Today we’re going to break down how to move your business from a Stage 2 company to a Stage 3 company — which means pushing past $3 million in revenue and $750,000 in EBITDA so you can build serious enterprise value and get on the radar of top-tier buyers.

This is more than just a due diligence checklist. It’s a de-risking roadmap that transforms your business into something a buyer actually wants to pay a premium for.

If you’ve already avoided the traps of Stage 1 and checked off those basics, here’s how you get to the next level.

Financial Strength: The Foundation of Stage 2

• Your EBITDA is over $250,000.
• You’ve been profitable for the last three years, with clean financial statements to prove it.
• You’ve got an in-house or contracted bookkeeper, and your year-end financials are prepared by a CPA from a reputable firm.
• You’re reviewing financials every month — your bookkeeper sends them, and you plus your shareholders hold monthly or quarterly calls with your accountant.
• The balance sheet has positive retained earnings, working capital is within 10% of industry standards, and your debt-to-equity ratio is under 1, meaning you have far more equity than debt.
• Obsolete inventory is cleared out. Inventory is tracked, counted, and accurately reflected on your balance sheet.
• Shareholders’ personal tax filings align with company books. There are no off-balance sheet loans, all cash flows through the books, and all taxes are paid and current.
• No cash flow issues in the last two years. There’s more than enough cash kept inside the business, and payroll runs without the owner’s involvement. Everyone’s paid on time, and there are no outstanding bad debts.
  

Legal Housekeeping: Protecting Your Value

• All client and supplier contracts are current.
• Your lease has more than five years left, plus a five-year renewal option — exactly what a bank wants to see.
• Business liability insurance is up to date, with all past claims settled.
• Any legal claims are resolved.
• Articles of incorporation, bylaws, minutes, and business licenses are all current and stored in the cloud — accessible in under five minutes.

Operational Independence: Making the Business Run Without You

• Your company has a manager in place who isn’t the owner.
• The owner can leave for over a month with zero disruption to sales or operations.
• The business isn’t reliant on one or two star employees. The team shares the load and works together.
• It doesn’t hinge on the owner’s personal network or skills — there are people who can do everything the owner does.
• Customer and supplier relationships are spread across employees, not just tied to the owner. Decision-making isn’t centralized — it’s distributed across the organization.

All positions have detailed job descriptions stored in the cloud, so if you brought in an HR company tomorrow, they could hire for you seamlessly.

Your hiring, onboarding, training, and performance reviews for each role are all documented and scalable. Each position is cross-trained so at least two people can handle any key function.

Employee performance is directly tied to company goals and KPIs, so everyone is rowing in the same direction. There are no outstanding workplace claims and no undocumented workers — everything is above board.

Marketing: Driving Demand, Not Just Waiting For It

• You’ve got a formal brand and style guide, and an active client list.
• You’re marketing to them consistently with a blog or newsletter — monthly or quarterly.
• Your CRM captures leads automatically and synchronizes with your website and marketing funnels.
• You’ve got solid sales materials and tools so your team can drive revenue. Marketing brings prospects in, sales converts them, and ensures they’re happy.

Defensible Value Proposition

Your business should have a unique advantage over competitors — something that can’t be easily copied in the next three years. That’s what protects your market share.

There’s a documented growth plan with a system in place. Everyone knows it, and the team is executing on it together.

Your CRM (whether cloud-based or not) tracks the active pipeline value, so you can clearly see, for example, that you’ve got a million dollars in potential clients about to close in the next month or two.

IT Infrastructure: Running Like a Modern Company

• Your CRM is not just there — it’s actually in use.
• All files are neatly stored in the cloud.

Your team should use cloud-based communication tools (like Google Chat or Microsoft Teams) — no scattered emails or text threads.

Customers & Suppliers: Spreading Your Risk

• There’s no customer concentration — your revenue isn’t overly dependent on one or two clients bringing in >10% of revenue.
• You check customer satisfaction once or twice a year with surveys, and all customer data lives in your CRM.
• You’re not dependent on one or two suppliers. You have backups lined up, so if something goes sideways, there’s no bottleneck.

Solid Operational Playbook & Facilities

• Your business has documented systems and an updated SOP manual. Every process is standardized so there’s a right way to do everything — driving consistency and efficiency.
• The facility is well-maintained. Critical equipment has five to ten years of life left, with nothing needing replacement in the next two years.
• You maintain a detailed asset list, so you always know what you own and its condition.

External Environment: Playing the Long Game

• You’re in a growing industry, in a growing community or market.
• Regulatory changes are a tailwind, not a headwind.
• There’s limited or no serious competition threatening you.
• Staffing isn’t a struggle, and both the industry and your company are environmentally friendly.

So What’s Next?

It’s pretty simple: you either have these things or you don’t. If you don’t, you fix them. Use the Sellable Business Checklist to maximize value from your business. That’s how you go from a Phase 1 company — with more than 10 major problems holding back your valuation — to a Phase 2 company with fewer than 10, and ultimately to a Phase 3 company that has eliminated these risks entirely.

Here’s why that matters:

• Buyers pay more for certainty. When you’re dialed in like this, buyers don’t see risk — they see opportunity. That means higher multiples and better deal structures.
• It makes financing possible. A solid, de-risked business will get banks onboard, unlock better leverage for buyers, and ultimately let you pull more out at closing.
• It creates freedom for you. A business that runs without you doesn’t just sell for more — it also means you have the choice to step back, take real vacations, or eventually step away entirely on your terms.

Right now, if you’re under $150,000 in EBITDA and under $750,000 in revenue, your company simply isn’t sellable. But start implementing these systems, drive up your top line, improve efficiency, and eliminate those big red flags — and you’ll step into Phase 2. From there, it’s a clear path to Phase 3.

And that’s where serious buyers are waiting, with serious money.

In the next post, I’ll break down exactly what it looks like at Phase 3, what buyers expect at that level, and how to command the kind of exit that lets you write your own story.

Until then, God bless.
— Raph