canonical/modules/M026-business-model-deconstruction.md

<!-- Generated loss-aware reference mirror from God_Level_Public_Company_Financial_Analyst_Job_Guide_V6_99_ALL_SUB70_FIXED.docx. Canonical source remains the bundled DOCX. -->

<!-- Module: 026 | Title: Business Model Deconstruction -->

## PART VI - BUSINESS QUALITY | MODULE 026

# Business Model Deconstruction

> Mission. Reduce the company to customers, value proposition, unit economics, pricing, cost structure, and capital requirements.

## Decision output

Objective: Reduce the company to customers, value proposition, unit economics, pricing, cost structure, and capital requirements. The completed work product must be reproducible from evidence, show the downstream financial or decision effect when material, state the strongest contrary case, and define a dated update rule.

## Explicit operating procedure

1. Identify the paying customer, end user, problem solved, alternative, purchase process, decision maker, contract/transaction mechanism, delivery channel, and switching behavior.

1. Map the revenue equation into units/customers/usage, realized price, mix, frequency, and retention; map cost into the resources required to deliver and support that revenue.

1. Locate the profit pool in the value chain and determine why this company captures it rather than suppliers, distributors, customers, or substitutes.

1. Identify the practical growth constraint: demand, sales capacity, manufacturing, qualified supply, power, permits, labor, capital, channel, or customer implementation.

1. Build unit economics and incremental returns before relying on consolidated margin or growth.

1. Write the business model in one causal page that another analyst can use to explain what creates customer value, what converts it into cash, and what can break the conversion.

## Required evidence and model bridge

- Primary-source set: KPI history, customer cohorts, pricing evidence, cost structure, capital requirements. Preserve exact document/version, date, period, and source location for every material factual input used in business model deconstruction.

- For each key concept - payer/user/decision maker, customer problem, value proposition, revenue mechanism, unit cost, capital - state whether it is a reported fact, analyst calculation, management claim, external estimate, or judgment. Quantitative concepts must retain raw components and units; qualitative concepts must retain the specific evidence and counterevidence.

- Map only economically relevant findings into the model or decision record. Process-control modules such as business model deconstruction may have no direct valuation line; in that case document the downstream error or governance risk the control prevents.

## Metrics and calculation controls

| Metric / concept | Construction | Required validation |
| --- | --- | --- |
| customer ROI | Customer economic benefit attributable to the product minus total customer cost, divided by total customer cost; use customer-specific operating data where possible. | customer ROI: Recalculate independently from cited source data; verify definition, period, units, scope, signs, and any reconciliation to reported financial or operating totals. |
| gross profit per constraint unit | Incremental or total gross profit divided by the binding scarce resource, such as machine hour, MW, wafer, sales rep, bed, or square foot. | gross profit per constraint unit: Tie the dollar measure to filed statements/footnotes; reconcile classification adjustments, one-time items, acquisitions/FX, and period consistency before using it analytically. |
| incremental ROIC | ROIC = NOPAT / average invested capital | incremental ROIC: Recalculate incremental ROIC from cited inputs; reconcile definition, period, units, signs, and source version; investigate and document any variance before use. |



## Worked application

> Case: software bookings grow but implementation capacity delays revenue.

- Reconstruct the relevant reported fact from primary evidence before interpreting the case. For business model deconstruction, show the raw components rather than only the resulting ratio or narrative.

- Build the causal chain through payer/user/decision maker, customer problem, value proposition, revenue mechanism, then identify which link is directly observed and which link remains an assumption.

- Calculate customer ROI, gross profit per constraint unit, incremental ROIC from sourced components under the reported/base interpretation and at least one skeptical alternative interpretation.

- Translate the difference between cases into the variable that matters for business model deconstruction: evidence quality, revenue, operating profit/NOPAT, free cash flow, invested capital, financing/dilution, risk, or valuation. Mark non-applicable links instead of inventing them.

- Expert consistency test: build the model from the customer transaction backward, not from accounting lines forward.

- Precommit the specific future filing, KPI, customer/supplier observation, regulator action, or market input that would materially invalidate the business model deconstruction conclusion.

## Failure tests

- FAIL if payer/user/decision maker cannot be defined and reproduced from the source pack.

- FAIL if the analyst cannot state the customer, problem, purchase decision, price, delivery mechanism, gross economics, capital requirement, and binding constraint in plain language.

- FAIL if the business model deconstruction conclusion depends on an unstated assumption, unreconciled definition, or evidence that cannot be traced to its source/version.

- FAIL if evidence materially inconsistent with the business model deconstruction conclusion is omitted, reclassified, or dismissed without a documented definition, materiality, causal, timing, and source-quality analysis.

## Completion test

A senior reviewer must be able to reproduce the business model deconstruction conclusion, vary the most sensitive assumption independently, trace the change through the model, understand the strongest opposing case, and identify the next evidence that would force an update. If any link is missing, the module remains open.