Quality of Earnings

An independent look at the earnings behind a business sale, so buyers, sellers and lenders can move forward knowing what the numbers really support.

Know What You're Really Buying

Tax returns and financial statements don't always tell the full story.

When a business changes hands, the price and the financing usually rest on one number: earnings. But reported profit often includes owner perks, one-time events, accounting choices and timing quirks that won't carry forward to a new owner.


A Quality of Earnings (QoE) report digs into those numbers, separates recurring events from the noise, and explains the adjustments in plain terms. It isn't an audit. It's a focused analysis built to answer the questions that matter in a deal.


Clear answers before the closing table, not after.

What Are You Trying to Figure Out?

These are the questions that decide whether a deal closes, at what price, and on what terms. A QoE gets them answered early, while there's still time to act on answers.

Who We Help

Buyers:

Understand what you're paying for. We test reported earnings, flag risk and surface the adjustments that belong in price and terms negotiations.


Sellers:

Get ahead of the buyer's diligence. A sell-side review shows where your numbers are strong, fixes the gaps before going to market and supports your asking price.


Lenders:

Underwrite with confidence. Our reports give credit teams an independent view of normalized earnings and cash flow behind an acquisition loan.

Are these earnings sustainable after the sale?

Is the asking price supported by the numbers?

Will cash flow cover the debt service?

Is my business ready to hold up under a buyer's diligence?

The Numbers Behind the Numbers


Financial statements tell us what was reported. A QoE explains what's recurring, what isn't, and what a new owner should expect.


The scope fits the deal, but a typical report looks at:

Adjusted EBITDA

Owner, one-time and non-operating items normalized

Proof of Cash

Reported results tied to bank activity

Margins & Cost

Gross margin drivers and cost structure

Revenue Quality

Trends, seasonality and customer concentration

Working Capital

A normal level to set the peg at closing

Debt-Like Items

Obligations that should come off the price

Two Wages to Engage



Start with a quick read on deal readiness, or go straight to a full report

Deal-Readiness Shapshot


Starting at $2,500


A lighter, faster review of the key earnings drivers and red flags. Ideal for sellers preparing to go to market, or buyers deciding whether a deal is worth pursuing.

Full Quality of Earnings Report


Starting at $5,000


A complete written report on normalized earnings, cash, working capital and risk areas, ready to share with lenders, investors and the other side of the table.


This is now required for All 7(a) SBA Loans.


How It Works

01


Scope & engage


We talk through the deal, agree on scope and send a focused document request.

02


Analyze


We work through the records, ask questions and build the earnings adjustments

03


Review findings


We walk you through the draft so nothing in the final report is a surprise.

04


Deliver


You receive the final report, typically in 2-4 weeks once records are in hand.

Independent by Design

A QoE is only as useful as it is objective. Independence means the firm preparing the report has no stake in how the deal turns out and no hand in producing the numbers it's testing.

For SBA Lending


Beginning October 1, 2026 the SBA requires a Quality of Earnings report on 7(a) change-of-ownership loans with a purchase price of $3 million or more. The report must come from an independent financial professional engaged by the lender, not the buyer or the seller.


That means a seller's own report, or one passed along by a broker, won't satisfy the requirement. On these engagements we work for the lender, with a report built around normalized earnings and debt service coverage.


Below the $3 million threshold, many lenders still ask for one, and the same standard of independence applies.

In Any Transaction


Even when no rule requires it, independence is what gives a QoE its weight. Buyers, lenders and investors can rely on findings from a firm that:


  • Didn't prepare the books or tax returns under review
  • Isn't representing the other side of the deal
  • Reports what the numbers show, favorable or not


Bringing an independent firm isn't a knock on the company's accountant. Its a second, objective look that everyone at the table can trust.