Quality of Earnings

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May 22, 2025

by a searcher from University of Southern California in Los Angeles, CA, USA

I am about to start my financial due diligence for a deal of around $5M, and before selecting who to work with, I am trying to figure out what a high-quality QOE report looks like and what topics should be covered in detail. If anyone has a sample report they can share or a list of items that should be covered, please email me at redacted
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Reply by a searcher
from University of California, Berkeley in Seattle Metropolitan Area, WA, USA
Really depends on the business, industry, and lender or investors to see what needs to be covered. You'd like to have a QoE provider who will be available to answer any questions you or your team will bring up, and one that could be fluid in the engagement to add further details. Can often be done in $1-2k range for a "Phase I" and then $3-7k for Phase 2 and beyond (say, if you need to rebuild/recast or provide detailed projections). ^redacted‌ has the Due Dilio platform which can connect you to multiple providers based on what you think you may need and your range of time/cost.
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Reply by a searcher
from Columbia University in New York, NY, USA
I went with Patrick Dichter's team at Appletree Business, highly recommend them for searchers on QoE work. You are basically trying to tie out the financial statements you receive from the business to their tax returns and bank statements. The goal is to validate the story that the sellers are telling you through the data. Key topics will be getting to a normalized SDE (validating seller adjustments), margins, cash proof using monthly bank statements, and any specific key points in diligence that you or the lenders need to validate or investigate.
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