Developing a business case
So, you’ve had THE idea. You may have been mulling it over for years or it suddenly appeared, as all good ideas do, while taking a shower. Now the very thought of this idea has you unable to sleep because it represents endless possibility. You’re eager to turn this idea into action and to get it launched. The only problem is that while you’re an expert in developing apps/pre-fabricating modular building materials/distilling craft gin, when it comes to financial modelling it’s all gobbledygook.
The value of an idea
According to the Australian Bureau of Statistics, more than 60 per cent of small businesses will stop operating within the first three years of starting-up. Many entrepreneurs who struggle to stay afloat do so because they failed to undertake the initial due diligence to ensure their idea was viable rather than an unrealistic pipedream. If you’re already established in business, you don’t want an acquisition or new product line to risk what you’ve already built.
It’s rare that a specialist in a particular field of business is also an authority on financial matters, so it’s best to recruit an advisor who is. They will help you to gather and decipher all the pertinent information to determine whether an idea or opportunity is worth spending time and money on. A professional advisor will see through the complexity of the opportunity and determine whether it has the potential to be viable.
Investing early in the resources and time to develop forward projections, break-even analysis and to think-through risk management is an important step to not only clarify your own understanding, but necessary if you want to pitch your idea and obtain buy-in from external decision makers such as company boards, shareholders or banking institutions. These stakeholders want to know that any investment will deliver value.
What to cover
A business case methodically outlines all the information required to support the decision-making process of whether a business or project is viable. Viability is assessed across a number of dimensions including;
- market viability
- technical viability
- business model viability
- management model viability
- economic and financial viability
You should expect this one document to meet the information needs of a broad audience and be clear in;
- Assessing associated costs
- Identifying problems and opportunities
- Presenting market research, including a competitor analysis
- Describing production and operating requirements
- Defining successful outcomes and approach
- Recommending governance frameworks
- Making financial projections
- Suggesting alternatives to any problems
This information will help you to validate the economics of an opportunity while also articulating your elevator pitch on how this idea is fulfilling an unmet need in the marketplace. The ability to communicate the idea effectively is just as important as assessing the proof of concept. If the idea progresses, you’ll need to be able to tell a persuasive and educated story to any stakeholders about the market need or the problem you’re solving.
A well-executed business case will also help your idea standout against competing parties and is an especially vital tool in raising capital or applying for government grants. It helps to build an answer to what would happen if the investment went ahead and carefully evaluates the risks and benefits.
It’s essential to note that a business case cannot be substituted with a business plan. A robust business case will make a recommendation as to whether an idea should proceed or not and is the precursor to a business plan. The business plan will define your activity for the next three to five years and will define your goals, strategies and objectives while also focusing on your operations to include sale forecasts, costs and any relevant market information.
Independence is an asset
Generating THE idea can be exhilarating. Even serial entrepreneurs can get tunnel vision because they’re intoxicated by the pursuit of something new. It’s also the reason why it’s crucial to have a detached and independent evaluator on your side.
Moore Stephens Australia advisors can serve as that much-needed cool head. Our global network and exposure to a diverse range of professionals and industries enhances our skill in developing business cases that help identify market trends and opportunities in Australia and beyond. We provide focus and support when you may be feeling overwhelmed by the sheer task of getting an idea up and running, and most importantly, we equip you with the vital information to ensure it succeeds.