This sample is a business case for a hypothetical ABC Company project discussed in the Business Case Primer. The sample shows the typical contents of a business case.
Business Case for New Office-Automation Equipment
Date: April 15, 2006
This business case recommends purchasing ElectroWorkFlow, an office-automation product that will save $23,400 in labor costs over three years.
Process and data improvements resulting from ElectroWorkFlow should increase productivity throughout ABC Company. For example, the productivity of the financial modeling staff may increase by up to 40 hours a year.
ElectroWorkFlow will cost $13,500 over three years; it will replace leased office-automation equipment that costs $6,000 over three years.
The return on investment (ROI) over three years is 218%. The payback period is 1.2 years.
ABC Company has an opportunity to save 260 hours of office labor annually by automating time-consuming and error-prone manual tasks.
This opportunity aligns with ABC Company's objective to grow efficiently and to devote its resources to revenue generating functions.
The business case team examined the three leading office-automation products. Two of them were eliminated from consideration because they cost from $40,000 to $60,000 over three years. Both products deliver the same benefits as ElectroWorkFlow. Because the products scale well, they are viable at companies much larger than ABC Company.
ElectroWorkFlow will provide all the capabilities and benefits of ABC Company's current office-automation product.
ElectroWorkFlow will eliminate the $2000 annual cost of the current leased equipment.
ElectroWorkFlow will solve two problems that require on average five hours of work each week by administrative assistants:
- Automatic distribution and updating of shared files
- Elimination of errors when overwriting files
Automatic Distribution and Updating of Shared Files
Administrative assistants at ABC Company spend on average three hours a week distributing and updating shared files. ElectroWorkFlow will automate these processes.
By automatically distributing and updating shared files, ElectroWorkFlow will save an estimated $4,680 per year in labor costs.
Elimination of Errors when Overwriting Files
ABC Company's current office-automation product has no built-in safeguards to prevent users from accidentally making changes to an obsolete version of a file and then overwriting the current version with the obsolete version. On average, users accidentally overwrite current files with obsolete files twice a month. Administrative assistants spend an hour correcting each problem.
By eliminating these errors, ElectroWorkFlow will save an estimated $3,120 per year in labor costs.
Improved Financial Modeling
Financial modelers use roughly two dozen shared files. When current data in these shared files is overwritten with obsolete data, financial modelers must recheck and redo their models. No records are kept for this work, but anecdotal evidence suggests that up to 40 hours per year may be wasted redoing financial models. At $50 per hour, this lost time costs ABC Company up to $2,000 a year.
ElectroWorkFlow purchase price: $10,000.
Estimated life cycle: three years.
Installation fee: $2,000.
Annual maintenance contract: $500.
Cash Flow Statement (three years)
ABC Company's discount rate as of April 1, 2006, is 0.05.
Return on investment (ROI): 218%
Net present value (NPV): $13,530
Internal rate of return (IRR): 68%
Payback period: 1.2 years
The volume of shared files will remain the same or increase over the next three years.
Significant changes will not occur in the way most shared files are distributed, used, and updated.
To realize $7,800 in annual labor savings, ABC Company must reduce administrative assistant (AA) labor by 260 hours per year.
Currently, ABC Company employs three full-time AAs and one part-time AA who works on average 34 hours per week. In 2005 ABC Company hired a leased worker to perform 120 hours of AA tasks.
By eliminating the leased worker (120 hours saved) and reducing the part-time AA to 31 hours per week (140 hours saved), ABC Company will save 260 hours per year in AA labor.
When the business case is approved, the IT department will schedule installation of ElectroWorkFlow over a weekend.
ElectroWorkFlow installers will perform all office automation conversion and testing work with the assistance of ABC Company's regular weekend IT staff.
ElectroWorkFlow trainers will provide a half day of training to a member of the IT staff and a half-day of training to the administrative assistants.
The office manager will monitor the administrative assistants' time reports each week to make sure that ABC Company realizes the anticipated labor savings. If administrative assistants encounter problems, they will report them to the IT support staff.
The office manager will prepare a monthly report on administrative assistant labor savings and submit it to the directors of IT and finance.
ElectroWorkFlow will be installed over the weekend of June 24-25, 2006.
Note: The lease for the current office-automation equipment expires on July 1, 2006.
ElectroWorkFlow will be production ready at 6:00 am on Monday, June 26, 2006.
A member of the IT staff will be trained from 9-12 am on June 26, 2006.
Administrative assistants will be trained from 1-4 pm on June 26, 2006.
This business case recommends purchase of ElectroWorkFlow on June 23, 2006, and installation over the weekend of June 24-25, 2006.
The $2,000 annual lease for the current equipment expires on June 30, 2006. To avoid renewing the lease, ABC Company should install ElectroWorkFlow no later than June 24-25, 2006. If necessary, ABC Company can install ElectroWorkFlow over another weekend in June 2006.
This schedule will enable ABC Company to realize the project's net present value of $13,530 by July 1, 2009.
This sample business case has been taken from the Business Case Primer.
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