Today I want to break down what it actually takes to move your business from a risky, unsellable Stage One into a stable, attractive Stage Two.

The tough truth? If your business checks off more than 10 of these common risk boxes, it’s probably unselleable right now. The good news is that with the right focus, you can fix it — and make a lot more money in the process.

Why Stage One is a Trap

Most Stage One companies have $40,000 to $750,000 in revenue, with EBITDA under $150,000. The problem is simple: buyers and banks see businesses at this size as too small and too risky.

Buyers want to see stable profits year after year. Maybe you can explain last year’s dip to me, but when I have to explain it to a buyer’s accountants, that’s when the purchase price starts getting hammered. Everyone — especially banks — wants predictable cash flows they can count on.

The Financial Foundation: Get Your House in Order

Let’s start with the basics.

✅ CPA-prepared financial statements.
Forget rough spreadsheets. Get real statements from a certified accountant.

✅ Monthly P&L reviews.
You shouldn’t just meet your accountant once a year. Review your numbers monthly.

✅ Positive retained earnings.
If your retained earnings are negative, it tells buyers you’ve lost money over time.

✅ Healthy working capital.
Too much inventory or overdue receivables? That’s a red flag. Keep working capital within 10% of industry norms.

✅ Debt-to-equity ratio under 1.5.
That means you should own more of your assets than the bank does.

✅ Accurate inventory.
What’s on your shop floor must match your balance sheet.

✅ Aligned tax filings and books.
Buyers compare your personal and business returns. If they’re off by more than 10-20%, expect trouble.

✅ Full transparency on debts.
Any money owed to family, friends — or yourself — needs to show up on the balance sheet.

✅ All sales through the books.
Running cash deals to save on taxes? That instantly kills your valuation. No buyer pays for “off-the-books” income.

Avoid These Operational Red Flags

• Your tax filings must be current.
• No major cash flow crises in the past two years.
• You shouldn’t be the one doing payroll or the books. Hire a bookkeeper or accountant so you can focus on driving growth.
• Outstanding bad debts? Write them off or sell them to a collections company.

If you’re in Stage One, your top priority is driving revenue and improving efficiency.

Legal & Structural Must-Haves

• Get your client contracts in order. Without them, collecting unpaid bills is nearly impossible.
• Suppliers should be under contract too.
• Your lease needs a renewal period so buyers — and their banks — know they can stay for at least five years.
• Have the right amount of insurance, and no outstanding claims.
• Your business must be properly incorporated by a lawyer, with articles, bylaws, and minutes on hand.
• Business licenses must be current, and all legal documents neatly stored online for easy diligence.

Build a Business That Doesn’t Rely On You

If you can’t leave for a month without the wheels falling off, you’re not running a business — you’re running your own job. Buyers see this immediately.

• Don’t rely on one or two key employees or your own personal customer relationships.
• Decisions can’t all run through you.
• Every role needs documentation, clear training systems, and at least two people cross-trained to handle it.
• Employee performance reviews should tie back to your company goals, like boosting revenue or improving cash flow.

Avoid undocumented workers or paying cash under the table. That might save taxes short-term, but it makes your business unsellable long-term. Remember: buyers aren’t buying your hustle. They’re buying a cash-generating system that solves problems and makes money without you.

Modern Sales, Marketing & Tech Systems

You should have:

• A brand and style guide.
• An active client list inside a real CRM, not a spreadsheet.
• A website and funnels that feed leads directly into that CRM.
• Marketing assets — brochures, videos, case studies — to support your sales team.
• A value proposition that’s unique and can’t be copied in the next three years.

Your CRM should actively track your pipeline so you can convert prospects into paying customers. That’s how you push revenue above $750K and start reaching Stage Two.

Streamline Operations & Your Facility

• Store all files online.
• Use modern team chat tools like Slack, Google Chat, or Teams — not scattered texts and emails.
• Avoid customer concentration. If one client makes up more than 10% of your revenue, it’s risky. Same for suppliers — always have backups.
• Have standard operating procedures so every job gets done the same way, every time.
• Keep your facility updated. No one wants to buy or work in a dump.
• Maintain a detailed list of all your equipment and plan to replace anything critical that has less than five years left.

Yes, everyone has budget constraints. But sometimes it’s time to invest — in better equipment, in people, and in your own systems — so your business can be worth what you hope one day.

External Risks to Watch

If you’re in a shrinking community or dying industry, it’s going to be tougher to sell. Same if new competitors are undercutting you, staffing is tight, or your industry is facing environmental crackdowns.

The point isn’t to scare you — it’s to highlight risks so you can tackle them now. If you do, you’ll de-risk your business, boost profits, and position yourself for a stronger exit down the line.

The Bottom Line

Use the Business Sellability Checklist as your guide to stabilize and grow. Not only will you make more money now, you’ll dramatically improve your chances of selling later — at a far better multiple.

When you move from Stage One to Stage Two (or even Stage Three), more buyers show up, valuations climb, and your business becomes a true retirement plan — not a trap that forces you to keep working forever.

Want to see where your business stands today, or build a roadmap to Stage Two? Reach out. I’d be happy to have a no-pressure, confidential conversation.

God bless,
Raph