Helpful Tips for Preparing a Business Requirements Document
When you are trying to grow your company by using the services of third parties to improve business processes, a business requirements document can help you make the most out of your partnership, while minimizing your company’s risk to harm.
Your business requirements document should be as detailed as possible to ensure that all parties are aware of expectations, tasks, and responsibilities. A business requirements document needs input from many different stakeholders. Therefore it’s important that the person in charge of this document has strong leadership skills.
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What is a business requirements document?
This type of document details your company’s needs for the completion of a special project or for a long-term contract, such as outsourcing business processes. A business requirements document defines the overall goals and expectations your company has. This document is also known by the following names:
- Business Needs Specifications.
- Business Requirements.
- Requirements Specification.
The following are the objectives of a successful business requirements document:
- Clear communication of your business needs and the type of outcomes that will satisfy your customers and your company.
- Achieve agreement among all stakeholders.
- Provide input into later phases of the project.
What are the reasons for completing a business requirements document?
Business owners often need to use the expertise of an external service provider. These services may involve accounting, information technology (IT) or marketing.
For instance, the economy relies heavily on technology. However, unless the company’s leadership or staff have the necessary expertise in relation to technology, they will need assistance with IT.
If a business wanted to take advantage of the benefits of artificial intelligence, large businesses have access to their own IT teams to implement the necessary business processes. However, it may be more beneficial for smaller companies to hire independent consultants generally known as managed service providers (MSPs).
How to write a business requirements document
It’s best practice to separate the process for creating your business requirements document into two phases.
The first phase
Your document creation team should set all the basic requirements for your project or contractual relationship in writing.
These requirements include:
- Anticipated benefits
- Implementation details
- Implementation timeline
The second phase
The document with all of your company’s requirements can be made into a contract between the hiring company and the external provider.
The basic sections of a business requirements document
Although business requirement documents can vary according to different companies, they should contain some essential sections to achieve your objectives.
The following should be included in your business requirements document:
1. Project objectives
Objectives include all of the steps involved in achieving the ultimate goal of the business proposal on which the business requirements document is based.
Project objectives should be:
Additionally, your proposal should outline two other objective types.
- Process objectives – These describe specific tasks with defined beginnings and endings.
- Impact objectives – This type of objective relates to the anticipated impact your proposal will have if you move forward with it.
2. Background justification for project or business relationship
You must explain why this project or outsourced relationship is necessary. This is known as a “needs statement” and is an essential ingredient for your business requirements document. You will only be able to measure the success of your project if you can show how its completion meets the needs of your business.
Your needs statement should include the following:
- Statistics supporting your proposal – This can include using research and comparative statistics. Consider referencing another company’s similar venture and its beneficial outcome, to show how your company could benefit.
- Use the most current data available – With the most up-to-date information, you can be confident that the business relationship you are considering will benefit your company under current business conditions.
3. Project scope
Clarify all of the elements to be included in the project. Specify the work and the responsibility that the hiring company should handle, as well as the responsibilities the contracted company will handle.
4. Financial projections
Your business requirements document must include the way your project or proposed business relationship will affect your company’s financial bottom line. The proposed funding mechanism for the project or business relationship is a key element in your document. The funding source should be very reliable, for example a bank loan.
Make sure you include a financial statement, which will provide an overview of your company’s financial health and ability to complete the specified proposal to the required standard. This statement will provide insight into your company’s financial strengths as well as any weaknesses.
The three essential parts of a financial statement include the following:
- The balance sheet
This serves as a snapshot of your company’s finances at a specific point in time. These time frames may be the end of a quarter or tax year. Your balance sheet shows your company’s assets (how much your business owns) and liabilities (how much your company owes).
- Income statement
This is, in essence, a profit and loss statement. This statement shows your company’s revenues and expenses at any point in time.
- Cash flow statement
This statement identifies the amount of cash that has flowed into and out of your company during a defined time period.
The financial statement is an essential tool when making business decisions, so having an up-to-date and easily accessible statement is essential when preparing for a project or external business relationship.
5. Human resource needs
Your document should address whether your company would need to hire workers. It should detail the specific job categories you will need and how you will fund them. Human resource requirements must also be considered as a part of your financial projections.
It is important for your document to include assumptions about the completion of your proposal. This step has often been neglected in business requirement documents. However, including the assumptions on which you are basing your proposal can prevent future problems. For instance, define how much office space your proposal may require for carrying out the necessary business processes and whether you will need to lease extra space.
7. Benefits in relation to costs
This is a cost-benefit analysis. This section of your business requirements document should outline your anticipated costs and how your company will benefit from this expenditure within a specified time period.
The best cost-benefit analysis identifies, quantifies and adds all the favorable factors that may result from your proposal. The next step involves analysts gathering all the negative factors involved in your proposal.
When a company’s leadership reviews the results of this analysis, they will make a decision about whether to move forward with the proposed project. If a business requirements document has been commissioned, it is highly likely that the company has already conducted the cost-benefit analysis.
8. Timelines and deadlines
When you’re creating a document for a project, make sure you outline your anticipated time frames for completing its various phases and milestones. This way everyone involved will be aware of the tasks that need to be completed along with the due dates.
9. Functional requirements
This section is where you can add very specific aspects of your projects, which could include organizational charts, diagrams and flowcharts.
For instance, organizational charts can display not only the current structure of your company, but it can also specify the proposed organizational structure that will be in place as a part of the project or contractual relationship.
Another term for deadline flow charts is process mapping. This part of the business requirements document shows all the steps, decisions and project tasks that must be completed, including any necessary deadlines.
10. SWOT analysis
The acronym SWOT stands for strengths, weaknesses, opportunities and threats. All business requirements documents should include this analysis. It analyzes the hiring company and how the proposed project, or other contractual relationship, fits with the goals and objectives of that company.
Company strengths and weaknesses are categorized as internal factors while opportunities and threats are classified as external factors.
Examples of business strengths include:
- The number of repeat customers.
- Happy customers – Includes customers who are satisfied with the service they receive from your company and recommend it to others.
- Walk-in business if your company is a brick and mortar retail business.
Possible business weaknesses:
- Inadequate marketing (for instance, dependence on a website and word-of-mouth for public exposure).
- Out of date website.
- No marketing plan.
- Very low marketing budget.
- Increasing the use of social media for promotion.
- Possible increase in walk-in traffic.
- Regular business-related events.
- Increased competition.
- Competitors already have a strong public profile through advertising.
- Media advertising costs.
Once you have worked out your strengths, weaknesses, opportunities, and threats, it’s now time to evaluate some important questions about your business proposal.
Here are some questions to consider:
- Do your strengths provide new opportunities?
- Is there a way to turn your weaknesses into strengths?
- How do you focus on your opportunities?
- How do you handle threats?
This SWOT analysis provides your company with the information necessary to ensure that the project or business relationship you are considering can be successful.
This part of the document summarizes general project requirements. Usually, the document team will write the summary statement after it has completed the main body of the business requirements document.
When does a business requirements document become a contract?
While your document has included all the specifics of the project or contractual relationship you are proposing, you should now think about the final step, which is the contract with the external service provider.
Your business requirements document has described all the important elements of your proposed business relationship. You have also done your due diligence in terms of research into the company with which you expect to work.
It’s now time to outline the particulars of your business relationship. Up to this point, you may have analyzed the general costs of the proposed project, but you should now specify exactly what you will pay for the services you receive from your external contractor. This is known as the contract stage.
Before you and your chosen contractor sign off on the project, you must add standard contractual language to your business requirements document. It’s highly recommended that you use an attorney for this part of your proposal.
The contractual language should include the following:
- Assurances of providing services and paying for these services.
- Restrictive covenants – These will prevent the contractor from stealing or sharing your company’s trade secrets.
- Consequences for contract breaches, if either party fails to fulfill the obligations they agreed to.
- Verification of any necessary insurance coverage and hold harmless clauses.
- Provisions for arbitration and litigation.
After all of these contract elements have been set out in writing and both parties have thoroughly reviewed and agreed to them, the final step is signing the contract.
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