How to Write a Business Justification

  Reviewed by: Jayne Thompson, LLB, LLM
  Written by: Mackenzie Maxwell      Updated November 21, 2018
Business people discussing strategy with a financial analyst

Any time a business goes through major changes, a business justification can help the leaders set the appropriate course of action. You may need this document, which is also called a business case, if you are just starting a business, expanding into new territory or changing your company structure. Furthermore, you will often need these any time your business applies for funding from investors or lenders. To make this document as useful as possible, make sure to learn to write it correctly.

Call Out the Problem You Solve

The most successful businesses solve a problem for customers. It can be a global problem, like companies that create alternative energy or make allergen-free foods. However, solving local or relatively small problems can be just as convincing for this purpose. For example, a rural grocery store may realize that the community has no coffee shop. If such a store wanted to get a loan to install a cafe in the store, the leaders may say that they will solve this issue in the town.

Depending on what you will use your business case for and how obvious the issue is, the length of this section will vary. If you need this document for your own decision-making process and the need you solve is exceedingly obvious, you may just start with a paragraph on the need you fill. However, if you need plenty of funding or the issue is complicated, you should consider adding research and charts.

List the Alternatives

Once you have convinced the reader that there's a problem to solve, you can show that you have considered all the possible ways of solving it. In some business justifications, it's appropriate to show that you are open to the options on this list.

Consider a local restaurant with owners who want to expand into a franchise. They may list alternative locations throughout the surrounding cities. To help shareholders, lenders or themselves make the decision, the writer may also list advantages, problems, research and notes on each possible new site.

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List the Positive Possible Outcomes

In the next section of the business case, identify as many advantages to your plan as you can. These positives should include any monetary gain or savings. However, you do not have to limit yourself to the numbers. Think about a business that wants to expand their marketing strategy. The first advantage may be increased brand awareness. The writer may then also include an estimate of increased revenue from new customers.

If you can find facts or conduct research to back up your claims, these can be helpful. However, you do not usually need to spend more than a paragraph on each positive outcome. Be as specific as you can in those three or four sentences.

Weigh the Risks

No business decision is completely without risk. As uncomfortable as it can be to consider the possible downsides of expanding or starting a company, it's important to give this portion of the case as much attention as the advantages. Like in the previous section, these points can be qualitative or quantitative.

Some of the risks may be unavoidable. For example, if you decide to expand into one town, you may have an opportunity cost for not investing in the alternatives. If you find a risk that is completely avoidable while you solve the problem, the justification has done part of its job. Think through ways to mitigate or eliminate this potential downside.

Assess Scope and Impact

Finally, you should outline how far you want to take this project for the time being and how it will affect day-to-day operations. Clearly explain the scope of the project or business. Although you may have big goals in your mind, keep the scope here relative to your audience.

For example, if you're only trying to gain funding to expand to one more location, limit the scope to this for the time being. You can always add more when you're ready to make your brand a global phenomenon. For this situation, the impact on your business may include the number of employees you will bring on. This may have additional impacts on your company. For example, if the expansion brings your total full-time employee number above 50, you may have to provide health insurance.

Be as specific as possible about each point and follow them to their logical conclusions. You may find that there is a different way to structure the project that has more favorable impacts. Remember that this means the business justification is working well.

About the Author

Mackenzie Maxwell is a small business owner. She has two businesses, including a martial arts gym in Texas. Prior to building her own, Mackenzie worked with small businesses and organizations to create effective marketing - from churches to insurance companies. She enjoys helping businesses with the startup spirit grow. Mackenzie has been writing in this field for six years and shows no signs of slowing.

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