CAPEX Approval Series
CAPEX Business Case Template and Structure
The nine sections a capital request needs, the numbers each one must carry, and the mistakes that send a business case back for rework.
A capital business case is a decision document, not a description of a machine. The structure below follows the order most industrial committees read in, and pairs with the CAPEX approval process and the approval workflow that decides who signs it.
Section-by-section template
- 1
Executive summary
One page, written last. State the constraint, the recommended option, the total capital required, the payback and return, the financing route and the decision being requested.
Must contain: Ask, cost, return, risk, decision date.
- 2
Problem and baseline
Describe the operational constraint in measured terms — throughput ceiling, scrap rate, downtime hours, labour dependency, energy intensity or a compliance deadline. Use records, not estimates.
Must contain: Baseline metrics with source and measurement period.
- 3
Options appraisal
Compare do-nothing, a low-capital debottleneck, and the proposed investment. Price the do-nothing option; it is the benchmark the committee approves against.
Must contain: Options table: cost, risk, time-to-benefit, residual constraint.
- 4
Technical scope
Define the performance specification, the scope boundary, applicable standards and acceptance criteria. This section becomes the RFQ, so vague wording here produces uncomparable quotations later.
Must contain: Specification, scope-of-supply matrix, acceptance tests.
- 5
Cost build-up and total cost of ownership
Equipment price is only part of the number. Add freight and duties, installation, civil and utility works, integration, spares and tooling, training, commissioning support, maintenance and end-of-life cost.
Must contain: CAPEX build-up plus multi-year operating cost.
- 6
Financial analysis
Simple payback as a first screen, then NPV and IRR against the company hurdle rate. Add a sensitivity on the two variables the case is most exposed to, usually volume and input cost.
Must contain: Base, downside and upside cases with stated assumptions.
- 7
Financing plan
State whether the asset is funded from cash, leasing, bank debt, export credit or development finance, and confirm the eligibility conditions attached to that route before the supplier shortlist is fixed.
Must contain: Funding structure, indicative terms, conditions precedent.
- 8
Risk register
Delivery, currency, single-source exposure, permitting, commissioning ramp-up and internal capacity. Each risk carries an owner, a mitigation and a residual rating.
Must contain: Risk table with owners and residual exposure.
- 9
Delivery plan and benefit tracking
Name the delivery owner, set the milestone schedule and payment structure, and fix the date of the post-implementation audit against the numbers in section 6.
Must contain: Schedule, owner, milestone payments, post-audit date.
The six numbers the committee will test
Baseline performance
Current throughput, yield, downtime and unit cost, measured over a defined period.
Target performance
The same metrics after commissioning, with the ramp-up period stated separately.
Total capital required
Full build-up, not the equipment quotation, including contingency as a named line.
Annual benefit
Margin, cost avoidance or capacity value, net of new operating costs the asset introduces.
Payback, NPV, IRR
Against the company hurdle rate, with the discount rate and asset life stated.
Downside case
A defined stress on volume and input cost, with the resulting return.
Six mistakes that send a case back
- Presenting the equipment quotation as the capital requirement.
- Leaving contingency implicit instead of naming it as a line with a rationale.
- Claiming a benefit the operations team has not agreed to be measured against.
- Using an optimistic ramp-up curve so payback appears in the first full year.
- Omitting the do-nothing option, which removes the benchmark for the decision.
- Writing the specification loosely, so quotations cannot be compared like for like.
Frequently asked questions
What should a CAPEX business case include?
An executive summary, a measured problem statement, an options appraisal that prices do-nothing, the technical scope, a full cost build-up and total cost of ownership, financial analysis with payback, NPV and IRR against the hurdle rate, a financing plan, a risk register with owners, and a delivery plan with a post-implementation audit date.
How long should a capital business case be?
A one-page executive summary supported by a structured annex is the format most committees prefer. Length is not the test; whether every number can be traced to a source and every assumption is stated is.
What financial metrics do capital committees expect?
Simple payback as a screen, then net present value and internal rate of return calculated against the company hurdle rate over the asset's planned life, plus a sensitivity showing the return under a defined downside on volume and input cost.
How much contingency should a CAPEX business case carry?
Contingency should be a named line with a rationale rather than a hidden buffer, sized against the specific uncertainties in the project — scope maturity, site conditions, currency exposure and installation complexity — and released through the delivery plan rather than spent by default.
Do I need supplier quotations before writing the business case?
Indicative pricing is enough to build the case, but the quotations that support the approved figure must be based on a frozen specification with identical scope boundaries, otherwise the comparison behind the number is not valid.
Continue in the CAPEX approval series
Educational, supplier-neutral and financing-neutral
Global B2B Group does not sell equipment and does not represent lenders, export credit agencies or development banks. This material is published to help industrial organisations plan, structure and prepare capital projects. It is general information for decision-making, not financial, legal or tax advice.