A business case is a document that helps explain a project by outlining its expected benefits.

Why do I need a business case?

Having a well-thought-out business case is essential when deciding whether to develop a new product or product range. For example, if an artist or art centre wants to launch a new product, a business case would explain why it’s a good idea, how much it will cost, how much profit it could make and why customers might want it. It helps decision-makers understand whether the project is worth pursuing.

This doesn’t mean every product needs to make a profit—sometimes the goal is to create something that adds value in other ways. For example, many art centres offer small tourist-friendly items so visitors can take home a piece of their experience, even if they’re not ready to buy a painting. A notebook or t-shirt today might lead to a larger sale in the future.

The reality is that product sales make up a small portion of an art centre’s income, often less than 5% of total revenue. Since product development can be costly, a business case helps to outline expenses, predict sales, and ensure smart decision-making. If a product seems likely to lose money, any benefits it brings should be weighed carefully against the financial risk. In most cases, products should at least break even to be worthwhile.

A business case doesn’t need to be technical, but should include the following information:

• Staff time: Estimate the hours/days likely to be spent on product development and the cost of this, based on salary level (including oncosts). Include in this an estimate of how much administration the project will likely need—phone calls, managing contracts and consulting artists can use up a lot of valuable time.
• Art centre costs: If the art centre is involved, does the art centre need to pay for anything (e.g., venue or material costs, artist fees)?
• Licence fee: How much will the artist/s get paid for the use of their image? There are different ways to think about a licence fee:
  • Flat fee: a fixed amount, paid once.
  • Percentage: the artist is paid a percentage of the wholesale or retail price, once sales are made.
  • A mix of payments: some up front, then a percentage of sales.
  • There are resources available to help art centres decide on the licence fee that is appropriate for the type and scale of use. Both Arts Law and Copyright Agency provide information and/or services (these services aren’t necessarily free) that can assist with or manage these negotiations.
• What happens to the artwork: Will the original artwork from which the design has been taken sell normally, or should the art centre buy it?
• Production costs: How much will the raw material/s cost? Can they be bought in batches, or all at once? Factor in freight costs if required and allow for wastage.
• Professional fees: Does the project need specialist expertise (designers, lawyers)? What will this cost? These fees may also include artist or workshop fees if artists are being asked to produce custom works.
• Promotional costs: What packaging and labelling will be used, and is there a cost for adding the products to the art centre website or social media feed, if required?
• Funding: Does the project need, or can it attract any external funding? This could be as a creative activity, or as a business development project. This will add to the administrative load and likely extend project timelines too.
• Contingency: Consider adding 10% to the costs, to cover the unexpected.

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Business case – third-party

As with art centre-only projects, the business case for product development proposals by a third-party will help art centres to think through potential costs and income so that the art centre can make an informed choice about whether to engage with this business.

A business case is meant to be a simple tool to help decide, not a technical document—particularly as with such a collaborative approach there are fewer costs and a simpler commercial proposition to consider. The business proposing to develop a new product should be able to provide:

• Retail and wholesale prices for the product: This may be per item (for example, in a line of merchandise) or per use (for example, if an image is being used once). If an art centre wants to stock and sell the products, check the volume of products that the art centre can buy at wholesale.
• Print/manufacturing run: How many products will be made? Check if there’s going to be more than one version, or scope for further editions if the product sells well (and if the same licence arrangements would then apply).
• Proposed licence fee
• Payment and reporting arrangements

Other important things to consider in your business case include:

• What happens to the artwork from which the design is taken? Does it sell normally, or can/should the business buy it?
• How much administration is likely to be involved? Factor in potential legal costs to review a licensing agreement.
• Whether the art centre should take a commission from any licensing fee? If so, how much commission is appropriate?
• Is the business offering anything else of potential value to the art centre? For example, free advertising or co-branding.

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Production planning

Production planning starts once the artist or art centre receives orders, and the product is approved for production. Orders may only go ahead that meet a Minimum Order Quantity (MOQ), or production might start before reaching a MOQ, which means the artist or art centre funds it themselves.

It’s important to have a good estimate of product demand, combining market research with knowledge of trends and customers.

Production planning involves creating a workflow to move a product from design to manufacturing and then to market, aiming for the lowest possible production cost. This planning ensures efficiency and is crucial for managing the supply chain. Good production planning helps with scheduling and inventory control, making sure products are delivered on time.

If you have the time and money, exploring software options to automate the production process can improve efficiency.

Monitoring and evaluating the plan as it progresses is essential, especially with potential supply chain disruptions. Having strategies like longer lead times in place can help avoid disappointing retailers and customers.

Things to consider

• What is the potential production capacity (how many products can be made in a week/month/year)?
• Does this fit with the target customer and order?
• Who is the design team?
• Who is the artist?
• What agreements or approvals need to be made?
• Where is the production facility/supplier located?

What to include in the production schedule

• Quantity and delivery dates
• The number of products to be manufactured
• The date when the order is released for production
• Where the products should be delivered once they have been completed
• Any contracts or agreements or invoices to be made to complete your order (as determined with your supplier, lawyer, artist and any other members of your product team)
• Final quality check

Follow your production schedule to ensure that you deliver on time and charge the agreed price.