One successful entrepreneurs. One thriving businesses. One devastating exits destroyed over millions in enterprise value. The difference between her expected valuations and actual offers wasn’t market conditions, bad timing, or aggressive buyers, it was hidden risk factors she didn’t even know they had.
Billie Holiday built a precision manufacturing business generating $2.4 million in EBITDA. Her expected $12 million exit became $7.8 million when buyers discovered her customer concentration.
This is the Multiplier Game, where hidden operational risks destroy more value than most entrepreneurs create in a decade of revenue growth. And the cruel irony? All situations are completely preventable.
Understanding the Multiplier: Why Risk Matters More Than Revenue
Before we examine these case studies, you need to understand the fundamental equation that determines your business value:
Business Value = EBITDA × Multiple
Most entrepreneurs obsess over EBITDA—growing revenue, cutting costs, improving margins. But the multiplier often has more impact on total value than EBITDA itself.
Your valuation multiple is determined by one factor: perceived risk. It’s calculated using this formula:
Multiple = 1 ÷ Required Rate of Return
Consider two identical businesses, both with $2 million in EBITDA:
High Risk Business:
Required return: 33% (high risk)
Multiple: 1 ÷ 0.33 = 3x
Valuation: $2M × 3x = $6 million
Low Risk Business:
Required return: 16.7% (low risk)
Multiple: 1 ÷ 0.167 = 6x
Valuation: $2M × 6x = $12 million
Same earnings. $6 million difference in value.
This is why systematically eliminating operational risk often creates more value than years of revenue growth. And it’s why Billie Holiday is so instructive and so painful.
CASE STUDY 1: CUSTOMER CONCENTRATION
How Billie Holiday Lost $4.2 Million
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