Business Model Canvas Explained by a New Jersey Business Valuations Expert

Video Transcript 

My name is Robert Bonavito, New Jersey Forensic Accountant. This video is part of a series of videos where I discuss forensic accounting topics for educational purposes only. If this was a litigated matter, I would take a different approach, have different conclusions based on different facts and circumstances.

Hi, my name is Robert Bonavito, New Jersey's forensic accountant, we do a lot of appraisals and valuations in our firm. More of you ask how do we analyze the businesses that we look at. And what we use is a technique called, the business model canvas.

And what the business model canvas is, it's basically nine key areas that every business should know about themselves. And what we do is we write the nine areas that have here. The nine areas that we look at are key partners, key activities, value proposition, relationships, customer segment, key resources, channels, revenue streams and cost structure.

And after we line these up on a canvas, we would write down who their key partners are, who their key activities are. And what we go through this exercise, it's a great way for us to understand the story of the company, to understand the narrative of the company. And this is basically a company in a nutshell.

And I'm gonna go through a quick example here, let's say we're doing a valuation on Facebook and, you know, I want to a better understanding of the business. Who would their key partners be? Well, it would be content providers, right? I mean that is a key partner. TV shows, music, articles, you know, you go on Facebook you see that type of stuff.

Key activity, what do you think the key activity in Facebook is? Well it's their platform development, correct? I mean, let's face it, if you went on Facebook and it didn't work, you would never use it. That is a key activity to make sure they have a really good platform.

Value proposition, what is their value proposition, right? Well, most people go on here to contact with friends and family, right? That's why you go on there. So it's important to understand what the value proposition.

Relationships, who they have relationships with. Well, they have relationships with suppliers, they have relationships with advertisers, they have relationships with the actual people using Facebook. What is their customer segment? They have internet users, advertisers, marketers, and developers, a couple of them.

Key resources would be, again, their have platform, again the programming and all that is a key resource. That is their most key resource, because like I said, if you go on Facebook and it's not working, you can't use it. You go on a couple of times and it's not working, you will never use it.

Let's see. Channels, basically websites, apps, your phone app. The revenue stream, it's free, right? For most of us, it's free, but advertisers and vendors have to pay for that. But basically most people don't pay anything for Facebook, and that's why they like it.

Cost structure, what's their biggest cost? Their biggest cost is the, you know, maintaining the data centers, general administration expenses, that type of stuff. What is their revenue stream, again, that's free.

And so when you go through and think about this canvas, you could put this up in your office and have all nine key areas with your key partners, your value proposition. I think you're going to have a really good understanding of your business. And for a business appraisal, like we are, we have a great understanding of the business we are appraising.

My name is Robert Bonavito, if you have any questions feel free to email me.