09/09/2026
Why a Quality of Earnings Report Can Change the Price of Your Business
You receive an attractive offer, sign the Letter of Intent, and begin due diligence. Then the buyer questions the earnings behind your valuation.
Suddenly, the price is open for discussion again.
A Quality of Earnings report, or QoE, examines whether your earnings reflect what a buyer can reasonably expect after taking ownership. It reviews revenue recognition, add-backs, unusual income, customer concentration, and working capital.
Consider this example:
A business with $2 million in adjusted EBITDA receives an offer at a 6x multiple, creating a $12 million enterprise value.
If diligence reduces normalized EBITDA to $1.7 million, that same multiple produces a $10.2 million valuation.
That’s a potential $1.8 million difference without changing the multiple.
A sell-side QoE can help identify questionable adjustments and accounting issues before buyers raise them. Sellers then have time to address concerns and prepare supporting records. Finding those issues early gives you options.
A QoE doesn’t guarantee a higher price. It helps you understand and defend the earnings supporting your asking price.
Before going to market, ask: Can our EBITDA hold up under scrutiny?