The Multiplier Game: Part 1 Study Questions

Grow Your Brain, Grow Your Business Value

Multiple Choice Questions

Question 1: What was the primary risk factor that destroyed Billie Holiday’s business valuation?

A. Poor financial performance and low EBITDA margins
B. Customer concentration with 42% revenue from Boeing
C. Outdated manufacturing equipment and technology
D. High employee turnover and labor issues

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Question 2: Holiday Manufacturing Solutions’ actual valuation offer from the Private Equity firm was:

A. $13 million at a 5.4x multiple
B. $12 million at a 5x multiple
C. $7.8 million at a 3.25x multiple
D. $7.2 million at a 3x multiple

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Question 3: According to the case study, how long had Billie’s relationship with Boeing lasted?

A. 3 years
B. 5 years
C. 8 years
D. 15 years

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Question 4: What was the total investment Billie would have needed to implement the diversification strategy over 3 years?

A. $150,000
B. $300,000
C. $500,000
D. $1,000,000

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Question 5: What percentage did Billie need to reduce Boeing to in order to achieve “premium diversification” according to the strategic plan?

A. 30%
B. 25%
C. 22%
D. 18% or less

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Explanation Questions

Question 6: Explain the “perception gap” between what Billie viewed as her Boeing relationship and what buyers saw. What were at least three specific differences in perspective?

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Question 7: Using the mathematics presented in the case study, calculate and explain how customer concentration destroyed Billie’s valuation. Show the difference between her expected valuation and actual valuation, and explain what caused this gap.

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Question 8: Describe the “Worst-Case Scenario Analysis” that buyers conducted during their risk assessment of Martinez Manufacturing. What specific factors did they consider, and how did this analysis influence their valuation?

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Question 9: According to the case study, what is the “Alternative Ending” for Billie if she had implemented diversification three years earlier? Include specific numbers about investment, resulting valuation, and ROI in your answer.

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Question 10: The case study states that “sophisticated customers actually prefer suppliers with diversified revenue bases.” Explain why this is true and how business owners should frame diversification when communicating with their largest customers.

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ANSWER KEY

Multiple Choice Answers

Answer 1: B , Customer concentration with 42% revenue from Boeing

Explanation: While Holiday Manufacturing had strong financial performance ($2.4M EBITDA, 39% margins), the case study explicitly states that Billie had “a ticking time bomb in her financials that she viewed as a strength: Boeing accounted for 42% of her total revenue.” This customer concentration was the fatal flaw that caused all three buyers to dramatically reduce their offers or walk away entirely. The other options (A, C, D) are not mentioned as issues in the case study.

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Answer 2: C , $7.8 million at a 3.25x multiple

Explanation: According to the case study, “Buyer #2: Private Equity Firm, Initial indication: $12 million (5x multiple), Revised offer: $7.8 million (3.25x multiple).” This represented the best actual offer Billie received. Answer A ($13 million at 5.4x) was the Strategic Acquirer Competitor’s initial indication, Answer B ($12 million at 5x) was the PE firm’s initial indication, and Answer D ($7.2 million at 3x) was the Strategic Acquirer Competitor’s revised offer.

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Answer 3: C , 8 years

Explanation: The case study explicitly states: “They’d worked together for eight years. Boeing’s procurement team trusted Holiday Manufacturing implicitly.” This long-term relationship was one reason Billie viewed the Boeing concentration as a strength rather than a vulnerability, but buyers saw the 8-year history as irrelevant to the structural risk.

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Answer 4: B , $300,000

Explanation: The Strategic Diversification Plan detailed in the case study shows: “Year 1-2: $150K in business development, Year 2-3: $150K in expanded sales team, Year 3-4: Maintain sales infrastructure. Total investment: $300K over 3 years.” This $300K investment would have preserved $4.85 million in enterprise value, representing a 1,617% ROI.

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Answer 5: D , 18% or less

Explanation: The case study’s diversification plan states: “Year 3-4: Achieve Premium Diversification, No customer exceeds 18% of revenue.” The plan progressively reduced Boeing’s concentration: Year 1-2 target of 30%, Year 2-3 target of 22%, and final target of 18% or less. The case also mentions that the alternative ending scenario had “Largest customer: 18% (Boeing, still important but not concentrated).”

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