This article show you how to build the circular business case by accounting for value across multiple product lives and aligning finance with operations.
The article covers how to model revenues beyond the first sale, how to manage cash timing, and how to reduce uncertainty with design choices. It sets a clear framework and method to build your own circular business case.
Table of Contents
Building the Circular Business Case
Reuse:
Use the same product again with little or no change. As an example, for a dress this includes cleaning, steaming, minor cosmetic touchups, and relisting. The job of the dress stays the same and performance expectations remain unchanged. Owner can be the same or a new buyer.
Repair:
Fix specific faults so the same product returns to normal use. As an example, for a dress this includes replacing a zipper, re stitching a seam, or resetting a hem. Pattern and structure do not change. This is usually the fastest way to rescue value when reuse fails initial checks.
Remake:
Rebuild the product to a like new standard through controlled work. As an example, for a dress this involves partial deconstruction, replacement of damaged panels, reset of lining, and a final quality audit. The result is sold or returned with a clear quality promise, often similar to new. Fashion teams sometimes say remake, but scholars and standards use remanufacture.
Repurpose:
Convert the product or its materials into a different product with a different job. As an example, a dress becomes a skirt, a tote, cushion covers, or panels for a new garment. Success depends on design quality and total yield across the new items.
Recycle:
Process the product into material feedstock rather than a finished product. As an example, for a dress fibers or polymers are recovered through mechanical or chemical routes, then re-enter production as inputs for future fabrics or trims.
The Problem With Linear Thinking
Unlike a circular business case, a linear approach assumes a single sale and little or no value once the first owner is finished with the product. The usual model usually treats the used product as waste.
The linear spreadsheet records the work to bring items back from customers, the transport, sorting, cleaning, and testing, as extra cost without the potential income that a managed repair and resale process can unlock.
The fix is to change the frame before changing any numbers. The full picture should include the first sale, the inspected pre owned sale, and the final recovery of parts or fiber, each paired with the tasks. Using this approach you develop the revenue and profits across the full lifecycle.
The Circular Business Case Example
A circular business case works when a product earns more than once and the steps that make this possible are reliable.
The circular business case has three earning moments:
- First is the initial sale.
- Second is an inspected pre owned sale, which means the item is taken back, checked, cleaned, repaired, graded for condition, and resold with a short warranty.
- Third is recovery of parts or materials at the very end.
Here is an example taken from the viewpoint of circular fashion which builds the business case.
| Account Line | Value | Notes |
| Retail price (new) | 150 | Price paid by first customer |
| COGS (new) | 67.5 | Initial build cost per unit |
| Gross margin (new) | 55% | Gross margin on new sale |
| Gross profit (new) | 82.5 | Retail price minus COGS |
| Buyback credit | 25 | In-store credit offered for returns |
| Refurbishment cost (avg) | 10 | Intake, clean, minor repair |
| Resale price (inspected pre-owned) | 80 | Ticket price for inspected pre-owned |
| Recovery revenue (materials) | 3 | Value of fiber/parts at EOL |
| Recovery processing cost | 1 | Handling to realize recovery value |
| Gross profit (recovery) | 2 | Recovery revenue minus processing |
| Assumed return rate (base case) | 30% | Share of units returning after first use |
| Grade mix (A/B/C) | 50% / 35% / 15% | Used for optional grade-level model |
| Refurbishment lead time (days) | 5 | Dock-to-rack target |
The dress sells for 150 dollars at a 55 percent margin, so first sale gross profit is 82 dollars and 50 cents on a cost of 67 dollars and 50 cents.
With a simple buyback, the customer returns the dress for 25 dollars in credit. Intake, cleaning, and a minor repair cost 10 dollars. An inspected pre owned resale at 80 dollars yields 45 dollars of gross profit because the effective cost is the 25 plus 10.
At end of life, parts and fiber recovery bring 3 dollars and cost 1 dollar to process, adding 2 dollars of gross profit and cutting waste.
Linear economics stops at 82 dollars and 50 cents. The circular path adds 45 from resale and 2 from recovery, lifting lifetime gross profit to 129 dollars and 50 cents, about 57 percent higher than a single sale. The enablers are a clear buyback, a short refurbishment loop, and a basic recovery channel.
| Scenario | New sale gross profit | Resale gross profit (inspected pre-owned) | Recovery gross profit | Total gross profit per unit |
| Linear (one sale) | 82.5 | 0 | 0 | 82.5 |
| Circular (with repair & resale) | 82.5 | 45 | 2 | 129.5 |
Design choices make earnings reliable. Robust seams, a removable lining, standard zippers, and a scannable code speed repair and intake, which keeps more dresses on the rack and fewer in bins.
Cash timing matters. A published buyback brings timely returns, and a five day dock to rack target keeps stock moving and working capital healthy. Stable timing lets finance plan credit lines and stores schedule regular inspected pre owned drops.
The logic works across categories. Durable goods, B2B equipment, and electronics also support a second life and a priced recovery step. The critical point is to convert this pattern into a circular business case that finance will trust.
How To Build A Circular Business Case
A strong case explains where money comes from, what work enables it, and when cash moves. Make every link visible so finance can see cause and effect.
- Map three revenue lines across time: As shown in the dress example, 150 dollars from the new sale, 80 dollars from the inspected pre owned sale, and 3 dollars from recovery net of 1 dollar processing.
- Pair each line with its enabling work: For the dress example, this involved the important step of redesigning for repair. Redesigning provides a framework for intake and grading, cleaning and small fixes, resale channel costs, and recovery logistics.
- Map the flow: Place each flow on a simple timeline so inflows and outflows are obvious and the cash gap is clear.
- Model the numbers: Keep numbers conservative and traceable to a source, such as a pilot, a vendor quote, or a contract term.
- Consider the biggest constraint: Show the single constraint that governs the overall feasibility, for example five days from dock to rack. This will determine decisions concerning how to scale and operationalise the process.
Set conservative assumptions for your circular business case
Define terms in place and choose values that finance will accept. These demonstrate both cash timing and total margin.
- Return rate means the share of sold products that come back under the buyback offer.
- Condition grade is an A, B, or C label that indicates how much work a returned product needs before resale.
- Refurbishment cadence is the time from arrival at the dock to the moment the product is ready for sale again.
- Use conservative values first, for example a lower return rate and a slower cadence, then test upside separately.
- Document how each input will be measured weekly so trends, not guesses, shape your decisions.
The Circular Business Case Metrics
There are two simple numbers you can use to judge trade offs quickly and to align finance with the circular business case.
- Circular profit multiplier equals total life cycle gross profit divided by the initial cost of goods.
- Revenue per unit of virgin input shows how much revenue each unit of new, non renewable material supports.
- In the dress example, the inspected pre owned sale and the final recovery lift both numbers, which improves cash productivity and material productivity at the same time.
- Put both metrics on the same dashboard and review them together each quarter.
- Use them to trigger action, for example pause intake if cadence slips and the multiplier falls, or adjust pricing if revenue per unit of virgin input stalls.
Build The Pitch for the Circular Business Case
A good pitch tells a story not just the numbers. A pitch moves in a straight line. First, why change now. Second, what you will do. Third, what it earns and when cash moves. Fourth, what proves it works and how you will control risk. End with a clear ask.
Quick script you can adapt
- Why change. We are leaving money and trust on the table by stopping at one sale.
- What we do. We add a buyback, a short refurb loop, a pre owned resale with a short warranty, and a basic recovery step.
- What it earns. One product now earns more than once, and total profit per unit rises by a large and measurable amount.
- How we control risk. We keep timing tight, we use conservative inputs, and we throttle intake if queues grow.
- What you decide. Approve the pilot and the two metrics. We run two cycles and then scale or stop.
The Circular Business Case: Tensions and Trade-offs
#1. Building a circular business case is a balancing act. You invest a little more up front, you earn it back across over time, and you keep cash steady by running the loop at a measured pace. The key to sucess is to recognise the trade offs, set simple rules, and review them on one page so everyone understand them and they are aligned towards the overall goal.
#2. Early cost versus later profit
Invest in better materials, a repair friendly design, and develop scannable codes. This is the investment which will result in the payback by enabling faster refurbishments, higher resale prices, and steady recovery income.
#3. Rules: do not scale buybacks unless refurbishment time is on target for the defined cycle. You need to tie intake to operational capacity and the sales rate. If either slips, then you will need to slow intake for a week and clear the queue.
#4. Cannibalization versus share gain
Certified pre owned products can shift some buyers from buying new, but it also wins new customers who otherwise leave for cheaper rivals. Keep offers clear by design, channel, or season.
What to track: net new customers, repeat rate, and total gross profit per product family. Use these to ground the discussion, not opinions.
#5. Recurring income versus working capital strain
More cycles mean more units in circulation and operations. If timings drift during cycles, inventory can swell resulting in diminished cash. Publish one dock to shelf target and review it regularly.
Corrections: pause intake when items shift past inventory targets and run a short clearance on aged stock, then restart when stock and sales are back in line within the set ranges.
#6. Show a simple cohort
For a group of one hundred units, even a small share of returns creates second revenue. The same calculations apply across product families, so using this approach you can see the opportunity to scale, not just a one treat the test as a on-off case study.
#7. Anchor on two metrics
Manage the program with two numbers: the circular profit multiplier and revenue per unit of virgin input. Together they show how well cash is earned over time and how efficiently new material is used. If you do not, teams will optimise single quarters rather than the full life cycle.
#8. (Re)Design
Design products so they are easy to repair, grade returned items honestly, refurbish to a clear standard, and price pre owned stock to sell within two weeks. Keep a basic recovery channel for parts and materials, and use scannable codes to speed intake. If you do not, bottlenecks will grow and resale will slow.
#9. Fit finance to the rhythm
Match intake to real repair capacity, set a firm lead time target, and pause intake when sell through slows. Then link working capital to the measured time from arrival to ready for sale so cash support rises and falls with actual throughput. Otherwise, growth will strain the balance sheet.
#10. State the brand upside
A visible buyback promise shows confidence in the quality of your brand (see circular fashion examples for some inpiration in the fashion industry). A short warranty on pre owned items builds trust and brings in new customers without weakening the brand.
Circular Business Case Summary
Circular business turns one product into a repeat earner. The loop is simple to explain and to run, buy back, grade, refurbish, resell, and recover.
When the steps are reliable, lifetime profit rises, working capital stays predictable, and the brand earns trust by standing behind quality beyond the first sale.
Use the circular business case to show that the numbers stack-up and support the change. Make a one page business case, with the circular profit multiplier and revenue per unit of virgin input showing progress that finance and sustainability can work in harmony.
References
- Ellen MacArthur Foundation (2013) Towards the Circular Economy, Vol. 1: An economic and business rationale for an accelerated transition. Available at: http://www.ellenmacarthurfoundation.org/towards-the-circular-economy-vol-1-an-economic-and-business-rationale-for-an Ellen MacArthur Foundation
- Ellen MacArthur Foundation (2013) Towards the Circular Economy, Vol. 2: Opportunities for the consumer goods sector. Available at: http://content.ellenmacarthurfoundation.org/m/50c85a620a58955/original/Towards-the-circular-economy-Vol-2.pdf content.ellenmacarthurfoundation.org
- Ellen MacArthur Foundation (2017) A New Textiles Economy: Redesigning fashion’s future. Available at: http://www.ellenmacarthurfoundation.org/a-new-textiles-economy Ellen MacArthur Foundation
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