Chapter 23: Proving the Economics

Chapter 23: Proving the Economics - Financial Support for the Recommendation

Learning Objectives

By the end of this chapter, you should be able to:

translate a recommendation into financial consequences

identify the major financial assumptions

estimate costs and benefits

explain expected financial impact

test different scenarios

present financial information clearly to decision makers

Why This Matters

Senior decision makers are going to ask:

How much will this cost?

What will we get in return?

How long will it take?

What happens if our assumptions are wrong?

Your financial analysis should answer these questions before the judges have to ask them.

Emphasise one-time and ongoing costs, financial value, feasibility, pro forma statements, best- and worst-case scenarios, and tying the analysis to profit.

Discover Your Mad Skills Principle

Financial analysis should prove the decision—not decorate the presentation.

Start With the Decision

Don't build a financial model simply because the case contains numbers. Start with: What financial question do we need to answer? It might be:

Is this investment worthwhile?

Can the company afford it?

How quickly will it pay back?

How much profit could it generate?

What level of adoption is required?

Which alternative creates the greatest value?

The financial model should answer that question.

The Financial Story

A useful financial story might look like:

Investment à New Revenue / Savings à Incremental Costs à Incremental Profit à Return / Payback à Value Created

That is much more useful than simply presenting a large spreadsheet.

Assumptions

Make your assumptions visible. For example:

number of customers;

conversion rate;

average transaction value;

price;

growth rate;

variable cost;

fixed investment;

implementation timing.

The judges should be able to see where your numbers come from.

Best Case / Base Case / Worst Case

A single forecast can create false confidence.

Instead, where appropriate, show a range.

Best Case: What happens if key assumptions outperform?

Base Case: What is the most reasonable expectation?

Worst Case: What happens if important assumptions disappoint?

This demonstrates that your team understands uncertainty.

Coach's Lens

Don't hide uncertainty. Use it to demonstrate judgment. A statement such as: "Our recommendation remains financially attractive unless adoption falls below 18%" can be much more powerful than: "Our projected ROI is 24.7%." The first statement tells the judges what matters.

Visualising Financials

Your existing presentation material strongly emphasises simplifying financials: highlight the key metrics, use charts rather than raw tables where possible, remove unnecessary detail, and make the meaning of the numbers immediately visible. The slide should answer: So what? Not: Can you read this spreadsheet?

Common Mistakes

Too Much Detail

The judges don't need your entire model.

Unsupported Assumptions

Show where the assumptions come from.

False Precision

Don't pretend uncertain estimates are exact.

Ignoring Costs

Revenue alone does not create value.

Ignoring Timing

A profitable project can still create short-term cash challenges.

Mad Skills Drill

Take your recommendation. Build a one-page financial case containing:

initial investment;

ongoing costs;

expected revenue or savings;

incremental profit;

one relevant return measure;

one critical assumption;

one sensitivity.

Then explain the entire financial case in 30 seconds.

Chapter Summary

Strong financial analysis answers: Does the recommendation create enough value to justify the investment, cost, and risk? The goal is not complexity. The goal is decision usefulness.

Key Takeaways

✓ Start with the financial question.

✓ Make assumptions visible.

✓ Focus on key drivers.

✓ Show financial impact.

✓ Test critical assumptions.

✓ Present the insight, not the spreadsheet.

Looking Ahead

Financial feasibility tells us whether the recommendation makes sense. Now we need to answer the question: How do we actually execute it?