Acquisition Entrepreneur: The Business Model Canvas
A Strategic Framework for Mapping and Navigating Business Acquisition Opportunities
There is no substitute for due diligence. However, adapting the Business Model Canvas strategic framework during your search can be a good first step in sorting through business acquisition candidates.
The Business Model Canvas, introduced by Alexander Osterwalder in 2005, can easily be adapted to help you evaluate businesses you’re considering; whether just looking at the listing, or combing through a Confidential Information Memorandum (CIM). You’ll be able to quickly map out the company’s business strategy, visualize trade-offs, and identify areas for growth or innovation. The model will give you a snapshot of how the business creates, develops, and captures value.
The Business Model Canvas is nine interconnected building blocks that represent the key components of a business: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure.
Here’s what it might look like when applied to Acquisition Entrepreneurship::
1. Customer Segments
Identify the customer base of the business you’re buying. You’ll want to look out for customer concentration, analyze demographic data, and buying behavior. You’ll want to determine whether the business serves a mass market, a niche market, or a combination of both.
2. Value Propositions
Understand what makes the business valuable to its customers. What products or services does the business offer? What are differentiators such as quality, convenience, price, and brand reputation? How do these value propositions contribute to the business’s success?
3. Channels
Review how the business delivers value to customers. Are they sold through retail stores, online platforms, or other distribution networks? What is the efficiency and cost-effectiveness of these channels?
4. Customer Relationships
Examine the types of relationships the business maintains with its customers. Are they based on personal assistance and one-on-one interaction, or self-service? What are the strategies used to attract, retain, and grow customer relationships? What advertising and marketing channels are used to reach customers?
5. Revenue Streams
Identify the primary sources of revenue for the business. This could be recurring revenue, subscription fees, licensing, brokerage fees, etc. Does the business rely on offering terms to customers? Are the revenue streams diversified revenue streams or relies heavily on one type, though sometimes one type is all you’re going to get.
6. Key Resources
Determine the critical resources needed for the business to operate. This includes physical assets, intellectual property, human resources, and financial capital. Evaluate the condition and scalability of these resources.
7. Key Activities
Analyze the core activities required to deliver your value proposition. This could involve manufacturing, marketing, customer service, or other operations. Identify the activities that contribute most to the business’s success.
8. Key Partnerships
Review the business’s network of partners and suppliers. This could include suppliers, distributors, or joint ventures. Assess the quality and reliability of these partnerships and how they contribute to the business’s efficiency. Check for supplier concentration. Is the business too reliant on a specific supplier?
9. Cost Structure
Examine the business’s cost structure, including fixed and variable costs. Identify the major expenses and evaluate if the business benefits from any economies of scale or scope. Understand how these costs impact profitability.
