Business Case
An important part of evaluating whether to undertake a project is the business case or financial justification. Our project portfolio management system provides a flexible approach to developing a business case.
How it Works
The first step is to determine project cost via a project budget. The budgeting process starts with estimating the resource requirements on the Resource Allocation tab.
Resource costs are then calculated based on resource costs in a resource table on the Costs page. Then other project costs are budgeted on this page.
Next, a sales forecast is developed on the Payback page. An average selling price or target price and a target cost are entered to determine revenue and gross margin. The Business Expense Allocation factor provides flexibility to determine payback in terms on net profit, EBITDA or gross margin.
The business case can support projects with multiple products and can support cannibalization. It can also support post launch expenses like on-going advertising or new tooling.
The resulting payback, whether net profit, EBITDA, or gross margin is used to determine the overall financial return for the project. Multiple metrics of the financial return are available including net present value (NPV), internal rate of return (IRR), breakeven time, and a risk-adjusted development productivity index.
