Building a Business Case for IT Projects: Nonprofit Edition
Whether budgeting for an IT project, proposing organizational change, or starting a new program, building a business case is key to getting buy-in, funding, and approval for your initiative, as well as providing a baseline for measuring the investment’s success over time.
Return on Investment (ROI) remains a standard measure of IT projects: How will your project impact revenue over time, and how much will it cost? While this is likely meaningful to financial stakeholders, and often a requirement for formal budgeting requests, it is difficult to calculate and an imperfect science. I’ve found that justifying an investment to the various stakeholders of a nonprofit’s budgeting committee or board requires more than a ROI calculation – sometimes much more, as there are many factors and assumptions that play into any major organizational decision.
Here are a few guidelines I offer organizations trying to justify an investment:
Enhanced mission delivery
Start here: How will the project enable the organization to fulfill its mission (better / faster / more)? Will a new system help feed more children? Help you advocate more effectively for your cause?
While difficult to quantify, I’ve found that the alignment of a business case with the mission and values of an organization can be more meaningful than operational efficiencies, especially to those responsible for an organization’s strategy, mission delivery outcomes, and long-term impact.
Increased fundraising or other forms of revenue
How will the system or initiative enable top-line growth? For instance, will a better system improve performance in certain programs? Provide better understanding of and targeting of existing donors? Enable new and more diverse types of fundraising?
Small increases in these variables across different programs within an organization will add up over time. Also look for areas of leverage – for instance, enhancements to acquisition will improve annual fund results in the near term, but also impact major giving identification and qualification over a number of years.
Will your project reduce costs by eliminating inefficiencies or redundant systems? Will the project simplify processes, with a direct impact on overhead and labor costs?
Don’t forget to count “shadow systems” such as the various spreadsheets, homegrown databases, and “back of the envelope” lists floating around the organization. These informal systems involve very real (and quantifiable) development and maintenance costs, as well as present a significant sustainability risk during staff turnover.
Will your initiative replace other costs? For instance, by enabling the consolidation of smaller applications into an enterprise-class solution?
Often, enhancements to systems and processes reduce focus on administration and overhead, and can allow for the reallocation of resources more strategically.
Don’t forget the intangible benefits of your proposal. While difficult to measure, improvements to constituent service, enhanced relationships, and increased transparency are meaningful to donors. Alternatively, reducing risk exposure, enhancing brand equity, or motivating and retaining staff can be “make or break” considerations for key internal stakeholders.
A thoughtful business case should be based on data (wherever possible) and documented assumptions (for any “unknowns” or “gray” areas), as well as take into consideration the time value of the investment. While a significant effort, I’ve found the exercise of documenting these items will prove fruitful in the project’s definition and planning, not just the budgeting effort.