Quality Of Earnings: Why Smart Sellers Order One First

In almost every lower middle market sale, the buyer will commission a quality of earnings report. It's an accounting firm's deep look at whether your EBITDA is real, repeatable and properly adjusted. The only question is whether you see those findings first or hear about them across the table.

What A QoE Actually Tests

A QoE goes well past your tax returns and reviewed financials. It tests how you recognize revenue, every owner and one-time expense you've added back, customer concentration, working capital trends and how cash really moves through the business. Your adjusted EBITDA is the number your price is built on, so every add-back gets questioned.

Why Waiting Costs You

When the buyer's accountants find a problem late in the process, it comes back as a lower price or tougher terms, right when you have the least time and leverage to push back. Deals agreed at one number in a letter of intent get re-traded at another. A seller who found the same issue months earlier could have fixed it, explained it or priced it in on their own terms.

What You Get By Going First

A sell-side QoE gives you a defended earnings number before you go to market. It speeds up diligence because the buyer's team starts from a well-documented file. It also tells buyers you're serious, which tends to bring stronger offers and fewer surprises.

When To Order One

Order it once you have a full fiscal year closed and your monthly books are clean, ideally three to six months before you plan to talk to buyers. That leaves you time to fix what it finds.

Our M&A team prepares owners for exactly this moment. Book a call with us this week. We'll tell you whether you're ready for a QoE, what it's likely to flag and how to walk into a sale with your number already defended.