Quality of Earnings Analysis
Buy-side and sell-side quality of earnings analysis for business owners, buyers, private equity groups, and lenders. Know the real earning power of the business before you sign.
What is a Quality of Earnings Analysis?
Think of it as a financial x-ray for your business. While your financial statements show what happened, a Quality of Earnings (QoE) review reveals the real earning power behind those numbers.
A QoE digs deeper than traditional financial statements to assess whether your company's earnings are sustainable, recurring, and accurately stated. It identifies adjustments to EBITDA that can significantly impact your company's valuation.
"In M&A transactions, reported earnings can be misleading. One-time gains, aggressive accounting, or hidden liabilities can distort the true financial picture. A QoE cuts through the noise."
What We Analyze
- Revenue quality and sustainability
- EBITDA adjustments and normalizations
- Working capital requirements
- Customer concentration risks
- One-time vs. recurring expenses
- Hidden liabilities and off-balance sheet items
Why You Need a Quality of Earnings Review
Whether you're buying or selling a business, understanding your true financial picture is essential. Here's what every business owner needs to know.
For Buyers
Make Informed Investment Decisions
You're about to make one of the largest investments of your career. A QoE report protects you from overpaying and surfaces risks before they become your problem.
- Avoid Overpaying
Validate that earnings are real, recurring, and accurately stated
- Uncover Hidden Risks
Identify customer concentration, pending litigation, or operational issues
- Negotiate with Confidence
Use data-driven insights to justify your offer price
- Satisfy Lenders
Banks and investors often require QoE reports for financing
For Sellers
Maximize Your Valuation
You've built your business – now get what it's worth. A sell-side QoE helps you command a stronger valuation and speed up the sale process.
- Support Your Asking Price
Document defensible EBITDA adjustments that increase value
- Speed Up the Sale
Proactively address buyer concerns before they arise
- Stay in Control
Identify and address issues before buyers find them
- Build Buyer Confidence
A clean QoE signals a well-run, transparent business
Don't leave money on the table or inherit someone else's problems.
A Quality of Earnings review is your insurance policy for the biggest financial decision of your business journey.
Quality of Earnings (QoE) Review
Ensuring Transparency, Accuracy, and Deal Readiness
Our Quality of Earnings (QoE) Review provides a comprehensive financial assessment for businesses navigating a sale, investment, or strategic decision-making process. At Harbor View Consulting, we deliver clear, data-driven insights that enhance deal confidence and maximize valuation outcomes. We serve both buy-side and sell-side clients.
Revenue Quality & Sustainability Analysis
- Breakdown of revenue streams to distinguish recurring vs. non-recurring income
- Contract retention trends and customer concentration risk assessment
- Validation of pipeline credibility and revenue forecast adjustments
Profitability & EBITDA Normalization
- Adjustments for non-recurring, discretionary, and owner-related expenses
- Margin analysis, benchmarked against industry standards
- Identification of potential cost savings and efficiency improvements
Cash Flow & Working Capital Assessment
- Evaluation of working capital needs and liquidity position
- Days Sales Outstanding (DSO) trends and cash flow constraints
- Forecast of future investments and operational expenditure
Risk & Compliance Evaluation
- Internal controls and financial risk assessment
- Compliance with accounting standards (e.g., ASC 606) and regulatory requirements
- Identification of key-person dependencies and operational vulnerabilities
Valuation Sensitivity & Deal Readiness
- Financial modeling for valuation discussions and scenario analysis
- Identification of synergies for potential buyers or investors
- Support for buyer due diligence and transaction negotiations
Other Assessments
- Technology infrastructure and integration feasibility analysis
- Federal and state historical tax filing validation
- Sales and use tax analysis to validate nexus thresholds
The Quality of Earnings Report: Cost, Timeline, and What You Receive
Every QoE is scoped to the deal in front of you, so you know what you are getting and when before work starts.
What you receive
- Adjusted EBITDA bridge with every adjustment explained
- Revenue quality and customer concentration analysis
- Net working capital analysis and a proposed peg
- Key risks and diligence findings to price into the deal
- A walkthrough of findings with you, your lender, or your counsel
Timeline
- Most engagements run three to six weeks
- Week one: data request, scoping, and management interviews
- Weeks two and three: revenue, expense, and working capital testing
- Final phase: review of preliminary findings and the final report
- Faster timelines are possible with dedicated resources
What drives cost
- Company size, number of entities, and locations
- Condition of the books: cash basis records take more work
- Number of periods analyzed
- Add-ons such as tax diligence or a systems review
- Deal timeline and how organized the data room is
Quality of Earnings vs. an Audit
An audit gives an opinion on whether financial statements follow accounting standards. A quality of earnings analysis answers a deal question: what is the sustainable, recurring earning power of this business? It adjusts EBITDA, tests working capital, and flags the risks a buyer or lender needs to price in. Audited statements are a strong starting point, and many deals still need a QoE on top of them.
Who We Work With
Owners preparing to sell, strategic and private equity buyers, and lenders financing an acquisition. We scope every engagement to the deal in front of you and walk you, your lender, or your counsel through the findings.
Why Choose Our QoE Analysis
Make confident decisions with our thorough and insightful financial analysis
Transaction Support
Comprehensive analysis supporting M&A, private equity investments, and strategic decisions.
Risk Mitigation
Identify and assess financial and operational risks before they impact your investment.
Value Creation
Uncover opportunities for operational improvement and value enhancement.
Performance Insights
Deep dive into historical performance and future growth potential.
Detailed Reporting
Clear, comprehensive reports with actionable insights and recommendations.
Expert Team
Seasoned professionals with extensive transaction advisory experience.
Client Success Stories
See how our Quality of Earnings analysis has helped clients make informed decisions
"Harbor View Consulting's Quality of Earnings review was quick and efficient. Their report gave me the confidence to move forward with the sale of my company."
CEO, IT Services Company
See a QoE engagement end to end
Read how our buy-side quality of earnings work gave a buyer clarity on adjusted EBITDA and the leverage to close on better terms.
Quality of Earnings FAQs
Straight answers to the questions buyers and sellers ask us most. More in our transaction advisory Q&A.
Revenue quality and customer concentration, EBITDA adjustments for one-time and owner-related items, working capital normalization, and a review of accounting policies, estimates, and reserves. The result is adjusted EBITDA that buyers, sellers, and lenders can rely on.
Read the full answerMost engagements run three to six weeks, depending on deal complexity, the number of entities, and how organized the data room is. We can add dedicated resources and parallel workstreams when a deal timeline is tight.
Read the full answerCost depends on scope: company size and number of entities, the condition of the books (cash basis records take more work), and add-ons like a working capital peg, tax diligence, or a systems review. Request a quote and we will scope the work with you before anything starts.
No. An audit gives an opinion on whether financial statements follow accounting standards. A QoE asks a deal question: what is the sustainable, recurring earning power of the business? It adjusts EBITDA, tests working capital, and flags risks a buyer or lender needs to price in. Many deals need both.
Buy-side QoE protects the acquirer by testing the seller's numbers and surfacing risks before price and terms are final. Sell-side QoE prepares the business for diligence, supports the asking price with defensible adjustments, and gives the seller time to fix issues before going to market.
Read the full answerWe analyze 12 to 24 months of monthly working capital, adjust for non-operating items, timing differences, seasonality, and growth, and agree which accounts are included. A clearly defined peg helps prevent post-closing disputes over the purchase price.
Read the full answerReady to Protect Your Investment?
Whether you're buying or selling, let's discuss how a Quality of Earnings review can give you confidence in your transaction.