a very important and integral part of the preparation of most business processes. It doesn’t matter whether it’s a product, a service, or any kind of work, this document will help you realize your plans. The scope of application of this method is very wide. It is used in business planning, business loan applications, and project management. Any project will require the development of a feasibility study, and the absence of one will turn the work into a waste of time.

So what is it?

A feasibility study is a reflection on paper of how potentially effective and feasible the implementation of a project will be. Very often, the abbreviation TEO is used for feasibility studies. So, it includes calculations, analysis, various estimates of return on investment, equity, various expert methods estimates and forecasting, depending on the project. Feasibility studies can be used both in the development of new products and in the improvement or modernization of old ones. The same applies to the construction or organization of production; a feasibility study can help make a choice when purchasing or creating certain production facilities, if such a choice exists.

Feasibility study and business plan: so what are the differences?

Since there are so many variations and structures for feasibility studies and several popular structures and examples for business plans, depending on the purpose and the specific product, a key difference should be highlighted.

A feasibility study is still just calculations and forecasts, it does not contain detailed description product, there are optimal and accurate estimates, formulas and explanations are used. For example: the company expressed the idea of ​​purchasing additional equipment - in this case, a feasibility study is being developed. If a decision has been made to open an enterprise, a business plan is developed.

Example of a feasibility study

As a rule, a project feasibility study consists of many components. The elements may be similar to a business plan, but they are still different. Here is a structural example of a feasibility study:

• Summary of the project (goal, essence, organizers, performers, sources of funds).
• Description of the organization and scope of activity ( general information, financial statements, personnel data, management structure, partners, prospects).
• The key idea of ​​the project (relevance, essence, further potential).
• Description of the project result (products; works; services, including their purpose, characteristics, data on competitiveness).
• Technology and engineering design (administrative, production, human resources, including patterns of their interaction, as well as various estimates, including one-time fixed and variable costs, an indication of production technology, a project implementation schedule, a description of the necessary work).
• Production program (production volume, prices, sales markets).
• Financing scheme ( Full description all sources of funds).
• Commercial feasibility (costs of preparation and various periods of project implementation, estimated revenue, income, profit indicators).
• Performance indicators (various indicators related to payback and costs, expected profit, project sustainability).

Remember this example- this is just a recommendation and approximate content of the feasibility study. Most of the methods presented are expert and require execution by qualified specialists in a particular field, and some projects may include other indicators or not include some of the given components.

In what cases is a feasibility study of a project necessary?

Situations vary, as does the degree of importance of a particular task. In essence, a feasibility study is a calculation of potential or desired changes associated with the costs of implementing a particular project. This is a great tool for answering questions related to deciding whether a project makes sense or not. The feasibility study answers the following questions:

• Will the project be profitable?
• How risky is the project?
• What is the payback period for the project?
• What solutions are required to implement the project?

Decor

As for the design, there is no single answer to this question. The design will depend on two specific factors, namely the case and the requirements agreed with the structure for which the feasibility study is being prepared. A case means a specific project, for example, for a small service or product there will be one design conditions, but the implementation of a megaproject will require completely different, more serious and large-scale calculations and analyses. As for the requirements, everything will depend on who the project is being coordinated with. For example, if you are doing a feasibility study for potential investors or lenders, then you will need to pay more attention economic efficiency design and calculation, and if the development is related to the release of new products, which is carried out on own funds, then the emphasis will be on marketing research and product quality.

Feasibility study in project management

Developing a feasibility study for a project is the key to starting any project. Without it, the project will not go beyond the concept stage and, accordingly, will not be implemented. Moreover, a well-executed feasibility study of the project will help in implementation, will become a supporting document at all stages, and will help protect the organization implementing the project from various force majeure circumstances associated with incorrect calculations or a sudden lack of funds.

Economic justification in its simplest form indicates the reason why the relevant organization intends to carry out the project. The business case usually includes a discussion of the benefits that the organization can receive as a result of the successful implementation of a given project, possible alternatives, as well as a financial analysis to determine the investment attractiveness of the project.

In practice - especially in the case of large projects or projects that involve significant risk for the organization - the business case is often drawn up as a separate document and attached to the project initiation form. In the case of small and medium-sized projects (which are most common), the benefits include savings, cost reduction, the possibility of obtaining additional income and so on. can be listed directly in the project initialization form.

The business case is in many ways similar to the analysis we perform when committing major purchase. For example, let's say you're about to buy a new convertible and you're willing to pay no more than $35,000 for it. First, you need to find out which automakers make convertibles that fit within your price range (with from a project management perspective, you are considering alternative options).

You then determine your desired vehicle specifications and negotiate the final price with the distributor (from a project management perspective, you determine the benefits of these technical characteristics). You may also want to consider financial alternatives and decide what interest rate and payment type are appropriate real possibilities your budget.

If you're primarily interested in the total price you'll pay for the car (including interest payments), then you should choose the payment option with the lowest interest rate you can find. But if the amount of monthly payments is important to you, then when searching for the same options with the lowest interest rate, you should give preference to those whose terms allow you to stretch payments over as long a period as possible. The business case considers similar factors.

Elements of the business case

There is no business case to document firm rules. Typically, you are trying to determine the tangible results of completing (or not completing) a given project. By tangible we mean “measurable” - cost savings, increased productivity or capacity, increased revenue, increased market share owned by the company, etc. By communicating with those interested in your project, you can find out what is most important to them.

The list below will give you some idea of ​​the types of physical elements that need to be kept in mind when determining the business case for a project. Not all of these elements need to be documented for every project; however, the more complex the project and the greater the risk it poses to your organization, the more of these elements you need to include in the business case:

• saving;
• cost reduction;
• opportunities related to receiving additional income;
• increasing the market share owned by the company;
• customer satisfaction;
• cash flow analysis.

The cash flow analysis is documented as part of the business case for the project involved. The purpose of this analysis is to assist the persons (or committees) reviewing requests to select projects suitable for implementation. We will look at several methods for analyzing cash flows in the article about “Project Selection Criteria”. In addition to the measurable elements, the business case should also include intangible elements, including possible, although unplanned, costs to the organization. The list below contains a number of examples of this type:

• transition costs;
• operating costs;
• changes in business processes;
• changes regarding personnel;
• recurring benefits.

Other business case considerations

Along with costs, benefits and cash flow analysis, the business case must take into account alternative solutions or methods of practical implementation of the relevant project. For example, there are thousands of suppliers offering millions of products that do x, y and z, but each of them has a different price. Is, for example, a ready-made solution offered for $2 million a better option than an alternative solution that is partly purchased externally and partly implemented? on our own this organization?

Questions of this kind very often have to be considered in economic justification. Each of alternative options must include both the tangible and intangible elements listed in the previous section. The economic justification should end with certain conclusions and recommendations. If the business case is properly prepared and documented, it speaks for itself. However, in any case, it is a good idea to indicate which alternative is the best for your organization.

The business case can be prepared by the trustee or the project manager - this depends on the culture of the organization concerned. However, regardless of who prepares the business case for a project, it is the trustee who is responsible for its financial viability, while the manager is responsible for the successful planning, execution and practical implementation. Figuratively speaking, the leader monitors correct execution form of the project, but the guardian fills this form with content (investments), on which the amount of profit provided by the final product (or result) of this project ultimately depends.

undoubtedly an important and fundamental document on initial stages project initialization. The feasibility study is included in the package of documents that the project office provides to the potential Customer, justifying the benefits and benefits of the implemented project. However, his correct spelling entertainingly fewer articles are devoted to teaching materials than, for example, writing Technical specifications (TOR) And Technical project(TP). In today’s article we will try to fill this gap and talk in more detail about the feasibility study document itself and how to draw it up correctly.

Let's take a closer look at the document itself in detail.

Any project starts with processes initialization, with the formulation of goals for solving production problems.

Feasibility study is compiled to analyze the technical and economic feasibility of initializing a project project.

It is at the stage of formation and consideration of the feasibility study that the customer decides for himself whether he will continue to invest in the project or not.

Rice. 1. The decision-making process for starting a project

Main purpose of training feasibility study (TES) one is to justify the need and feasibility of creating/modernizing any system (hereinafter referred to as the Project). But the target audience for whom the feasibility study is intended may be different.

A feasibility study can be prepared for both internal use(for example, for coordination with Management and further development of the project), and externally (for example, to confirm the investment attractiveness of the project to stakeholders, creditors and investors). Second case is the most common and in demand. The development company prepares a package of documents, which also includes a feasibility study, and submits it in the form Commercial offer to a potential Customer.

Depending on for whom and for what purposes and tasks the feasibility study document is being prepared, the depth of elaboration of some sections may be different.

Here is a general summary table of the range of potential stakeholders when preparing a feasibility study:

After preparation, the feasibility study is agreed upon and approved by Management. Management makes one of the following possible decisions:

• Reject the project as inappropriate and economically unprofitable.
• Temporarily postpone the project with the need for additional clarification.
• Approve the feasibility study document with further submission for approval
• Approve the feasibility study document granting authority to implement the project.

If the project is agreed upon/approved, it is assigned a budget, and the Project Manager is given authority to implement the project. Next you canbegin further implementation processes.

1. First option, if the project is implemented within the company, the preparation of the feasibility study is directly carried out by Functional customer

Functional customer is a representative of a business unit who oversees the further development of the project and is responsible for spending money for this project.

2. Second option, when a feasibility study is prepared by a potential contractor planned to attract the implementation of a project. Third-party consulting companies may also be involved in drawing up a feasibility study. It is generally accepted that the cost of developing a feasibility study should be no more than 5-10% from the cost of the entire project.

A feasibility study usually constitutes a separate document. However, it should be noted that in general outline A feasibility study is similar to a business plan.

But the main difference between a feasibility study and a Business plan is that a Business plan directly describes the ways to implement the strategy, goals and objectives of the organization in the context of projects necessary for implementation, and a feasibility study is more intended to justify specific project .

At the same time, a feasibility study can be formalized in different ways, in some companies it is short description on 1-2 pages in A4 format, and in some it is a complex of documents, on the preparation of which a group of dedicated specialists or even the entire department works.

There is an official structure of the Feasibility Study according to the Soviet GOST 24.202-80:

In practice, each company prepares a feasibility study in its own format, describing only the main sections of the feasibility study.

You can select main standard sections of the feasibility study, which are necessarily present in the feasibility study in one form or another:

• Project Summary
• Project idea. What is the idea of ​​a feasibility study for a project, and why is it needed? Project feasibility study plan with step-by-step explanation.
• Rationale. Why exactly such solutions are proposed, the reason for choosing this particular material, type of activity or equipment. It is also necessary to include all possible calculated risks in the feasibility study calculation.
• Requirements calculations for production (financial, raw materials, labor, energy). It is necessary to calculate how much money will be required to launch this project. If you are preparing a feasibility study to obtain a loan, you should indicate all possible sources of income
• Economic justification(calculations that show the result of the enterprise’s activities after changes)
• Conclusions and offers(summarizing, conclusion, evaluation)

If you will develop a feasibility study using your own structure and format, be sure to include standard mandatory sections in the document. The wording of sections may be different, but the semantic purpose of the sections must be reflected in final document.

The period for preparing a feasibility study depends on the level of detail in the description of the feasibility study; the scope of functionality planned for development and implementation; number of processes under consideration; readiness and relevance of current regulations and other internal documents, describing the provisions for the operation of the processes under consideration; availability of ready infrastructure and dedicated personnel.

So the time frame for preparing a feasibility study, depending on the volume and complexity of the calculations, ranges from 3 days to several months.

For example, as a basis for the description, let’s take the structure of a feasibility study according to GOST 24.202-80, because it currently has the most extensive structure and is the official structure for developing a feasibility study.

Why exactly SWOT analysis? Firstly, it will most fully reflect the information that interests us to describe this section. Secondly, this tool is the most common among Managers, because... displays Current state with strengths and weaknesses and allows you to identify the direction in which you need to move further, using strengths, in order to exclude weak sides and minimize risks.

Section 3. Goals, criteria and limitations when implementing EDMS

These same indicators can be used in the future as key performance indicators (KPI, Key Performance Indicators).

KPI, Key Performance Indicators – these are performance indicators of a unit (enterprise) that help the organization achieve strategic and tactical (operational) goals.

Section 4. Functions and tasks of the implemented Project

Section 5. Expected technical and economic results of the Project implementation

The section provides a list of expected costs, economic efficiency, sequence and stages of implementation of the Project with the distribution of necessary resources. If the project is calculated for more than a year, then the indicators are calculated both as a total and for each year separately.

Index ROI must be calculated at the stages of: preparation of a feasibility study based on preliminary expert assessments; upon completion of implementation based on assessments taking into account process optimization; during the period of operation of the System based on actual indicators. Thus, the dynamics of changes and the actual effectiveness of implementation are monitored

Also included in the feasibility study are calculations NPV and financial and economic indicators EBIT, NOPLAT and others.

NPV, Net present value ) is the sum of discounted values ​​of the payment stream, reduced to today. Used materials:

1. UFC-Invest, Feasibility Study
2. Laboratory of business ideas, How does a feasibility study differ from a business plan
3. Osnova.ru, We are developing a feasibility study for the implementation of EDMS (part 1)
4.Guidelines for the preparation of industrial feasibility studies

undoubtedly an important and fundamental document in the initial stages of project initiation. The feasibility study is included in the package of documents that the project office provides to the potential Customer, justifying the benefits and benefits of the implemented project. However, fewer articles and teaching materials are devoted to its correct writing than, for example, writing Technical specifications (TOR) And Technical design (TP). In today’s article we will try to fill this gap and talk in more detail about the feasibility study document itself and how to draw it up correctly.

Let's take a closer look at the document itself in detail.

Any project starts with processes initialization, with the formulation of goals for solving production problems.

Feasibility study is compiled to analyze the technical and economic feasibility of initializing a project project.

It is at the stage of formation and consideration of the feasibility study that the customer decides for himself whether he will continue to invest in the project or not.

Rice. 1. The decision-making process for starting a project

Main purpose of training feasibility study (TES) one is to justify the need and feasibility of creating/modernizing any system (hereinafter referred to as the Project). But the target audience for whom the feasibility study is intended may be different.

A feasibility study can be compiled both for internal use (for example, for coordination with Management and further development of the project), and for external use (for example, to confirm the investment attractiveness of the project to interested parties, creditors and investors). Second case is the most common and in demand. The development company prepares a package of documents, which also includes a feasibility study, and submits it in the form Commercial offer to a potential Customer.

Depending on for whom and for what purposes and tasks the feasibility study document is being prepared, the depth of elaboration of some sections may be different.

Here is a general summary table of the range of potential stakeholders when preparing a feasibility study:

After preparation, the feasibility study is agreed upon and approved by Management. Management makes one of the following possible decisions:

• Reject the project as inappropriate and economically unprofitable.
• Temporarily postpone the project with the need for additional clarification.
• Approve the feasibility study document with further submission for approval
• Approve the feasibility study document granting authority to implement the project.

If the project is agreed upon/approved, it is assigned a budget, and the Project Manager is given authority to implement the project. Next you canbegin further implementation processes.

1. First option, if the project is implemented within the company, the preparation of the feasibility study is directly carried out by Functional customer

Functional customer is a representative of a business unit who oversees the further development of the project and is responsible for spending money for this project.

2. Second option, when a feasibility study is prepared by a potential contractor planned to attract the implementation of a project. Third-party consulting companies may also be involved in drawing up a feasibility study. It is generally accepted that the cost of developing a feasibility study should be no more than 5-10% from the cost of the entire project.

A feasibility study usually constitutes a separate document. However, it should be noted that in general terms a feasibility study is similar to a business plan.

But the main difference between a feasibility study and a Business plan is that a Business plan directly describes the ways to implement the strategy, goals and objectives of the organization in the context of projects necessary for implementation, and a feasibility study is more intended to justify specific project .

At the same time, a feasibility study can be drawn up in different ways; in some companies it is a brief description of 1-2 pages in A4 format, and in some it is a set of documents, on the preparation of which a group of dedicated specialists or even the entire department works.

There is an official structure of the Feasibility Study according to the Soviet GOST 24.202-80:

In practice, each company prepares a feasibility study in its own format, describing only the main sections of the feasibility study.

You can select main standard sections of the feasibility study, which are necessarily present in the feasibility study in one form or another:

• Project Summary
• Project idea. What is the idea of ​​a feasibility study for a project, and why is it needed? Project feasibility study plan with step-by-step explanation.
• Rationale. Why exactly such solutions are proposed, the reason for choosing this particular material, type of activity or equipment. It is also necessary to include all possible calculated risks in the feasibility study calculation.
• Requirements calculations for production (financial, raw materials, labor, energy). It is necessary to calculate how much money will be required to launch this project. If you are preparing a feasibility study to obtain a loan, you should indicate all possible sources of income
• Economic justification(calculations that show the result of the enterprise’s activities after changes)
• Conclusions and offers(summarizing, conclusion, evaluation)

If you will develop a feasibility study using your own structure and format, be sure to include standard mandatory sections in the document. The wording of sections may be different, but the semantic purpose of the sections must be reflected in final document.

The period for preparing a feasibility study depends on the level of detail in the description of the feasibility study; the scope of functionality planned for development and implementation; number of processes under consideration; readiness and relevance of current regulations and other internal documents describing the provisions for the operation of the processes under consideration; availability of ready infrastructure and dedicated personnel.

So the time frame for preparing a feasibility study, depending on the volume and complexity of the calculations, ranges from 3 days to several months.

For example, as a basis for the description, let’s take the structure of a feasibility study according to GOST 24.202-80, because it currently has the most extensive structure and is the official structure for developing a feasibility study.

Why exactly ? Firstly, it will most fully reflect the information that interests us to describe this section. Secondly, this tool is the most common among Managers, because... displays the current state with strengths and weaknesses and allows you to identify the direction in which you need to move further, using strengths to eliminate weaknesses and minimize risks.

Section 3. Goals, criteria and limitations when implementing EDMS

These same indicators can be used in the future as key performance indicators (KPI, Key Performance Indicators).

KPI, Key Performance Indicators – these are performance indicators of a unit (enterprise) that help the organization achieve strategic and tactical (operational) goals.

Section 4. Functions and tasks of the implemented Project

Section 5. Expected technical and economic results of the Project implementation

The section provides a list of expected costs, economic efficiency, sequence and stages of implementation of the Project with the distribution of necessary resources. If the project is calculated for more than a year, then the indicators are calculated both as a total and for each year separately.

Index ROI must be calculated at the stages of: preparation of a feasibility study based on preliminary expert assessments; upon completion of implementation based on assessments taking into account process optimization; during the period of operation of the System based on actual indicators. Thus, the dynamics of changes and the actual effectiveness of implementation are monitored

Also included in the feasibility study are calculations NPV and financial and economic indicators EBIT, NOPLAT and others.

NPV, Net present value ) is the sum of discounted values ​​of the payment stream, reduced to today. Used materials:

1. UFC-Invest, Feasibility Study
2. Laboratory of business ideas, How does a feasibility study differ from a business plan
3. Osnova.ru, We are developing a feasibility study for the implementation of EDMS (part 1)
4.Guidelines for the preparation of industrial feasibility studies