You now have the goals and framework of your program, along with several initial forecasts of what you could deliver within that program. Now, you have to start making commitments to what you can deliver. This leads into what I consider the most important part of building a program: creating the business case. It is time to put all of the numbers, hard facts, soft benefits, and timing together to pitch the details of what you are actually going to do.
I go about business cases with four (easy) steps.
1. Narrow Your Opportunity Cost/Benefit Ranges
Step 1 is getting closer on what is likely for each opportunity to narrow the range of costs and benefits. I like to narrow down to the two most likely delivery scenarios for each to get a better figure on what is likely. You will still have a range of both benefit and costs, but it should be less wide. Whatever you do, do not pick the most optimistic forecast for all of your projects. This is not a time to over promise what you can deliver, but it is also not a time to sandbag your forecast for every project. The goal should be realistic but conservative (a bit lower on savings, a bit heavier on costs).
Realistically, your opportunities will typically fall into the classic 80/20 rule where 20% of your sites are probably going to account for about 80% of your benefits. Spend your time on those where possible. Make sure you also account for uncertainty by refining your Low/Medium/High delivery likelihood rankings.
2. Estimate Your Risk and Uncertainty
Most programs are for at least three years. A lot can happen in three years that cannot be accounted for today. The big risk items impacting a real estate program include:
- Business growth/retraction above historical norms
- Workforce location efforts that will impact the employee populations at opportunity sites (up or down)
- Market condition changes (higher or lower than expected real estate cost inflation)
- How experienced the team is at forecasting (are they typically optimistic or pessimistic on forecasts)
Apply some contingency factors to your opportunity estimates. I find it can be helpful to discount High likelihood benefits by 10%, Medium likelihood by 40%, and all others by around 65%. For costs, I discount 0%, 25%, and 50% respectively because costs tend to hold flatter than benefits over time. This builds an accounting into your forecast for things that can go sideways after the program kicks off. It also helps give you an idea of the risk built into your program. If your non-risk adjusted estimate is $45 to $55m but your adjusted estimate is $35 to $40m, it means that $50m is not very likely at all. However, if your $45 to $55m drops to $40 to $50m, it might still be feasible to go with the top end.
Again, this is often as much art as science. Some of the risk and uncertainty may actually exist outside of your control around the appetite from the business and finance to invest at certain levels over the program time horizon. Take everything into account, but stick to your realistic but conservative approach.
3. Determine the Numbers for Your Business Case
There is no right part of the range for you to pick for your business case. Sometimes the low end of your risk adjusted range is the best to go with. Other times, it may be the middle or top end. It depends on a lot of factors outside of the math. This is the first moment where the politics of your company should come into play for how you build up your business case.
The first question you have to consider is how much a first number is going to anchor your audience to that number. I have seen programs come to a screeching halt because the first draft said $100m of benefits but then the next one came back with only $80m. I have also seen examples where a team goes in with $50m of proposed benefits and is told to make it at least $75m. Every organization has a different culture with these. If your leaders will assume you are lowballing and force you to increase it, then you should absolutely start closer to the lower end of your range. If your leaders want to see consistency and confidence, it may be best to go for the lower or middle. However, if your leaders are the type to review things critically and cause you to naturally whittle away at your numbers, start at the higher side.
Of course, still others like to see how the sausage gets made and want you to bring the ranges and details for them to help you pick the right number. It is worth being careful here because too many leaders think they understand real estate and can accidentally steer the program down a bad path out of misplaced good intentions.
4. Make the Details fit a Single Page
Do not overcomplicate your business case at this point. You should not be bringing specific project details to the table. You should not be committing to a number of projects by year. You should barely be committing to savings by year. This phase of the program is still very fragile because nothing has been committed to by either side. Finance has likely not given clear guidance on the rules for the costs and benefits and the business has not been fully engaged to vet the direction of travel. Neither of those steps is feasible until a draft of a business case is on paper.
But, often leaders want detail before they say yes. The goal of this first program business case is not to get the final yes, or even first yes. The goal at this point is not to be told no. Your program should show realistic numbers and opportunity while not being obviously sandbagged. You are laying the groundwork for leaders to want the benefits from the program you are proposing. The more they get excited about what you can deliver for them, the more support they will give you.
This is all part of a process that will take months. Do not come out of the gate too hard and fast looking to achieve more than makes sense at any step. Definitely do not overpromise at this stage. More often than not, leaders come back looking for you to deliver MORE, not less. If you put everything into the first draft, you will not be able to add in more. But also remember, any additional benefits probably come with a higher cost to benefit ratio. The easy, low cost stuff makes up the bulk of the early forecasts. Everything after that is harder and more expensive.
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