Like any group, Experience Management (XM) teams must compete for organizational attention and resources. To secure these investments over other competing priorities, XM teams need to forecast and communicate the expected business value of their XM efforts – an XM Skill called “Value Planning,” which is part of XM Institute’s Realize Competency. This value narrative often takes the form of a business case prepared by the XM team and submitted to budget holders to request funding for a specific project or initiative. Unfortunately, many XM teams fall into the trap of treating the development of this business case as a periodic, standalone activity, with minimal preparation or consideration for what happens after they receive the requested investment. This not only results in weaker proposals that are less likely to be approved, it also fails to set the eventual project up for success. Instead, XM teams need to take a more mature, holistic approach. 

To develop a persuasive business case – one with convincing and defensible value forecasts – you must ground your proposal in data and align it to your organization’s broader business objectives. This process starts with orienting your audience (e.g., budget holders, functional leaders, relevant stakeholders, etc.) around the current state of the experience you are looking to change, along with a clear vision of how you plan to improve it and who will need to be involved. Compiling this information will not only allow you to tell a compelling story about why your proposed solution is better than the status quo, it will help you ensure that you are involving the right stakeholders early on in the process.

Some activities you may want to carry out in this step include:

• Collect evidence for why the status quo needs to change. Begin the process of building a business case by demonstrating why the current state should change. Define the pain point or opportunity that you are requesting organizational resources to address. We recommend documenting this in the form of a targeted insight that can be quickly summarized in a simple statement – something like, “Through [source of the insight], we learned that [description of insight].” – which you can then support as necessary with compelling data, quotes, and visualizations. This targeted insight could originate from any number of different sources, including customer or employee feedback, operational or behavioral data, key driver or competitor analyses, or market research findings. For example, the insight might be something you learned from your employee listening activities about how ineffective managers are contributing to attrition among high-performing talent, details of how an innovative new offering from a competitor is taking market share, or data showing that customers who own a certain product call into the contact center with disproportionate frequency. Regardless of the exact form this targeted insight takes, make sure it is supported by evidence and framed in a way that inspires change. The goal of this activity is to document the current state in a way that will motivate your audience to invest in and prioritize making improvements. 
• Define your desired future state. Once you’ve captured the current state, you should then describe how the experience will be different after your organization has properly addressed the insight. What is the objective you are working toward? For instance, if your targeted insight highlighted the issue of high-performing employees leaving due to ineffective managers, your desired future state might document how you would like managers to engage with high-performing employees going forward. If your insight was related to an innovative new offering from a competitor, you might briefly describe a new product or feature your company could create to avoid disruption. The goal here is to articulate a clear objective for the XM effort you are requesting resources to fund. Even if the ultimate outcome doesn’t exactly match this vision, taking the time to explain how you expect the experience to change as a result of the investment will help you define and scope the project, identify internal and external partners, and align everyone around a common goal.  
• Specify how you plan to achieve that future state. After characterizing the current and future states, you need to outline your improvement plan. What are the specific activities you plan to undertake to address the insight and achieve your vision? These proposed activities are the foundation of your business case; these are the XM projects or initiatives you are requesting resources to fund. The more targeted and well-defined the proposed activity, the easier it will be to forecast and track the business value it generates. More contained projects – such as fixing a broken touchpoint or creating internal enablement resources – will likely be more straightforward to build a business case around. Initiatives that are broader in scope or focused on building the capabilities of your XM program or team – like increasing headcount or acquiring new software – might be trickier. For these more nebulous activities, consider the “types” of actions these new capabilities will allow you to drive (e.g., increasing headcount might allow you to close the loop on more issues across more lines of business). Regardless of their exact form or scope, make sure you are choosing activities that align with your organization’s broader experience and business objectives. Define specific timelines for when your organization is likely to realize the benefits and costs of each proposed activity as those will help shape your decisions and assumptions in the following steps. The goal here is to identify at least one proposed project or initiative that will help you reach your desired future state and which you will be able to construct a compelling business case around.  
• Understand the individual(s) approving your budget request. Now that you know what you will need resources for, identify the budget holders who will be responsible for reviewing your funding request. Often these requests are evaluated and approved by decision-makers one or two levels above your current role, although this will likely depend on the size of your request relative to the size of your organization. The goal of this activity is to identify who the individuals are that you will need to persuade, which specific outcomes they care about, and how they typically make decisions. Taking the time to understand the individual motivations of your budget holders will help you work backward to frame your business case in a way that resonates with this essential audience, helping you secure funding over other competing requests. Here we especially recommend identifying the types of investment analyses these individuals prefer when evaluating budget requests like this (e.g., Net Present Value (NPV), Internal Rate of Return (IRR), and Return on Investment (ROI)).
• Identify key stakeholders for taking action. Ultimately, to implement your planned activities, you will need the cooperation of many different stakeholders. We recommend identifying and involving these key partners early on in the process as they will likely have information – like relevant data points, a departmental roadmap, key performance indicators (KPIs), preferred communication channels, etc. – that will be important later on, and building a relationship with them at the outset can remove many potential friction points down the road. These stakeholders may be functional leaders who will need to support the planned activities with their time or resources, frontline employees who will need to change their behaviors, or technical partners who will help build the processes or infrastructure to support your efforts. They might also include individuals with the skills to help you develop and refine your business case, with specialties in areas like data and analysis, change management, or financial planning. If you are requesting budget for a larger, programmatic investment – such as growing your team’s headcount or establishing a CX or EX Center of Excellence – you should also identify the leaders you will need to partner with to ensure your program is successful, like an Executive Sponsor or members of a Steering Committee. The goal of this activity is to open lines of communication with the people you will need to help build a compelling business case and, eventually, implement the proposed activities. One useful tool to help you categorize and communicate with these stakeholders is a Stakeholder Mapping Exercise.

Budget holders will only approve funding requests that are likely to generate a positive Return on Investment (ROI) for the organization, which is calculated as the Return (benefits minus costs) divided by Investment (costs). Therefore, to build a persuasive business case, you need to provide evidence that your planned projects will create meaningful financial benefits for the organization – ones that will outweigh the required investment costs. 

Now that you have determined which actions you plan to take and why, you need to quantify the benefits you expect to see from these activities, which starts with estimating how they will affect specific business KPIs. This is the most critical – yet often most challenging – step in the business case development process because your budget holders will deprioritize investments that don’t have well-supported improvement forecasts. The amount of work you put into this step should be commensurate with the size and risk of the investment you are requesting. At the end of this step, you should have a succinct list of KPIs you expect your planned actions to influence, the magnitude of the impact they will have on each KPI, and evidence to support this claim. 

Some activities you may want to carry out in this step include: 

• Select a few business KPIs to build your proposal around. Because you are ultimately asking your budget holders for cash, you need to convert your planned activities into cash flow improvements. This process starts with identifying a handful – no more than five – business KPIs that you expect your proposed project or initiative to influence. These KPIs should be metrics that represent value to your organization in the form of cash flow, such as by increasing revenue (e.g., churn/renewal rate, purchase frequency, sales quota attainment) or decreasing costs (e.g., workforce productivity, self-service adoption rate, product return rate). While your planned activities will likely affect many business KPIs, your analysis and narrative will be stronger if you focus only on the few that matter most. To select and prioritize these metrics, partner with the collaborators you identified in the previous step. If you are struggling to come up with a list of KPIs, consider some universally important business outcomes, like customer acquisition, customer spend, customer tenure, and cost-to-serve for CX or talent acquisition, workforce productivity, employee tenure, and cost-to-support employees for EX. The goal here is to identify a few KPIs that clearly align with your organization’s financial and strategic priorities, that connect to the business outcomes your budget holders and key stakeholders care about (as identified in Step 1), and that you can quantify with adequate evidence to support your business case.
• Set a baseline volume for each KPI. Once you have prioritized the KPIs for your business case, determine how those KPIs are performing today. This may require you to work with others in the organization who have access to customer and employee behavioral data. For this exercise, it is often adequate to have metrics that summarize the behaviors of groups of customers or employees (e.g. customer churn rate, product return rate, employee attrition rate), rather than individual-level data. For example, a B2B technology firm may have prioritized client churn rate as a business KPI for a planned CX initiative. After reviewing the data with other teams, it may find that its client churn rate is currently 10%. While you may still need some segmentation to account for how different customer or employee groups might respond to your planned actions, this is far less intensive than collecting and analyzing all customer- or employee-level data. The goal here is to create a clear baseline from which you expect to help the organization improve. 
• Determine the drivers of each KPI. Your business KPIs are likely influenced by many factors (or “drivers”), not all of which are within your ability to control. Here you are breaking down each selected KPI into its contributing factors and assessing which of those factors your planned actions can impact. You can uncover these drivers in a number of different ways, including performing key driver analysis on existing data, interviewing stakeholders with deep knowledge of the KPI, conducting qualitative research (e.g., ethnographic research, advisory councils, focus groups), or reviewing relevant external industry research. Depending on the size of your budget request – larger requests justify greater due diligence – you may even consider running an experiment here to inform and validate your estimates. Once you’ve identified these drivers, you will find that while you can influence some of them through your planned activities, others are structural and unlikely to change. For example, a B2B technology firm may perform linkage analysis on its existing experience and operational data and find that only a third of its 10% client churn rate is driven by addressable factors – like how easy it is to do business with the firm and the frequency of technical issues – while two-thirds is driven by non-addressable factors, like clients that went out of business or are located in a specific region. The goal here is to create clear guardrails for which portions of each business KPI your planned activities can reasonably influence versus which portions are structural. After you do this, you may want to revisit the projects or initiatives you planned in Step 1 to ensure they address the key drivers of the business outcomes you are focused on.
• Estimate the improvement to each KPI. Once you have established the drivers of your business KPI, you then need to make an informed assumption about how much you expect your planned activities to improve that metric. Work with the key stakeholders you identified in Step 1 to determine what a reasonable improvement might be given your proposed changes and the quantitative and qualitative data available to you. For instance, the CX team at the B2B technology firm might partner with account management leadership to identify how much of the addressable churn rate they could realistically tackle over the next three years. Based on these conversations and planned activities, the team might determine that together they could reduce the 10% client churn rate by 15%, leading to an expected improvement of 1.5% (10% x 15%). Developing these forecasts in partnership with key collaborators will not only set your project or initiative up for success over the long run, it will also make your investment request more convincing to budget holders. The goal of this activity is to estimate and establish support for the KPI improvements in your business case so that you can say something like, “[planned action] will improve [business KPI] by [improvement amount] by addressing [addressable factors of the KPI that your planned action will impact].” Keep these improvements handy as we will use them in Step 4.

Once you have estimated how much your planned project or initiative will improve selected business KPIs, you then need to estimate the costs associated with implementing it. This requires itemizing the human and financial capital required to successfully execute these proposed activities as well as highlighting relevant risks and dependencies. 

Providing a comprehensive account of these costs will help build the credibility of your business case and allow budget holders to confidently compare the project’s estimated return with its estimated investment. It will also decrease the likelihood of unexpected expenses down the line and demonstrate that you are prepared if you need to pivot in response to changing circumstances –  all of which will make it more likely that budget holders will trust and approve your funding request. Keep in mind that this may be an iterative process, with budget holders asking for more details or a refined proposal to help them come to a decision.  

Some activities you may want to carry out in this step include: 

• Forecast labor requirements. To carry out your planned actions, you will likely need to dedicate time to a range of different tasks, such as project management, program design and maintenance, governance, bug fixes, etc. These actions may also require employees and managers throughout the organization to adopt new behaviors like closing the loop with dissatisfied customers, completing a particular training course, or incorporating experience insights into their everyday decisions. Here you are breaking down the expected labor costs associated with successfully implementing your proposed project or initiative. For example, if you want 500 managers to take a new training course to better support their high-performing employees, you might estimate that this course will take three hours per manager, plus an additional one hour per month to put those learnings into practice. To determine the labor costs of this project, you would start by calculating the cost per manager per hour. To do this, divide the average manager compensation by the number of hours worked per year (e.g., $200k / 2,000 hours = $100 cost per hour). Multiply that figure by the number of hours required from each manager (3 hours one time + (1 hour per month x 12 months) = 15 hours per manager). So for 500 managers, the labor cost of this project for one year would equal $750,000 (500 managers x $100 hourly cost-per-manager x 15 hours per manager per year). In addition to costs associated with your existing labor force, if implementing your planned activities necessitates additional headcount, you will also need to account for the costs of recruiting, hiring, and onboarding those employees in this step. The goal here is to accurately set your budget holders’ expectations around what your planned activities will require from a labor standpoint.
• Identify external service requirements. Accomplishing your planned action may also require you to invest in external services, like new technology implementations or advisory consultants. For example, you may need to purchase new software to capture and analyze feedback from your customers or employees, new systems to track and manage closed-loop processes, or a new training platform to house learning and development courses. Here you would work with the relevant external vendor to develop a comprehensive proposal for the costs needed to develop, deploy, and maintain these investments. Your budget request may also include professional services, such as program design, change management, training, or ongoing support. Scope these services so that you can include their costs in your request. The goal here is to provide your organization with clear expectations of how much budget is required for external services as part of your project or initiative.
• Estimate incremental business investment required. Depending on the actions you plan on implementing, your existing XM program budget may not be enough to cover the ongoing costs associated with supporting and maintaining that action over the long term. For example, if your planned activity includes listening to your customers in new ways to generate more insights, you may need access to additional budget to put those insights into action. In this step, you are determining whether you will need to request a larger program budget to ensure you can sustain the proposed project or initiative over the long run. This can be tricky to estimate as you may not yet know what exactly these actions are likely to be. We recommend considering the types of actions you would ideally like to drive following the successful implementation of the project or initiative and whether existing budgets would be enough to cover them. The goal here is to set expectations with budget holders for how many additional resources you are likely to need over the long run to achieve the KPI improvement you forecasted in Step 2. 
• Perform a risk analysis. You should also take the time to document all relevant risks to the project, including their consequences and likelihood. Risks may come from within the project, within your organization, your market, or the broader economy. This can be a significant undertaking so work with others in the organization, especially those in finance and IT, to provide informed estimates on the likelihood and consequences of these risks. You might look at the success rates of similar initiatives in the past along with reasons for delays, budget overruns, and underperformance. You might find that of the 11 comparable initiatives proposed over the last three years, four failed to achieve their goals on time and one was considered a complete failure. You can go further by breaking down the reasons for underperformance so that you can plan for them and show your budget holders that you understand the key risks involved with your initiative. Few groups do this well, so this type of analysis is a great opportunity to differentiate your budget request from others. The goal here is to document and quantify the risks associated with your investment to allow your organization to make a well-informed decision that considers factors that may result in your project falling short of the forecasted benefits.
• Determine how costs will change over time. As you quantify the costs associated with your proposed project or initiative, remember that they are likely to occur at different times. Some will be incurred upfront, some will be incurred over time, and some will change from year to year. For example, if you are purchasing a new software contract, this may include upfront implementation costs along with an ongoing license cost that may increase each year. Your labor costs might also change in line with inflation and the growth of the company. The goal here is to document which expenses you expect you will need to fund at which points over the time horizon you identified in Step 1.

Once you have estimated the business KPI improvements (Step 2) and costs (Step 3) of your proposed project or initiative, you need to develop a model that projects how those forecasts will translate into future cash flow and then use that projection to calculate the investment summary metrics your budget holders care most about. These types of metrics – like Net Present Value (NPV), Internal Rate of Return (IRR), and Return on Investment (ROI) – will allow budget holders to quickly assess your business case and compare your proposed projects with others competing for budget. 

If you have completed the recommended activities in Steps 1 to 3, generating this projection should be relatively straightforward. However, it does require you to make well-informed assumptions and use certain financial calculations, which may fall outside the realm of your professional expertise. Where needed, we encourage you to seek additional support from your finance team to ensure you execute this step successfully. 

Some activities you may want to carry out in this step include: 

• Document formulas for each prioritized business KPI. After establishing your estimated KPI improvements at the end of Step 2, you need to help your budget holders understand what those improvements mean for the organization in financial terms. Converting these improvements into monetary outcomes is mostly an algebra exercise, which starts with identifying the formula your organization uses to calculate the impact of each of your selected business KPIs on cash flow. These formulas often vary between companies, so we recommend working with teams like Financial Planning and Analysis (FP&A) to identify what you use. For example, if your planned action focuses on decreasing the rate of product returns, you may consult with your counterparts in finance and uncover that they use the formula Number of Products Delivered x Average Cost per Return x Decrease in Product Returns to calculate the cash flow impact from the reduction in product returns. As you document these formulas, keep in mind that $1 of revenue is not the same as $1 of cash flow to the organization, which means that if you are examining a business KPI that influences revenue – such as sales conversion rate, purchase frequency, sales rep cross-sell performance, marketing effectiveness, etc. – you need to include “profit margin” in your formula. For example, the formula to calculate the cash flow impact from a reduction in customer churn might be Annual Volume of Customer Churn x Average Annual Revenue per Customer x Profit Margin x Decrease in Customer Churn. The goal here is to have formulas that convert each of the KPI improvements in your business case into cash flow to use in your cash flow projection.  
• Populate the formulas and calculate the annual benefits. Now that you have your formulas, the next step is to fill them out. Some of these metrics will come from the KPI improvements that you forecasted in Step 2 (e.g., in the above examples, Decrease in Product Returns and Decrease in Customer Churn) and some will come from your organization’s data (e.g., Number of Products Delivered, Average Cost per Return, Annual Revenue, and Profit Margin). To populate the metrics with data from your organization, you may need to partner with other teams, like FP&A. While many of these metrics will be well-known or easily found, you may also have to review company reports, trade publications, and industry benchmarks. If there are metrics within your formula where the data does not yet exist, provide ranges that accurately reflect your uncertainty. For example, if you are trying to populate the product return rate formula and find that your organization hasn’t quantified Average Cost per Return before, you might interview a few relevant stakeholders and conclude that your company’s average cost per return is between $15 and $20. If ranges become so wide that they impact your conclusions, take steps – like sampling a certain population – to reduce your uncertainty. For example, after completing this activity, you might have a fully completed formula of 10M products delivered per year x $15 cost per product return x 1.5% decrease in product returns = $2.25M annual run rate benefit from your planned project. Do this for each KPI in your business case, and then add together these annual figures. The goal here is to estimate the annual benefit from your actions.
• Forecast cash flow impact per year over your time horizon. Once you have calculated the annual expected benefits from your proposed project or initiative, calculate its cash flow impact across the time horizon you identified in Step 1. This requires you to account for both the costs you identified in Step 3 as well as any adjustments you may need to make to the annual benefits. The annual benefits from your planned activity will probably not remain constant year-to-year. Update those projections to reflect things like the time it will take to deploy your initiative, build momentum, create enablement tools and resources, etc. For example, you may decrease the Year 1 benefit by 25% if you expect it to take three months to implement your action. You may adjust your Year 1 and 2 benefits if you expect it to take time for your organization to fully adopt and adhere to any new behaviors prescribed in your action. You may also adjust your expected annual benefits depending on how mature your organization is across the XM Competencies and its upcoming growth plans (e.g., headcount growth, revenue growth, margin improvements). After you have adjusted your forecasted annual benefits for each year of your time horizon, you then subtract your cost estimates from Step 3 from those numbers to get your cash flow impact for the year. Using the previous example, you might have something like $2.25M Annual Benefit x (1 – 50% Adjustment for Year 1) – $250k Year 1 Cost = $875k Year 1 Cash Flow Impact. The goal here is to calculate the cash flow impact per year after accounting for all costs and adjustments, being able to say something like, “We estimate the cash flow impact to be $900k, $1.4M, and $2.0M in years 1, 2, and 3, respectively.”
• Calculate investment summary metrics. Once you have your cash flow projections, identify which metric(s) your budget holders will most likely want to see to evaluate your budget request (if you didn’t already do this in Step 1). The exact metrics you calculate here will depend on what types of investment analysis these individuals prefer to use when evaluating requests like this. Often they include investment summary metrics like NPV, IRR, ROI, and Payback Period. Calculate the ones that will resonate most with your individual budget holders. These metrics will provide decision-makers with a clear, high-level takeaway of your proposal in terms that are easy for them to compare with other budget requests. Just remember, to be convincing, it is critical that all the assumptions underlying these metrics are well-supported, especially the KPI Improvements from Step 2. The goal here is to help your budget holders compare your investment against others by saying something like, “We estimate this project to have a Net Present Value of $2.8M and an Internal Rate of Return of 336%.”

Organizations operate with finite resources, and budget holders need to be good stewards of these assets. Consequently, they will base their investment decisions not on who has the largest, flashiest forecasts, but on who they trust to deliver the best results. At this point, you have completed the due diligence required to put together a clear and defensible business case. It’s now time to prepare and present your request. To ensure you inspire confidence among your budget holders, we recommend including a deployment roadmap for your planned actions alongside the quantitative elements of your proposal. Keep in mind that this may be an iterative process, so be ready to take budget holder feedback and revisit previous steps. 

Some activities you may want to carry out in this step include: 

• Build an accountability plan with milestones and timelines. Now that you have all the elements in place, create a delivery plan that you can socialize with budget holders and relevant stakeholders. Decision-makers will feel more confident approving your request if you present a clear plan for driving accountability as part of your business case. Even if your proposed actions aren’t ultimately successful, taking the time to develop a delivery blueprint like this will help you – and the rest of the organization – better understand what went wrong so you can learn from the process. Within your accountability plan, define milestones that indicate meaningful progress on your project or initiative – like completing an initial pilot release or capturing a certain number of success stories from users – as well as realistic timelines for when you expect to accomplish these milestones. To monitor your progress, actively track the KPIs you built your business case around and institute a regular meeting cadence with key stakeholders to review and discuss these KPIs. The goal of this activity is to develop a solid delivery plan that will build confidence in your both budget holders and key collaborators and ensure you deliver on the forecasted benefits of your proposed project or initiative. 
• Prepare your allies to defend the KPI improvements with you. Where possible, bring your key stakeholders into your business case presentation, especially if they committed to helping you deliver KPI improvements in Step 2. You may want some of them present in the meeting while you may want to reference or quote others. For example, if you partnered with the Head of Customer Success to design an initiative to reduce customer churn, it would be powerful for budget holders to hear from them directly. Including key stakeholders will reinforce to decision-makers that you have done your due diligence and are well-equipped to actually deliver on the benefits you’ve forecasted in your business case. The goal here is to strengthen your budget request by highlighting the perspective of your colleagues and demonstrating that you are prepared to implement your proposed activities. 
• Supplement your business case with qualitative and experiential data. While your business case should be grounded in the projected financial value to your business in the form of cash flow, many budget holders will also want to deliver better experiences to your customers and employees. Your request will ultimately be more compelling if you augment the numbers with anecdotes, quotes, and experience data from customers and employees showing how your proposed project or initiative will provide value to them as well as to the business. For example, increasing digital self-service adoption won’t just reduce costs for the business, it will also make it easier for customers to accomplish their goals while allowing customer support agents to engage in more meaningful conversations. The goal here is to provide the icing on the cake for your budget holders, demonstrating how your proposed actions will produce value for customers and employees along with the business.
• Present your business case to budget holders. Finally, it is time to present your business case to your budget holders. We recommend keeping your presentation short to allow time for discussion. Anchor your narrative around why this is a smart business investment and what you need from them to bring it to life. Keep supporting resources on hand, perhaps in an appendix, to call upon as needed. Your budget holders will likely have questions and pressure test your assumptions. This participation is valuable feedback. Be confident in the due diligence you have conducted while staying open to alternative viewpoints. If they have more accurate numbers for you to use, be quick to adjust yours. If they aren’t convinced by your evidence for your KPI improvements, ask what they would like to see to increase their confidence in the projection. The goal here is to secure funding for your proposed project or initiative. However, this initial meeting may also result in actionable feedback about what adjustments you should make to strengthen your business case, with the ultimate goal of moving towards alignment and consensus on the investment.