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The included Capital Budgeting Business Case model contains 5 tabs Sample Business Case Model – Documentation (1 of 4) Overview Tab The “Overview” tab, in orange, provides a 5-year financial summary of both the benefit case, cost of investment, resulting cash flow analysis, and key financial metrics to drive business decisions. It contains very few inputs, as values are pulled from the next 4 tabs. Benefits Tabs The next 3 tabs, in green, comprise the identified financial, quantifiable benefits, divided into the sections of “Revenue Enhancements, “Costs Benefits,” and Capital Benefits.” The benefits and associated assumptions are clearly defined and calculated in these tabs. For each benefit, values are calculated over the 5-year time frame and are pulled into the “Overview” tab. Cost of Investment Tab The “Cost of Investment” tab, in red, delineates the identified costs associated with undertaking this project/initiative. In the example model, it has been structured similar to the benefit tabs, though this does not need to be the case. The structure is dependent entirely and how the cost structure of this investment. Costs are also calculated over 5 years and summarized in the “Overview” tab.

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The first tab, Overview, presents the financial summary—and is the report presented to executives Sample Business Case Model – Documentation (2 of 4) <ul><li>The model is divided into the following sections: </li></ul><ul><ul><li>Revenue Impact (pulled directly from the “Revenue Enhancements” tab) </li></ul></ul><ul><ul><li>Cost Impact (pulled from the “Cost Benefits” tab) </li></ul></ul><ul><ul><li>Capital Impact (pulled from the “Capital Benefits” tab) </li></ul></ul><ul><ul><li>Cost of Investment (pulled from the “Cost of Investment” tab) </li></ul></ul><ul><ul><li>Cash Flow analysis </li></ul></ul><ul><ul><li>Financial metrics </li></ul></ul><ul><li>The first 4 sections are all formula based—the only modifications you should make are to add or remove line items, which will need to tie to the supporting tabs </li></ul>1 2 3 4 5 6 1 2 3 4 5 6 <ul><li>There is only 1 key assumption value that requires customization, the “Discount / Hurdle Rate” value (highlighted in yellow) </li></ul><ul><li>There are 2 additional sections to add qualitative detail ( “Details” at top right, “Assumptions” at bottom left) </li></ul>OVERVIEW TAB 7 8 7 8 <ul><li>Notice that the yearly discount factors assume the cash flow is averaged over the year </li></ul><ul><li>This is why the formula in cell D43 has a power of 0.5 and not 1 </li></ul>

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Your benefits should be clearly defined—both in terms of definitions and calculations—remember, these need to be validated Sample Business Case Model – Documentation (3 of 4) BENEFIT TABS <ul><li>There are 3 Benefit Tabs: </li></ul><ul><ul><li>Revenue Enhancements – includes all identified revenue enhancements </li></ul></ul><ul><ul><li>Cost Benefits – includes both Cost Reductions and Cost Avoidances </li></ul></ul><ul><ul><li>Capital Benefits – includes both Capital Reductions and Capital Avoidances </li></ul></ul><ul><li>Each of these 3 tabs is structure the same </li></ul><ul><ul><li>At the top, tabulate all your assumptions </li></ul></ul><ul><ul><li>Your assumption values are indicated by yellow cells and should be clearly defined </li></ul></ul><ul><ul><li>Below the assumptions are your actual benefits </li></ul></ul><ul><ul><li>Each benefit has its own section in blue, which contains 4 sub-sections: the name of the benefit (darker blue), benefit description (light blue), calculation details (gray), calculated values over 5 years (white) </li></ul></ul><ul><ul><li>The Excel formulas for the calculations should not contain any numbers—only references to assumption values identified in the top section </li></ul></ul>

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Structure your cost of investment to best reflect the actual cost structure of your initiative Sample Business Case Model – Documentation (4 of 4) COST OF INVESTMENT TAB <ul><li>In our sample model, we have structure the Cost of Investment tab to be identical to the Benefit tabs </li></ul><ul><li>This may or may not be the case for you when you customize this to your needs </li></ul><ul><li>The structure of this tab is fairly flexible and should be designed to most intuitively reflect the actual cost structure of your project </li></ul><ul><ul><li>For instance, if the project you are evaluating requires significant upfront fixed costs and then marginal ongoing variables, you may want to structure this spread into 2 sections: 1 for the initial costs, and 1 for ongoing costs that are driven by the sales volume assumptions </li></ul></ul><ul><ul><li>You should keep the leading practice of listing your assumptions on top and highlighted in yellow </li></ul></ul><ul><li>Remember that all values should be negative, as these are costs </li></ul>

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THIS DOCUMENT ONLY INCLUDES THE MODEL DOCUMENTATION PORTION OF THE ‘BUSINESS CASE TOOLKIT’ You can check out and download the full Business Case Toolkit here: http://learnppt.com/powerpoint/58_Business-Case-Development-Toolkit-with-Excel-model.php

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