Developing a Business Case and Feasibility Study, Explained

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Developing a Business Case and Feasibility Study

Project Management · Chapter 2: Launching and Defining a ProjectSection 2.2 · lesson 11 of 7311 min · free with a free account

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In this lesson

Arguing a project is worth doing and testing whether it is feasible.

  • Describe the six parts of a business case and why doing nothing is an option
  • Assess technical, economic, operational, legal and schedule feasibility
  • Calculate payback period, simple ROI and benefit-cost ratio
  • Test a recommendation with sensitivity analysis

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Transcript

Everything said in the video, section by section (1,420 words). Read along, or search it.

Opening Question

Worth Doing and Able to Be Done

Joanna manages a group of outpatient clinics. Patients miss appointments, and reception spends much of the day on the phone. She wants online booking, and she knows her board will ask two questions. Is it worth doing? And can it actually be done? The first question needs a business case: a written argument for why to invest, what the alternatives are, and what each gains and gives up. The second needs a feasibility study: an investigation of whether the work can be carried out under real conditions.

Structure

Six Parts of a Business Case

A business case has six parts. The problem or opportunity, in plain terms, with evidence. The options considered: the realistic ways of responding. The benefits, measurable where possible. The costs, both up front and year by year. The risks that could shrink the benefits or grow the costs. And the recommendation: which option, and why. Keep it proportionate: two pages for a small change, more for a large investment. And it isn't the charter. The business case argues for a decision before it's made. The charter records the decision, and the authority that follows.

Options

Always Include Doing Nothing

A case with only one proposal gives the decider nothing to compare, and reads like advocacy. A fairer case shows at least two alternatives, plus doing nothing: carrying on exactly as now. Doing nothing is the baseline every other option is measured against. It forces the writer to say what the problem costs if it's left alone. An option is a distinct way of responding. The recommendation is the one the writer advises, with reasons.

Feasibility

Five Angles of Feasibility

Feasibility looks at an idea from five angles, and a project can pass four and fail the fifth. Technical: can we build or obtain it, and make it work? Economic: is it worth the money? Operational: will people actually use it, and can daily work cope with it? Legal: are we allowed to do this? And schedule: can it be ready when it's needed? Technical and operational are easy to confuse. A system can work perfectly on a test bench, and still be abandoned because staff find it slower than their old way. And legal rules vary by country, state and sector. Where personal data or contracts are involved, ask qualified counsel before committing.

Worked Example

Two Booking Options Over Five Years

Now the economics. Joanna compares two options over five years. These figures are illustrative. Option A is a booking system bought from a vendor: 30,000 up front, 15,000 a year in benefits, and 3,000 a year to run. Option B is custom-built and linked to patient records: 80,000 up front, 26,000 a year in benefits, and 6,000 a year to run. Doing nothing means telephone booking only. The three screening measures that follow are simple, and undiscounted: they treat money in year five as worth the same as money today. Discounting comes in a later chapter.

Payback Period

Outlay Divided by Annual Net Benefit

First, the payback period: how long until the cumulative net benefit equals the initial outlay. Payback equals the initial outlay, divided by the annual net benefit: the yearly benefit minus the yearly running cost. For A, fifteen thousand minus three thousand is twelve thousand a year. Thirty thousand divided by twelve thousand is two and a half years. For B, twenty-six thousand minus six thousand is twenty thousand. Eighty thousand divided by twenty thousand is four years. Shorter payback is usually preferred: the money comes back sooner, and is exposed to less uncertainty.

Return on Investment

Net Gain as a Share of Cost

Second, simple return on investment: the net gain, as a percentage of the total cost. Total cost is the initial cost plus all the running costs over the horizon. Net gain is total benefit minus total cost. For A, total benefit is fifteen thousand times five: seventy-five thousand. Total cost is thirty thousand plus fifteen thousand of running costs: forty-five thousand. Net gain, thirty thousand. Divided by forty-five thousand, that's sixty-six point seven percent. For B, benefit is a hundred and thirty thousand, and cost is eighty thousand plus thirty thousand: a hundred and ten thousand. Net gain, twenty thousand. Divided by a hundred and ten thousand: eighteen point two percent.

Benefit-Cost Ratio

Total Benefits Over Total Costs

Third, the benefit-cost ratio: total benefits divided by total costs, over the same horizon. Above one, benefits exceed costs. Exactly one, they balance. Below one, costs win. For A, seventy-five thousand over forty-five thousand is one point six seven. For B, a hundred and thirty thousand over a hundred and ten thousand is one point one eight. The ratio and ROI carry related information: an ROI above zero means a ratio above one. They're reported separately because readers find each easier in different settings.

Quick Check

Payback for Option C

Quick check. A third option, C, costs twenty-four thousand up front. It brings eleven thousand a year in benefits, and costs three thousand a year to run. What's its payback period? Pause, and work it out. Three years. The net benefit is eleven thousand minus three thousand: eight thousand a year. Twenty-four thousand divided by eight thousand is three. Two point two comes from forgetting the running costs, and dividing by eleven thousand.

Comparison

Option A Wins Every Screen

Side by side, Option A beats B on every screening measure: a shorter payback, a higher ROI, and a higher ratio. Doing nothing has no outlay, but no gain either, and missed appointments carry on as a continuing cost. Track A's running total of net benefit, and it starts at minus thirty thousand, then crosses zero at two and a half years. The gains keep building after that, which payback never counts.

Sensitivity

When Lower Adoption Shrinks the Return

These measures are quick, but they leave things out. Timing: all three treat year five like year one, and payback ignores everything after the payback point. Risk: one set of numbers hides how uncertain they are. Intangibles, like patient experience, are left out, and inventing numbers for them misleads. And sensitivity: how much the answer moves when an assumption moves. Suppose fewer patients adopt A, and its benefit is ten thousand a year, not fifteen. Net benefit falls to seven thousand, so payback becomes thirty thousand over seven thousand: four point two nine years. Total benefit is fifty thousand against the same forty-five thousand cost. ROI falls to eleven point one percent, and the ratio to one point one one. One assumption moved by a third takes A from clearly attractive to barely positive. So a careful case says how far each figure can move before the recommendation changes.

Debate

Simple Measures and Presenting the Case

How much weight simple measures deserve is debated. One side says that for small decisions they're right: quick, transparent, and less falsely precise than elaborate models. The other says undiscounted measures can favor the wrong option when benefits arrive at different times, and a quick answer that misleads is worse than a slow one. When presenting, lead with the recommendation and the decision you want: approve Option A, with a budget of thirty thousand. Then the assumptions, all the options including doing nothing, the risks, even those against your own preference, and what happens after a yes or a no.

Quick Check

Option B Breaks Even

Quick check. Suppose Option B's running costs turn out to be ten thousand a year, not six thousand. Everything else stays the same. What's B's five-year benefit-cost ratio now? Pause, and work it out. Exactly one. Benefits are a hundred and thirty thousand. Costs are eighty thousand plus fifty thousand of running costs, also a hundred and thirty thousand. So B now only breaks even over five years. A modest change in one running cost wiped out its margin.

Case Resolution

A Phased Rollout With Phones Open

Back to Joanna. Her feasibility findings complicated the numbers. Technically, both options could be built. On schedule, B couldn't be ready before the clinic's busiest season. Legally, patient data meant counsel had to review any vendor arrangement before signing. The operational finding mattered most. Many patients are older adults who prefer the phone, and reception feared two booking methods would double their work. That was the weak point in A's benefit figure, so she ran the sensitivity check, and showed how much lower adoption cut the return. She recommended A, with conditions: a phased rollout, phone booking kept fully open, and a review after six months of how much benefit was real. The board approved. She traded a slower, smaller benefit for protecting patients who can't or won't book online.

Key Takeaways

Case, Feasibility and Screening Measures

To recap. A business case argues whether a project is worth doing. A feasibility study asks whether it can be done. Compare at least two options, plus doing nothing. Payback is the outlay over the annual net benefit. Simple ROI is net gain over total cost. The ratio is benefits over costs. And test the sensitivity of every key assumption before you recommend.

About Project Management at UPI Study

Project Management (Business 230) is a self-paced online course of 73 video lessons in 12 chapters, from starting and defining a project to planning, budgets, scheduling tools, proposals, contracts, execution, monitoring, closure, teams and certification. It carries a NCCRS credit recommendation for 3 semester credits.

Every lesson transcript is free on pages like this one, and the videos are free with a free UPI Study account. Enrolling adds a practice quiz after each lesson, the graded work and final exam that earn the credit, lifetime access, and an official transcript on completion. UPI Study has helped over 130,000 students with college credits. ACE and NCCRS have over 2,100 cooperating colleges that will consider accepting credits; the final decision is with the universities.

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Why take it here

Why students take Project Management with UPI Study

How projects are planned, run and closedProject Management teaches how to deliver work on time and on budget: scope, schedules, the critical path, budgets and earned value, risk, contracts, monitoring and closing a project, and leading the team. It is a common course in business, management and engineering degrees.
Credit at a fraction of the priceThe same 3 credits can cost $750 or more at a US college. Here it is one payment, self-paced, with lifetime access.
Finish your degree soonerTransfer credits reduce the courses you still owe, so you can graduate earlier or lighten a heavy semester.
Strengthen an applicationA completed college-level course on an official transcript shows admissions and scholarship committees you can do the work.
Study on your own scheduleNo start dates, no deadlines. Watch the lessons, practice, and take the final when you are ready.
130,000+students helped with college creditsACE and NCCRS have over 2,100 cooperating colleges that will consider accepting credits; the final decision is with the universities.

Where the credit goes

Universities that work with NCCRS

Project Management carries a NCCRS credit recommendation. These universities work with NCCRS; some are UPI Study's signed partners. ACE and NCCRS have over 2,100 cooperating colleges that will consider accepting credits; the final decision is with the universities.

Thomas Edison State UniversityThomas Edison State UniversitySigned partnerUniversity of the PeopleUniversity of the PeopleSigned partnerCharter Oak State CollegeCharter Oak State CollegeSigned partnerStrayer UniversityStrayer UniversitySigned partnerColumbia Southern UniversityColumbia Southern UniversitySigned partnerIndiana TechIndiana TechSigned partnerPenn StatePenn StateWorks with NCCRSSouthern New Hampshire UniversitySouthern New Hampshire UniversityWorks with NCCRSSUNYSUNYWorks with NCCRS +many more cooperating universitiesFind my college →

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FAQ

Questions students ask us

About Developing a Business Case and Feasibility Study

What is the difference between a business case and a feasibility study?
A business case argues whether a project is worth doing, covering the problem, options, benefits, costs, risks and a recommendation. A feasibility study investigates whether the work can actually be carried out, looking at technical, economic, operational, legal and schedule angles. A project can pass four feasibility angles and fail the fifth, such as a system staff will not use.
How do you calculate the payback period of a project?
Payback period equals the initial outlay divided by the annual net benefit, which is yearly benefit minus yearly running cost. A system costing $30,000 up front with $15,000 a year in benefits and $3,000 in running costs nets $12,000 a year, so payback is 2.5 years. A common mistake is forgetting to subtract running costs.
How do you calculate simple ROI and the benefit-cost ratio?
Simple ROI is net gain divided by total cost, where total cost includes the initial outlay plus all running costs over the horizon. The benefit-cost ratio is total benefits divided by total costs. With $75,000 of benefits and $45,000 of costs, ROI is about 66.7 percent and the ratio is about 1.67. A positive ROI corresponds to a ratio above one.
Why does a business case need sensitivity analysis?
Sensitivity analysis shows how much the answer moves when an assumption moves. If an option's yearly benefit falls from $15,000 to $10,000, payback can stretch from 2.5 to about 4.3 years and ROI drop from 66.7 to 11.1 percent. A careful case states how far each figure can move before the recommendation changes, since undiscounted screening measures also ignore timing and risk.

About the Project Management course

How many college credits is Project Management?
Project Management (Business 230) carries a NCCRS credit recommendation for 3 semester credits. ACE and NCCRS have over 2,100 cooperating colleges that will consider accepting credits; the final decision is with the universities.
How much does Project Management cost and what is included?
$250, paid once, with lifetime access: all 73 video lessons, a practice quiz after each, the graded work and final exam, and an official transcript when you finish. Students who want several courses choose UPI Study PRO instead.
Which universities accept UPI Study credits?
UPI Study has signed partner agreements with universities such as Thomas Edison State University, University of the People and Charter Oak State College, and works with universities such as Penn State, SNHU and SUNY. ACE and NCCRS have over 2,100 cooperating colleges that will consider accepting credits; the final decision is with the universities. Use "Find my college" on this page to check yours.
How long does Project Management take?
It is self-paced with no deadlines. The 73 lessons total about 15 hours of video; most students add reading and practice time and finish in a few weeks to a few months, on their own schedule.
How are the exams done?
Quizzes and assignments are online in the course. The final exam is taken online with proctoring; a person on the UPI Study team checks assignments, usually within two days.
How do my credits reach my college?
When the course shows 100% complete, request the official transcript from your dashboard. It is sent to the college you name, and you can send it to more than one. Check your college first with "Find my college" on this page, or ask Athena.

Ready for the full course? Earn 3 credits in Project Management.

73 video lessons, a quiz after each one, and the graded work that earns the credit. Recommended for credit by NCCRS.

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