Business Case: $120K Mobile App Feature

Executive Summary

Recommendation: Proceed with mobile app feature development

Base Case Financial Performance:

• ROI: 203% over 3 years
• Payback Period: 13 months from project start
• Year 3 NPV: $377,070 (at 10% discount rate)

Key Success Drivers:

1. Revenue achievement ($200K ARR Year 1 target, $100K-$350K range significantly impacts returns)
2. Development cost control (budget $120K, range $100K-$150K)
3. Revenue growth trajectory (20% YoY base case, 10-30% range determines long-term value)

Critical Risks & Mitigation:

1. Revenue underperformance - Mitigation: Phased rollout with early customer validation, pre-sales or pilot commitments from key accounts
2. Development cost overruns - Mitigation: Fixed-price contract or MVP-first approach ($80K for core features, $40K for enhancements)
3. Lower than expected growth - Mitigation: Customer success focus in Year 1, usage analytics to drive expansion, annual pricing reviews

Decision Required: Approve $120K development budget and 3-month timeline

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Financial Analysis

Three-Scenario Model

Scenario	Dev Cost	Annual Ops	Y1 ARR	Y2 ARR	Y3 ARR	3-Year ROI	Payback	NPV (10%)
Best Case	$100K	$35K	$350K	$455K	$592K	581%	7 months	$952K
Base Case	$120K	$40K	$200K	$240K	$288K	203%	13 months	$377K
Worst Case	$150K	$50K	$100K	$110K	$121K	-20%	39 months	-$2K

Cost Breakdown

One-Time Costs (Base Case: $120K):

• Development range: $100K-$150K
• 3-month build timeline
• Includes engineering, design, testing, deployment

Ongoing Annual Costs (Base Case: $40K/year):

• Operational cost range: $35K-$50K/year
• Infrastructure, hosting, maintenance
• Customer support and updates
• Starts Month 4 after launch

Revenue Projections

Base Case:

• Year 1 ARR: $200,000
• Year 2 ARR: $240,000 (20% growth)
• Year 3 ARR: $288,000 (20% growth)
• Total 3-Year Revenue: $728,000

Best Case:

• Year 1 ARR: $350,000
• Year 2 ARR: $455,000 (30% growth)
• Year 3 ARR: $592,000 (30% growth)
• Total 3-Year Revenue: $1,396,500

Worst Case:

• Year 1 ARR: $100,000
• Year 2 ARR: $110,000 (10% growth)
• Year 3 ARR: $121,000 (10% growth)
• Total 3-Year Revenue: $331,000

Financial Metrics Summary

Base Case (most likely):

• 3-Year ROI: 203%
• Payback Period: 13 months from project start (10 months post-launch)
• NPV (10% discount): $377,070
• Total 3-Year Net Profit: $488,000

Best Case:

• 3-Year ROI: 581%
• Payback Period: 7 months from project start
• NPV (10% discount): $951,578
• Total 3-Year Net Profit: $1,191,500

Worst Case:

• 3-Year ROI: -20%
• Payback Period: Never (doesn’t break even by Year 3)
• NPV (10% discount): -$1,615 (essentially break-even)
• Total 3-Year Net Profit: $31,000

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Sensitivity Analysis

Variable	Base Value	-50% Impact	-20% Impact	+20% Impact	+50% Impact	Sensitivity
ARR (revenue)	$200K	52% ROI	143% ROI	264% ROI	355% ROI	VERY HIGH
Development cost	$120K	304% ROI	237% ROI	176% ROI	143% ROI	VERY HIGH
Operating cost	$40K/yr	304% ROI	237% ROI	176% ROI	143% ROI	VERY HIGH
Revenue growth rate	20%	83% ROI	150% ROI	263% ROI	366% ROI	VERY HIGH

Key Insights:

1. Revenue achievement is the critical variable - Missing base case revenue by 50% ($100K vs $200K) drops ROI from 203% to 52%, shifting to worst-case scenario. This requires high-confidence validation before proceeding.
2. All cost and revenue variables show high sensitivity - This indicates the business case depends on execution across multiple dimensions. No single variable can be ignored.
3. Revenue growth rate matters significantly for long-term value - Difference between 10% and 30% annual growth swings 3-year ROI by 283 percentage points. Focus on customer success and expansion is critical.

Validation Priorities:

1. Must validate: Customer demand and willingness to pay through pilot program or pre-sales commitments
2. Must validate: Development cost through technical architecture review and vendor quotes
3. Should validate: Growth assumptions through customer interviews on expansion potential

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Risk Assessment

Risk 1: Revenue Underperformance (Probability: Medium, Impact: High)

Description: Year 1 ARR comes in at $100K-$150K instead of projected $200K, resulting in worst-case or below-worst-case scenario.

Root Causes:

• Market demand lower than expected
• Competitive offerings emerge during development
• Pricing resistance from target customers
• Sales execution challenges
• Product-market fit not achieved
• Customer adoption slower than projected

Mitigation Strategies:

• Pre-sales validation: Secure $50K-$100K in pilot commitments or pre-sales before starting development (Month 0)
• Phased launch: Release MVP to 5-10 early customers for feedback before full launch (Month 2)
• Customer development: Conduct 20 customer interviews on willingness to pay and feature priorities (Month 0-1)
• Competitive analysis: Monitor competitive landscape during build, adjust positioning as needed
• Pricing flexibility: Build tiered pricing model to capture different customer segments

Early Warning Indicators:

• Customer interviews showing weak demand signals (<50% expressing strong interest)
• Pilot program conversion rate <40% (fewer than 4 of 10 pilots converting to paid)
• Sales pipeline not building ($0-$25K in qualified pipeline by Month 2)
• High churn rate in first 90 days (>20% monthly churn)

Contingency Plan:

• If pilot shows <$75K likely Year 1 ARR, pause development and re-evaluate business case
• If Year 1 tracking to <$125K, reduce operational costs and extend payback expectations
• If churn is high, allocate resources to customer success before expanding sales

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Risk 2: Development Cost Overruns (Probability: Medium, Impact: Medium-High)

Description: Development costs exceed $120K budget, reaching $140K-$180K, reducing ROI and extending payback.

Root Causes:

• Underestimated technical complexity
• Scope creep during development
• Integration challenges with existing systems
• Platform compatibility issues (iOS vs Android)
• Quality issues requiring rework
• Resource availability constraints

Mitigation Strategies:

• Fixed-price contract: If using external vendor, negotiate fixed-price agreement with clear scope (Month 0)
• MVP-first approach: Build $80K core feature set first, validate with customers, then invest $40K in enhancements (Month 0-2)
• Technical spike: Conduct 2-week architecture review before full commitment to validate feasibility and cost ($10K, Month 0)
• Scope control: Define must-have vs nice-to-have features, defer enhancements to post-launch
• Weekly budget reviews: Track spend weekly against milestones, course-correct immediately on variances

Early Warning Indicators:

• Technical spike revealing complexity beyond expectations
• Spending >35% of budget by end of Month 1 (should be ~25%)
• Feature delivery slipping by >2 weeks
• Team requesting scope additions or timeline extensions

Contingency Plan:

• If projected to exceed $150K, cut scope to MVP and launch with reduced feature set
• If timeline slips beyond 4 months, launch with core features and phase remaining work
• Set absolute cap at $150K; anything beyond requires feature cuts

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Break-Even Analysis

Minimum Year 1 ARR for Break-Even: $65,934

This represents 33% of base case projection, providing a 67% cushion or margin of error.

What This Means:

• Even if revenue comes in at only 1/3 of base case projection, the initiative breaks even over 3 years
• Base case projection can miss by $134,066 (67%) and still achieve 0% ROI
• Worst case scenario ($100K Year 1 ARR) is still 52% above break-even threshold

Confidence Level: The large cushion (67%) provides high confidence that the initiative will be profitable even if projections are significantly optimistic.

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Assumptions Documentation

Revenue Assumptions (Confidence: Medium)

1. Year 1 ARR achievable: $200K ARR in Year 1 (range: $100K-$350K)

   • Basis: Market analysis, customer interviews, competitive pricing research
   • Risk: Market demand may be lower than estimated; competitive dynamics may limit pricing power
   • Validation: Customer pre-sales commitments, pilot program results, sales pipeline building

2. Growth rate sustainable: 20% annual revenue growth in base case (range: 10-30%)

   • Basis: Industry benchmarks for mobile app features, customer expansion patterns
   • Risk: Market may saturate faster; competitive pressure may limit expansion
   • Validation: Customer feedback on expansion plans, usage analytics showing engagement

Cost Assumptions (Confidence: Medium-High)

3. Development cost accuracy: $120K budget is sufficient (range: $100K-$150K)

   • Basis: Technical architecture review, vendor quotes, internal engineering estimates
   • Risk: Underestimated technical complexity, scope creep, integration challenges
   • Validation: Technical spike ($10K, 2 weeks) to validate architecture and cost estimates

4. Operational costs controlled: $40K/year ongoing costs (range: $35K-$50K)

   • Basis: Infrastructure cost modeling, support volume estimates, maintenance projections
   • Risk: Scaling costs higher than expected, support volume exceeding projections
   • Validation: Quarterly cost reviews, vendor pricing commitments

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Recommendation & Next Steps

Recommendation: Proceed with mobile app feature development with structured risk mitigation

Rationale:

• Strong base case ROI (203%) with reasonable payback (13 months)
• Even worst case scenario achieves break-even (~10% ROI)
• Large margin of safety: can miss revenue by 67% and still break even
• Upside potential is significant (best case 581% ROI)

Pre-Conditions for Proceeding:

1. Complete customer validation (20 interviews + pilot commitments for $50K+ Year 1 ARR)
2. Technical architecture spike validates $120K budget and 3-month timeline
3. Secure development resources (internal team or vendor commitment)
4. Define MVP scope and phased rollout plan

Success Metrics:

• Year 1 ARR: $200K (minimum $125K to remain on track)
• Payback period: <15 months
• Customer adoption rate: >40% of target segment
• Monthly churn rate: <10%
• Operational costs: <$45K/year

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Document prepared: 2025-12-03
Analysis period: 3 years
Discount rate: 10%
Confidence level: Medium (based on need for customer validation)
Next review: After customer validation phase (Month 1)