Jason Taken is a business broker. A recast he helps you stage is a conversation starter. It is not the report a PE associate will rely on.
What does a manufacturing QoE actually open?
Job-cost cut-off. Bill-and-hold. Percentage-of-completion on long jobs. Customer-owned inventory sitting in your counts. Related-party rent. Owner vehicles. One-time legal bills that somehow appear every year. Add-backs in manufacturing is the vocabulary. Adjusted EBITDA is the earnings-base sibling.
Census CBP 2023 counted 284,452 plants, 68.4% under twenty employees (Source: Census CBP). Small files still get recast. They do not always get a fifty-page institutional binder.
| Artifact | What it is | What it is not |
|---|---|---|
| CIM recast | Broker-staged conversation | A lender-grade QoE |
| Quality of earnings | Independent test of cash and earnings | A tax audit |
| Supported business valuation | Often required on 7(a) change-of-ownership | A teaser multiple |
| Tax returns | The starting pile | The ending earnings base |
| Add-back binder | Documents for every personal or one-time item | A vibe about “owner perks” |
BizBuySell’s 2021–2025 manufacturing sold set cleared at 2.75x median SDE (Source: BizBuySell). A QoE that kills $80k of add-backs moves that math more than a lunchtime argument about “the market.”
When does an SBA file need something that looks like QoE?
When the lender needs a supported valuation and a recast it can defend inside a $5 million box and a 10% injection (Source: SBA). Not every Main Street shop commissions a full institutional report. Many still need more than a spreadsheet with yellow cells.
IBBA Market Pulse Q1 2026 found 83% of deals over $5 million drew three or more offers (Source: IBBA). Competition does not spare you the recast. It often funds a better one.
Why sellers still prepare even when they do not pay the invoice
Because time is the cost. A binder that cannot show the legal invoice, the personal insurance, or the related-party rent will lose those add-backs. Buy a manufacturing business is the buyer pillar. The FAQ index only names the report.
A 223-day median close is a long exclusive to spend rescuing undocumented perks. Stage the binder before the first serious tour.
How should you read the first draft without starting a war?
Read the bridge. Every add-back that died should have a sentence. If the sentence is “insufficient support,” the cure is a document, not a speech. If the sentence is “this is recurring,” the cure is a better argument about frequency, not a louder adjective.
Revenue cut-off on long jobs is where manufacturing files bleed. A percentage-of-completion estimate that always lands on the pretty side of year-end will be tested. Bill-and-hold that exists to hit a bonus will be tested. Bring the job-cost reports before the firm has to ask twice.
Working capital in the QoE and working capital in the peg should be cousins. If the report says you need $900k of NWC and the LOI peg said “normalized” with no number, you now have a number. Write it into the purchase agreement. Do not argue the report and ignore the peg.
A first draft that kills $80k of add-backs on a 2.75x SDE file just moved the enterprise value by more than a lunchtime multiple argument. Treat the draft as math. Treat the CIM as a hypothesis.
Sellers who refuse to schedule the QoE kickoff until “after we agree on price” are scheduling a re-trade. The report is how the price becomes real. Hide from it and you will meet it later, with less leverage and a shorter exclusive.
What should you bring if someone already said “we will do a QoE”?
Three years of tax returns and interims. Bank statements if asked. The add-back list with source documents. Job-cost or WIP reports. Related-party agreements. A written peg definition. Whether the buyer’s firm has already been engaged.
A Main Street shop may not commission a fifty-page institutional binder. It still needs a recast a lender can defend. Treat “we will skip QoE because we are small” as a decision about depth, not a decision to skip documents. The add-back folder is cheaper than a re-trade.
If two buyers commission two firms, you may see two bridges. That is not a reason to pick the friendlier one and ignore the harsher one. It is a reason to reconcile the deaths. The surviving add-backs are the file. Stage the binder before the first serious tour so the draft is boring.
Treat every dead add-back as a document problem first. Speeches do not revive a line the firm marked unsupported.
A CIM recast is a hypothesis. The QoE is the test. Do not treat the first as if it were the second.
Educational information only. A QoE is not legal, tax, or appraisal advice. After the owner URL, the conversion path is a confidential intro call if you want the binder staged rather than surprised.