What’s the difference between a Fortune 500 company with a chief financial officer and a smaller company that uses bookkeepers or accountants to manage its finances? Obviously, there are many.
But the difference we are focusing on here is the degree to which a CFO can offer strategic financial advice when a company is at a turning point. If you are asking, “What is the next step for my business?,” and you are too small to employ a CFO, I will share with you some of the things you need to know to make the right decision.
Building a business case is essential in sound strategic decision making, yet many small firms lack the wherewithal to do it. In any significant business situation, before you make a decision, you should go through a rigorous and analytical process to determine the impact of your action. The business case is designed to give you the opportunity to look at the variables involved so that you can make the most valid decision based on your risk/reward profile.
You want to make a business case anytime you find yourself thinking along these lines: "I have an idea. I want to consolidate my company, expand my company, move my company, acquire a new company, sell my company. What information do I need to assess my choices and make the best strategic decision?"
Other experts at TrustedPeer take on a single subject and present five Common Problems, five Key Trends and seven Best Practices that explore their subject in depth.
I'm taking a slightly different approach: I want to help you understand what you need to know about creating a business case for seven different situations that may affect your company. For each situation, I identify a Common Problem that creates it, a Key Trend that affects it, and then as the Best Practice for each, I explain the process of creating a business case to address it. Each Common Problem aligns with a Key Trend and a Best Practice to form a complete picture of how your firm might cope with a single situation.
It’s not just about plugging in a bunch of numbers and running sensitivities. The "art" of building a business case is about the assumptions behind the numbers, the analysis to determine if those assumptions make sense and if they are really the right assumptions to consider in making a business decision.