Avoiding Unpleasant Surprises – Why Every Seller Needs a Quality of Earnings Report


In my work with family-owned businesses and various enterprises, I’ve observed a recurring theme: the unexpected pitfalls during the acquisition process. And let me tell you, nothing derails a potential deal faster than financial surprises.

So, how do you ensure transparency and trust from both sides of the table? The answer lies in a Quality of Earnings (QoE) report.

For buyers, the due diligence phase is akin to peeling back the layers of an onion. You want to uncover the core, understand the real financial health of a company, and ensure there are no hidden liabilities.

A QoE report does precisely that. It provides a deep dive into the company’s earnings, highlighting any non-recurring items, assessing the sustainability of earnings, and giving a clear picture of the company’s financial trajectory.

Simply put, it’s your roadmap to making an informed decision.

But here’s a perspective many sellers often overlook: Why wait for the buyer to dictate the narrative?

As the owner, you’ve poured your heart and soul into your business. You know its value, its potential, and its challenges. But perception is a powerful tool.

By proactively conducting a QoE report, you’re not just preparing for the sale; you’re controlling the narrative. You’re ensuring that the story told is accurate, fair, and representative of your business’s true value.

Imagine the scenario: You’re in a negotiation, and the buyer presents a list of financial concerns. But instead of being caught off guard, you’re a step ahead. You’ve already addressed these in your QoE report, providing clarity and, more importantly, solutions.

This proactive approach not only builds trust but also positions you in a place of authority. It says, “I understand my business, and I’ve done my homework.”

In my experience, the most successful transitions are those where both parties come to the table informed, prepared, and transparent. A QoE report is not just a document; it’s a testament to your commitment to a fair and successful acquisition. It eliminates the “what-ifs” and replaces them with “here’s how.”

To my fellow business owners, I urge you:

Don’t wait for the buyer to shine a light on your financials.

Take the reins, be proactive, and ensure that the story told is the one you’ve lived, nurtured, and grown.

After all, who better to tell your business’s story than you?

Updated: Oct 19, 2023

About the author
Rich Hall of Rich Hall Group is a member of XPX Houston

A business owner is ready for a transition but not sure of the right path to follow.