# Building a business case: turning a technical idea into a decision

> The synthesis of the whole track: assembling CAPEX, OPEX, TCO, ROI and risks into a file that gets an industrial investment a yes.

- Source : https://industryhub.site/en/learn/economics/business-case
- Track : Industrial economics
- Level : Expert
- Reading time : 7 min
- Language : English

## The culmination of the track

We have seen CAPEX and OPEX, TCO, ROI and payback, LCOE. These notions are useless in isolation: they take on meaning in a **business case** — the file that turns a good technical idea into an **approved decision**. It is the language that lets the engineer and finance talk to each other.

## The six blocks of a business case

A solid business case fits in six parts, in this order:

1. **The problem.** A line consumes too much, equipment fails too often, a standard requires it. Quantified: so many hours of downtime, so many euros lost per year.
2. **The solution.** What you propose, concretely, and why it answers the problem.
3. **The cost.** Detailed CAPEX, annual OPEX, and the **TCO** over the service life. This is where the track pays off.
4. **The gain.** Savings, availability gained, quality, compliance. Translated into **payback** and **ROI**, and for large files into **NPV/IRR**. The formal criterion: approve if the net present value is positive and the internal rate of return exceeds the cost of capital.

$$\mathrm{NPV} = \sum_{t=1}^{n} \frac{CF_t}{(1+r)^t} - I_0 > 0 \qquad \mathrm{IRR} > \text{cost of capital}$$

5. **Risks and assumptions.** What the calculation rests on (energy price, production volume, service life) and what happens if those assumptions move.
6. **The recommendation.** Do / don't do, and the plan if it is a yes.

## The decisive reflex: quantify the status quo

The most common mistake is presenting the project's cost **without comparing it to anything**. Yet an investment is not judged in the absolute, but **against the option of doing nothing**.

> Doing nothing also has a cost: breakdowns, over-consumption, fines, loss of competitiveness.

A good business case puts the two columns side by side. Often it is the **hidden cost of inaction** that carries the decision, far more than the project's ROI.

## Being honest about assumptions

A credible file states its assumptions **plainly**:

- the energy price used, and its source;
- expected gains in a **prudent** scenario, not an optimistic one;
- realistic service life and utilisation rate.

An ROI announced at 250% that collapses to 40% because the price assumption was fanciful is unforgivable. Better a modest file that holds than a brilliant one that is disproved. A **sensitivity** analysis (what happens to NPV if the energy price drops 20%?) strengthens credibility.

## After the decision: measure

The business case does not stop at signature. You define, **before** launching, the **KPIs** that will prove the gain: availability, specific consumption, scrap rate, cycle time. You measure a **baseline** at the start, then track these KPIs. That is what lets you say, a year later: "the project kept its promises" — or learn why not.

## Full circle

You now know how to read an industrial investment like a decision-maker:

- separate what you **buy** (CAPEX) from what you **operate** (OPEX);
- compare on **total cost of ownership** (TCO), not purchase price;
- judge profitability by **payback**, **ROI**, then **NPV/IRR**;
- compare energy sources by their **LCOE**;
- and assemble it all into an honest **business case**, compared with the status quo.

This is exactly the reasoning that decides, every day, the investments made in industry.

## Key takeaway

A business case links a problem, a costed solution (CAPEX/OPEX/TCO), a gain (ROI/payback, NPV/IRR) and the risks. A good file is honest about its assumptions and puts a number on the option of doing nothing.