What the firm actually samples
Invoices around period-end. Job-cost to ship. Customer scorecards. Inventory physical versus book. Related-party rent. Family payroll. The adjusted EBITDA bridge is an output, not the fieldwork. Sellers who want to survive that fieldwork should read surviving quality of earnings before the data room opens.
BizBuySell’s manufacturing median remains 2.75x SDE on the 2021–2025 sold set (Source: BizBuySell). A QoE that knocks $150,000 off SDE is a mid-six-figure price event on that base. Treat the binder like enterprise value.
What QoE is not
It is not a tax provision. It is not an equipment appraisal. It is not a Phase I. It is not a promise that next year will match last year. SBA lenders inside the $5 million 7(a) box still may require their own review even when the buyer paid for one (Source: SBA).
Census CBP 2023’s 68.4% under-20-employee share is why many Main Street files never see a full QoE (Source: Census CBP). Absence of a QoE is not proof the add-backs are clean.
| Work product | Who signs | What it decides |
|---|---|---|
| CIM recast | Broker / seller CPA | Opening earnings story |
| Quality of earnings | Independent firm | Whether that story survives |
| Tax return | CPA | Taxable income, not deal EBITDA |
When should a seller commission a sell-side QoE?
When the file is institutional, the add-back list is long, or last year’s margin jumped without an obvious cause. A sell-side report can shorten arguments. It cannot forbid the buyer from hiring their own firm.
What a manufacturing QoE spends its hours on
Cut-off: jobs billed in December that shipped in January. WIP: percent-complete that only the owner understands. Concentration: the true top ten after you combine bill-to names. Related party: rent, trucks, and the lodge. Inventory: book versus a real physical. Revenue quality: price-ups that will reverse, or a spot order that was 18% of last year.
The firm will also read the add-back schedule and kill lines that lack paper. That is why add-back and adjusted EBITDA are separate nouns. QoE is the test, not the schedule.
Sellers who want to survive should clean the items they already know are dirty before the kickoff call. The seller companion is that playbook. The glossary only names the report.
Isolation
The glossary names the report. The FAQ holds the question. Educational information only. Jason Taken is a business broker, not the QoE accountant.
When the workpapers are worth defending, book a confidential intro call.
What to send the firm on day one
Three years of tax returns, interim financials, a job-cost export, AR and AP agings, inventory by class, payroll registers, and the add-back binder. If those are not ready, you are not ready for QoE. You are ready for a cleanup month. Sellers who want a sell-side report should still expect a buyer-side rebuild. The value of sell-side work is fewer surprises, not a gag order.
If the seller owns the building and charges a token rent, the firm will reset it. If the buyer is not buying the building, that reset is a going-concern cost. Put it in the model before you argue about add-backs on the lodge. A CIM recast is the opening story. This report is the test of that story. Quality of earnings for buyers is the scope. After the workpapers are worth defending, a confidential intro call is the conversion path.
What QoE is not
It is not a CIM recast. It is not a tax provision. It is not an equipment appraisal. It is not a Phase I. It is not a promise that next year will match last year. SBA lenders inside the $5 million 7(a) box still may require their own review even when the buyer paid for one (Source: SBA). Census CBP 2023’s 68.4% under-20-employee share is why many Main Street files never see a full report (Source: Census CBP). Absence of a report is not proof the add-backs are clean.
How it shows up: as a buyer-side (or sell-side) binder that rebuilds trailing profit. A CIM should not call the broker recast a QoE. BizBuySell’s manufacturing median remains 2.75x SDE (Source: BizBuySell). A report that knocks $150,000 off SDE is a mid-six-figure price event on that base. Treat the binder like enterprise value. Surviving quality of earnings is the seller companion.