Due Diligence · August 2026
What a Quality-of-Earnings Report Actually Buys You
"Quality of earnings," or QoE, sounds like a compliance exercise. It's closer to a home inspection you order on your own house before listing it.
Sellers who commissioned their own earnings review closed at 7.4x EBITDA. Sellers who skipped it closed at 7.0x. But that lift concentrated in deals above $50 million.
You'd rather find a problem yourself, on your own schedule, than have the buyer's inspector find it during the walkthrough and use it to knock money off the price — or walk away entirely.
What it actually checks
A QoE analysis rebuilds your EBITDA from the ground up and asks, line by line: is this number real, is it yours, and will it keep showing up after you leave? In practice that turns up things like:
- Personal expenses run through the business — a truck, a boat, a family member on payroll who doesn't work there — that a new owner won't inherit, and that should be added back to EBITDA in your favor.
- Revenue recognized too early, or one-time items dressed up as if they'll recur.
- A working capital shortfall: if you've told a buyer you'll deliver $100 of working capital at closing and only deliver $80, that's a $20 reduction in your price, straight out of your pocket.
That last point surprises a lot of first-time sellers — a QoE isn't only about what gets subtracted. Practitioners who do this work say a well-run QoE is often as much about finding legitimate positive adjustments an owner didn't know to claim as it is about catching problems.
Why the size caveat matters more than the headline stat
The 7.4x-vs-7.0x gap comes from GF Data's analysis of deals completed since Q3 2024, and it's real — but it concentrated in transactions above $50 million in enterprise value. Below that, don't expect a QoE to hand you a bigger number by itself. What it does instead is protect the number you already have.
Diligence findings and earnings discrepancies are, combined, the single largest cause of signed deals falling apart before closing — see the piece on why deals collapse. A QoE done on your own terms, months before a buyer's team starts digging, is the most direct way to keep that from happening to you.
The takeaway
If you're 12–18 months out from a possible sale, get a QoE. Above $50 million, it may earn you a real price premium. Below that, treat it as insurance — its job is making sure the number you signed an LOI at is still the number that shows up at closing.
