Pricing

9 Steps to Build a Business Case for an Enterprise Pricing Solution

By Robert Irwin
April 23, 2014

As soon as I have established a trusting relationship with a prospect, almost the first question the Pricing Leader will ask for advice on is how to go about building a Business Case for a Pricing Solution.

The following is a list of activities, action items and tricks that I would follow when putting together, preparing and presenting a business case for your Pricing Project:

1. Understand your internal Budget planning cycle

• Even before project sign-off you will most likely need to have the Budget for the project included in your internal investment plan.

• Plan a long time in advance. This may mean planning a whole year in advance.

• Make sure you know exactly the key cut-off dates for each milestone in the budget process.

• Warning: do not under estimate how long this can take.

2. Understand what it takes to get a project signed-off

• Check what requirements the Board has to sign off on Capex project investment.

• Are there specific NPV, Cashflow, Payback or IRR metrics that need to be met for funding approval.

3. Make sure your Efficiency gains go a long way to covering the cost of the project

• Efficiency gains are easier to quantify. They are easier to understand, explain and defend.

• Be ready to answer the obvious question that will come from Management: “So does this mean that we can reduce headcount?” Know how you will respond to this and know what are the more value add activities that the respective resources will have time to focus on.

• Warning: Don’t mistake this for an excuse to leave out Effectiveness measures.

• You will need the Effectiveness focus to survive in the long run (see my previous post on: Beware the “Efficiency Rut” – at your peril!).

4. Use solid calculations to build the numbers

• Including well-founded assumptions is perfectly ok.

• Warning: Do not guesstimate.

• The more complex the better.

5. When you present, know your numbers (off by heart)

• You should be able to ‘whiteboard’ any calculation without having to refer to a cheat sheet.

• Know the sources of your references and basis of your assumptions.

6. Make sure your Direct Manager knows and understands the Business Case

• Find time to walk your Manager through the business case and the calculations. Make sure their support is unwavering and they will stand up for your Business Case in front of the Board.

7. Seek professional advice

• If you are not sure where to start, most credible software vendors will have a template you can use.

• If you really don’t know where to start, convince a credible software vendor to build a business case for you and then adapt it as your own.

• Warning: If you follow this path, do not fall into the trap of not knowing how the calculation build-up works.

8. Ensure any measurements that impact other departments are pre-approved

• Get buy-in to the measure, the calculation and the number.

• Document this buy-in.

9. Before you present to the Board, have a (at least 1) dry-run

• Find someone in your team to present the Business Case to and have their challenge your assumptions and calculations.

• Make sure you are watertight.

In summary, I would just encourage you to follow each of these steps and not treat them as a list of options.  Missing any one of these can set you back in terms of time or in the worst case, result in the outright rejection of your request for funding.

  • B2B Pricing , business case , Enterprise pricing , pricing project

    Robert Irwin

    Robert has worked in Pricing for over 10 years and has spent the last five years at Vendavo helping customers implement and automate their pricing processes, strategies and margin optimization. Before joining Vendavo, Robert was the Global Director of Pricing at a High Tech manufacturer where he developed, built and led the Pricing Organization. He is experienced in leading sales and operations teams in the international business environment and has a proven track record of successfully leading organizations through structural and process change. Robert has an MBA from Wake Forest University and a BA (Hons) in International Business from Sheffield City Polytechnic.