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Big vs. Valuable

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Big vs. Valuable

Most founders aim to boost sales, but prioritizing top-line growth can attract low-quality revenue, potentially reducing your company’s value.

To an acquirer, revenue quality varies. They prioritize future revenue predictability, valuing recurring income from contracts and subscriptions higher than one-off sales. Consequently, firms with recurring revenue often command a revenue-based valuation, whereas businesses reliant on transactional revenue are usually valued based on a multiple of EBITDA.

Why Mike Winnet Turned Google Down

Mike Winnet provides an excellent case study on the importance of prioritizing the right kind of revenue.

Winnet started U.K.-based Learning Heroes after recognizing that most e-learning programs were long and boring. He saw an opportunity to transform the industry by selling large companies a subscription to his short, engaging, animated training courses.

Although his company was growing, it was still thirsty for cash. Winnet was drawing a salary of just £500 a month when he received a lucrative offer from Google. The giant search firm offered Winnet £90,000 to create a custom course for them. The course would have taken his team just three months to develop, and Winnet would have welcomed the injection of cash.

But Google’s offer was a one-time transaction and didn’t sit right with Winnet, who was trying to build a company based on recurring revenue. “I know loads of people who would have taken that £90,000 contract, but we didn’t because it didn’t fit the model. We used to have a sign on the wall that said, ’Does It Make the Boat Go Faster?’ and if the decision didn’t make the boat go faster, we wouldn’t do it.”

Not only was Winnet concerned Google’s offer would slow their journey to becoming a subscription-based e-learning juggernaut but he also knew the one-off nature of the revenue had the potential to undermine the value of his company in the eyes of potential acquirers.

Winnet started Learning Heroes with the intent of selling it within three years for £10 million. He knew he would need to position the company as a product-based subscription business to garner such a premium offer.

Winnet understood that a simple service company doing one-off projects, like the one Google was offering, would be lucky to garner an offer of one times revenue. In contrast, a subscription-based product company could command a much higher valuation from an acquirer.

By accepting the Google project, Winnet would have run the risk of appearing to be a project-based consultancy and accidentally falling into the service business category in an acquirer’s mind.

In the end, Winnet’s discipline paid off when he accepted an acquisition offer from Litmos of £8 million, representing roughly four times his revenue at the time.

Had Winnet been viewed by an acquirer as a traditional service company, he would have likely been offered a quarter of what he received.

Rather than focusing exclusively on revenue growth as a goal, owners that sell for the highest multiples tend to concentrate on growing value, even if that occasionally comes at the expense of short-term sales.

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Growth vs. Value

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Growth vs. Value

We live in a business world where growth is worshiped. Entrepreneurs measure themselves by how many people they employ. Many founders dream about making lists whose sole criterion is revenue growth.

However, if your endgame is to sell your business to a strategic acquirer one day, indiscriminate revenue growth may not result in a commensurate spike in your company’s value; in some cases, it may even detract from it.

Strategic Buyers Value What They Cannot Replace

Strategic acquirers—the buyers that usually pay the most—are looking for something they can’t easily do themselves. They covet that unique offering that would take too long—or cost too much—for them to duplicate. But the more extraneous offerings you add, the less valuable you become in their eyes.

Take Michael Lieberman, who co-founded a software company named Datastay. It revolutionized how brake manufacturers cataloged their design drawings through its product lifecycle management software. Datastay became synonymous with the brake manufacturing industry. Lieberman was on a first-name basis with almost every brake manufacturing executive in the industry. He was the man to know, the one who hosted dinners at trade shows—he was the guy.

Then Autodesk entered the picture, seeing Datastay as their gateway to the product lifecycle management software market. Autodesk, a billion dollar serial acquirer renowned for software tools indispensable to designers and builders across various sectors, acknowledged Datastay’s dominance in the brake industry and saw the potential to market Datastay’s product lifecycle management software across the myriad industries Autodesk served.

Autodesk offered Lieberman an extraordinary ten times revenue for his nine-employee company.

Had Lieberman prioritized broad revenue growth, he might have diversified his offerings to the brake manufacturers, diluting the core value that attracted Autodesk. Brake manufacturers need all sorts of other software, but Lieberman remained disciplined and focused exclusively on product lifecycle management tools.

Lieberman could have branched out to other industries, but spreading his attention to other industries would have weakened his connection to the brake industry and invited competition.

Instead, he stuck to his knitting: Make the world’s best product lifecycle management software for the brake industry.

Private Equity and Strategic Acquirers See Things Differently

Unlike the private equity acquirer that usually bases their valuation on a multiple of your Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), the typical strategic acquirer is trying to calculate what your product or service offering is worth in their hands.

The typical strategic acquirer is much larger and better resourced than the companies they target. They don’t need you to diversify for them. Instead, they want the company that has the one puzzle piece they want, and the less diversified that offering is, the higher the premium they’re prepared to pay.


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Just Add Capital

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Just Add Capital

If you’re looking to attract an investor or an acquirer one day, expect them to dig into your sales and marketing process.

If you’re a company that sells to other businesses, an investor will want to know where you get your leads from and how much each costs you to generate. They’ll want to know what technology you are utilizing to support your sales team. They’ll want to understand how your sales reps get meetings and how many appointments a good rep has each week. They’ll want to know the close rate of a high performer and how it compares to an average performer.

The investor’s questions aim to gauge the scalability of your sales model under significantly higher investment rather than simply to assess your past performance. Acquirers love stumbling over a business where the main constraint to growth is capital. They fall over themselves for a company that has an efficient sales engine that needs more fuel (i.e., money). Most investors have lots of capital but struggle to find businesses with a sales system that won’t collapse under the weight of more money.

How Gregg Romanzo Built a Sales System

In 2004 Gregg Romanzo started an old-school freight brokering business. Most freight brokers are nothing more than a handful of people arranging shipments in return for razor-thin margins, but Romanzo realized his sales model had the potential to grow into something much bigger.

Romanzo’s model involved hiring high-potential people with a relatively modest base salary of between $40,000 and $60,000 per year and teaching them the business from scratch. He armed them with a computer and access to the best scheduling software and tied their variable compensation to the gross margin of the jobs they booked. Romanzo knew if he could get a rep to clear $100,000 per year in total compensation, he would be able to keep them for the long run.

Romanzo took his very best talent—the top one or two percent—and built a team around them so they could earn even more. This cohort of salespeople could clear three, four, or even five hundred thousand dollars in an exceptional year.

Since Romanzo paid a relatively low base salary and his people didn’t need a lot of equipment, he was able to hire a lot of salespeople. By the time he sold his company, he had 200 employees, 190 of which were salespeople. That’s 95% of his headcount dedicated to sales.

How does that compare to your company? If you have a winning formula you think would hold up if you doubled or quadrupled your sales team, consider monetizing the sales model you’ve created. Either hire a lot more reps or show a deep-pocketed investor or acquirer how durable your sales model is and how all you need is their capital to grow it.

To learn more about our program and see how we can help you prepare for the sale of your business go to

The Switzerland Structure

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The Switzerland Structure

One of the eight factors that impact the value of your company is something the team at The Value Builder SystemÔ refers to as “The Switzerland Structure,” which emphasizes the importance of business independence. It cautions against excessive reliance on any single entity, whether suppliers, employees, or customers. While many business owners recognize the risks associated with dependency on a high-profile customer or employee, the hazards of anchoring to a single supplier are often overlooked.

Supplier dependency comes in many flavors, but the most pernicious is a dependency on a single marketing supplier for sales leads, such as a dominant e-commerce site or social media platform.

6 Ways Marketing Supplier Dependency Cuts Your Value

Amazon, for instance, is a prime example where businesses heavily invest to gain market access and visibility. However, dependence on a single sales platform like Amazon can devalue a business in the eyes of investors or acquirers for several reasons:

  1. Increased Risk Exposure: Sole reliance on one platform exposes a business to risks of sudden policy, fee, or algorithm changes. Such negative alterations by the platform could significantly impact the business’s sales and profitability.
  2. Lack of Diversification: Over-dependence on a single channel is perceived as a vulnerability, while a diversified sales approach suggests resilience and adaptability, appealing attributes to both investors and acquirers.
  3. Limited Growth Potential: Exclusive reliance on one platform can restrict a company’s growth opportunities. Investors typically favor businesses with multiple channels for growth. Being bound to one platform can limit a business’s potential for expansion.
  4. Brand and Customer Relationship Limitations: Operating primarily through a third-party platform may lead to limited customer interaction, hindering the development of a strong brand identity and customer loyalty, both highly valued by investors.
  5. Negotiating Power and Autonomy: Dependence on a platform like Amazon can reduce control over crucial business aspects, such as pricing and customer service. Investors may view this lack of autonomy as a strategic weakness.
  6. Perception of Innovation and Independence: Businesses demonstrating innovation and independence are often more attractive to investors. Over-reliance on a single platform can create an impression of a lack of these qualities.

How Chad Maghielse Improved His Score on the Switzerland Structure

Chad Maghielse’s company, Pets Are Kids Too, originated with a simple spray to help improve his dog’s breath and swiftly expanded to over $2 million in sales with a 35% profit margin within three years, relying solely on Amazon. Recognizing the risks of this dependence on the e-commerce giant, Maghielse embarked on a path of supplier diversification.

Maghielse expanded to another e-commerce platform,, and launched his own online store. This strategy reduced Amazon’s share of his sales to 65%, while Chewy and his store contributed 30% and 5%, respectively. A significant reduction in his business’s platform risk and an increase in its appeal to potential buyers resulted from this strategic shift.

Thanks in part to Maghielse’s diversification strategy, Pets Are Kids Too was acquired in a deal that valued the company at three times its EBITDA, with a substantial portion paid up front. Maghielse’s journey highlights the critical insight that diversification not only shields against market volatility but also enhances a business’s overall value.

Embracing the Mentality of the Swiss

Reducing your reliance on a single marketing supplier not only bolsters your company’s market resilience but also notably increases its value. Adopting a Swiss-style mindset, which values independence and strategic autonomy, is more than a tactical move; it is a key strategy for achieving sustainable growth and boosting the value of your business in the long run.


To learn more about our program and see how we can help you prepare for the sale of your business go to

Core Values as a Growth Catalyst: The $14 Million Journey of Sauceda Industries   

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In the competitive third-party logistics (3PL) sector, Jay B Sauceda turned Sauceda Industries into a standout business, ultimately reaching $14 million in sales before being acquired by

His secret weapon? His core values: “Yes, And,” “Explore More,” and “Give a Sh!t.”

Talent Recruitment

Sauceda found his first significant opportunity with Howler Brothers, the digitally native purveyor or stylish and rugged outdoor gear whose leadership related to Sauceda’s core values.

Sauceda’s values weren’t mere posters on a wall but embedded into job descriptions, ensuring new hires were aligned with the company ethos. “Yes, And” fostered constructive dialogue, “Explore More” encouraged initiative, and “Give a Sh!t” signaled a commitment to quality.

In the fiercely competitive landscape for hourly workers, Sauceda utilized job ads as both a magnet and a filter. His distinctive ads read:

“We’re looking for someone who gives a shit about their work, gets annoyed with coworkers who don’t pull their weight, wants to level themselves up in a big way and cares about being somewhere long enough that people remember their name.” 

Such postings instantly distinguished Sauceda Industries from the mundane listings of competitors, drawing talent aligned with the company’s dynamic culture.

Employee Training and Metrics

New hires were introduced to Sauceda’s values through dedicated training programs. Performance evaluations considered not just revenue metrics but also the embodiment of Sauceda’s core principles. Employees who exemplified “Yes, And,” “Explore More,” and “Give a Sh!t” found themselves rewarded and recognized. Their Slack channel was full of praise for team members embodying their core values.

Creating a distinctive culture was crucial for Sauceda. He recalls, “Our values lived in our daily interactions, whether it was an employee going above and beyond for a client or in our collaborations.”

Client Relationships

The core values extended to client interactions, offering criteria for long-term partnerships. A cornerstone example was Howler Brothers, whose alignment with these values set the stage for both parties’ success. Sauceda emphasized, “When a client fits naturally with our core values, the collaboration is far more likely to be fruitful.”

A Valuable Company

Leveraging this values-centric model, Sauceda Industries grew from a 3,000-square-foot office in 2013 to a sprawling 126,000-square-foot facility with 150 employees by 2020. “We bootstrapped all the way to the top,” Sauceda asserted, attributing the company’s fast, self-funded growth to its value-driven framework.

In the competitive 3PL landscape, Sauceda Industries didn’t just serve clients; it built relationships based on shared values. Through strategic recruitment, impactful training, and a vibrant work culture, these core values helped pave the way for a business that thrived, achieving $14 million in sales before it was acquired by in 2021.


To learn more about our program and see how we can help you prepare for the sale of your business go to

3 (Creative) Ways to Get Your Business to Run Without You

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If you aspire to build a valuable company, one crucial factor is to ensure your business can operate independently without your constant involvement, but embarking on this journey can feel daunting. In this article, we’ll explore three cost-effective, simple strategies to set your business on a path to autonomy and allowing it to thrive without your constant presence.

  1. Replace yourself by niching down. 

The reason most owners can’t replace themselves is that a substitute would be too expensive. Trying to replace your breadth of experience would likely require a very high-salaried employee. If you can’t afford to replace all of what you do, niche down your core offering.

For example, Casey Cavell’s baseball business, D-Bat Academy, could have catered to a broad range of players: professionals, softball players, slow-pitch beer leaguers, fast-pitch…but instead, he got specific about who his business was for: 5- to 10-year-old kids.

Sure, he could have charged more per customer if he catered to college athletes and aspiring pros—but those elite athletes would expect to get a hitting coach with years of expertise, and Casey would have had to staff for that.

On the other hand, when you have a business where one of its primary objectives is to give an 8-year-old an awesome birthday party, well, an entry-level employee can deliver on that.

When you narrow down your offering, you can bypass the high salary that comes with someone with a wide breadth of experience.

  1. Create a question diary.

When Jodie Cook was building her social media agency, she made a conscious choice every time an employee came to ask her a question.

The easy thing to do would have been to answer the question, but she forced herself to write each question down. She turned that question diary into a business manual that documented how to do every single task required of her employees.

Her manual came in the form of an Excel spreadsheet with 50 tabs, each one documenting a specific process, like payroll for example.

Challenge yourself to do the same: When an employee asks you a question, resist the urge to just answer and move on. Document those queries, and turn them into a standard operating procedure (SOP) that enables your staff to develop expertise in their role. The go-to reference becomes the manual…instead of you.

  1. List your employees alphabetically on your site.

Most companies list their employees by seniority, with the owner and CEO as the top listing. However, this communicates that you are the most important person in your company, which will trigger everyone from salespeople to suppliers and prospective partners to want to go straight to the top by calling you.

An effective strategy to downplaying your role in your company (and getting others to step up and shoulder more) is to list employees alphabetically rather than by seniority on your company’s website. This approach can minimize the spotlight on you. Additionally, using titles like “Head of Culture” and “Head of Product” instead of “CEO” or “Owner” can further obscure your seniority, making it less likely customers will call you by default.

Getting your business to thrive without you gives you the freedom to cherry pick the projects you want to work on or just own your business and collect passive income. A business that runs without you is also a valuable, sellable asset if you ever choose to move on to a new chapter in your life. Niching down, creating SOPs, and downplaying your role on your website are all tactical things you can do today to get your business running more independently in the future


To learn more about our program and see how we can help you prepare for the sale of your business go to

Hidden Value: A 3-Part Approach to Hiring High-Potential Employees

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French economist Jean-Baptiste Say characterized an entrepreneur as one who “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.” This expands the term’s literal translation from the French for “one who undertakes” to include the concept of value creation.

Bootstrapping founders epitomize the principle of creating more value with less resources, particularly when hiring. While it may be tempting to try and hire C-level executives with extensive resumes and impressive LinkedIn profiles, smaller businesses often cannot afford those seasoned professionals. To combat this, value creators need to develop a knack for hiring talented people about to blossom.

High Potential Employees, or HIPOs, might have thin resumes—but spotting their burgeoning talent allows you to create significant value that others overlook. This is challenging to do well, however, since most HIPOs have limited credentials for you to evaluate.

Here’s a three-part process for spotting HIPOs, developed by Skubana co-founder Chad Rubin, who built his company to $5 million in revenue with the help of a team of HIPOs before deciding to sell it to 3PL Central.

Rubin criticized the traditional hiring process as “broken.” How can you evaluate a candidate’s potential in just a 45-minute meeting? Rubin’s alternative solution comes in a three-part approach:

1. Hide a Golden Egg

Many young candidates apply for any (and every) job they come across, but Rubin sought detail-oriented applicants who took the time to understand his business and the specific role. He embedded an obscure request within each job posting to identify those who had read it in full. For instance, he asked candidates to include the name of their favorite ’90s band in their cover letter. Rubin’s intention wasn’t to compile a new playlist; he wanted to see who had read the entire posting.

2. Pattern Recognition

Aware that traditional interviews wouldn’t suffice to gauge a candidate’s potential, Rubin turned to pattern recognition assessments to evaluate their intelligence. He discovered

an online puzzle that required candidates to recognize patterns in a set of images, and he found this to be a reliable measure of their intellectual potential.

3. Measure the Fit

Once satisfied with their cognitive abilities, Rubin aimed to gauge how well a candidate would mesh with his team. Instead of relying on a conventional interview, he used a Culture Index psychometric test to assess psychological attributes beyond IQ, thereby measuring their fit within the company culture.

Another psychometric assessment you can leverage is the Kolbe A Index. It measures the ways people instinctively take action and is a great barometer to use when evaluating the value that new employees will bring to your business.

Let’s walk through a concrete example of how you can use a Kolbe score to assist your hiring process. If you need a manager who will run the daily operations of your business, here’s what to look for on the four attributes Kolbe measures, on a scale from 1 to 10:

Fact Finder: 6-8

This attribute measures how someone gathers and shares information. For someone running the day-to-day operations of your business, look for the sweet spot of someone who gathers a lot of info before taking action, without succumbing to analysis paralysis.

Follow Thru: 5-8

This category focuses on how candidates organize and design. You’re looking for someone who initiates systems, structure, and organization, so they should score relatively high here.

Quick Start: 4-6

This one’s about how a candidate deals with risk and uncertainty. Look for someone with a healthy dose of risk aversion. Watch out though, because if they score too low, say a 1, they might not be a fit for an entrepreneurial company.

Implementor: 3-7

The last bucket covers how candidates handle space and tangibles. Ideally, you’ll find someone in the middle who is able to keep things working the way they should, and construct tangible solutions when needed.


This unique three-part hiring strategy, paired with these effective assessment tests, will empower you to consistently recruit high-potential employees—even when they’re entry-level—and unlock hidden value for your organization.


To learn more about our program and see how we can help you prepare for the sale of your business go to

“The Costly Consequence of an Unprepared Exit: Lessons from a Failed Business Sale”

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A Louisville business owner in her early 60’s in the software/services industry was looking to sell and begin her retirement. She had created and operated a successful company that employed 50-100 people and sustained rapid customer and revenue growth. She felt the company was in great shape and ready to be sold. A private equity firm expressed interest in the business and she decided to sign a LOI.



The due diligence process continued for months and she felt like they were being VERY picky, demanding documentation and details that seemed irrelevant to her. Less than two weeks before the deal closed, the firm rescinded their offer. The owner was blindsided and dejected by the whole process. She wondered what was not to like about her “baby” – the business she bootstrapped to the level of success she achieved? How could this have happened? Here’s the answer: she was not ready to exit her business. She failed to prepare her business for sale and neglected items including documenting processes, sales process structure, corporate governance best practices and other salient points the private equity firm was looking for.

She made a huge mistake, and now that mistake is compounded. She failed to have her firm “Show Ready”, as we would say in our Biz2BeachTM terminology. In other words, if you were to put on a show where your business was the star, you wouldn’t spend parts of the show explaining away why the set didn’t look right or why you were singing off key (if this show is a musical).

To further compound her agony, she realized she may have set herself back in an important way she had not yet considered. Since the first private equity firm declined to purchase her company, a subsequent sophisticated buyer will certainly ask if she has entered into any LOI in the prior five years. When she discloses that she HAS, and it failed to result in a sale, her company may be considered “damaged goods” in any future buyer’s eyes! Why? Because that’s the way humans process things. Imagine if a homeowner were to list a $500k house for $750k and not receive any offers for a year. Even if they were to lower the price closer to $500k, potential buyers have a tendency to wonder “What is wrong with a house that has been on the market for a year?” The same effect translates to any asset for sale, especially a closely-held business. Making a mistake like this comes at a cost, and in this case likely multiple millions of dollars.



The moral of the story is that owners can’t afford to wait until they feel like they are ready to retire to begin the preparation for a sale. It’s tricky, complex and requires concentrated effort and dedication. We encourage you to consider starting your journey at Here you can begin to understand the process involved in making your business “Show Ready” well ahead of time.

How First Impressions Can Drive the Value of Your Business

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The initial impression customers have of your business often influences how much they decide to spend with your company. This is well known, but have you ever considered how first impressions affect the way potential investors value your business?

When raising capital, investors’ initial perception of your business significantly impacts their valuation, affecting both the equity you’ll need to give up for growth and the company’s value when selling.

Take Jeremy Parker’s experience raising money for as an example. Investors initially perceived as a simple distributor of promotional products. Despite Parker’s efforts to position the company as more than a middleman, investors weren’t convinced. They categorized with other promotional product companies, offering Parker a low single-digit multiple of EBITDA for a stake in his business.

Parker re-strategized, presenting as an e-commerce platform with a memorable domain name and a world-class, elegant, direct-to-consumer buying experience. This shift in perception transformed from a simple distributor to a technology company in investors’ eyes. As a result, Parker received an acquisition offer that valued his $30 million company at a healthy multiple of revenue.

When it comes to raising funds or selling your business, optics matter significantly, and the way investors categorize your business in their minds plays a crucial role.

The Alibaba Discount: Why Diversification Can Hurt Your Valuation

Speaking of being categorized incorrectly inside the minds of investors, recently Chinese Internet giant Alibaba announced its intention to split into six separate businesses. In the two weeks following the announcement, Alibaba’s market value increased by $19 billion. Why would investors welcome such a move? Alibaba consists of a range of businesses resembling those of, including e-commerce, logistics, and cloud storage. Before the announcement, Alibaba was valued at just ten times their earnings forecast for next year, yet each individual business as a standalone will likely fetch a much higher multiple.

Investors often discount businesses like Alibaba, as they are compelled to purchase assets they may not be interested in. They frequently apply the lowest value multiple of a particular business to the entire group of companies. Amazon faces a similar situation. The Bloomberg Intelligence Unit estimates that Amazon’s cloud storage division, AWS, could be valued at $2–3 trillion as a standalone

business. However, as a collection of various services, from e-commerce to audiobooks and cloud storage, Amazon’s entire market capitalization is less than half (around $1 trillion) of what Bloomberg analysts believe just one of its divisions could be worth as a standalone.

Focus or Diversify? Striking a Balance Between Revenue and Valuation Goals

Investors typically prefer businesses that concentrate on dominating a single product or service rather than diversifying into various unrelated offerings. A diversified portfolio may lead investors to perceive your business as unfocused, which can result in a lower valuation. The same principle applies when you decide to sell your company. If your business appears scattered, potential acquirers may focus on your least valuable division and apply that multiple to your entire organization.

It’s essential to prioritize your goals: Do you aim to grow your business by increasing revenue or enhancing its value? While these objectives are related, they require different strategies. Pursue diversification if your primary goal is to boost revenue. However, if you’re striving for a more valuable company that could potentially be sold, maintaining a clear focus is crucial.


To learn more about our program and see how we can help you prepare for the sale of your business go to