Quality of Earnings
Know what the earnings really are before you pay for them
Zenith prepares independent Quality of Earnings reports for buyers, sellers, and lenders on lower middle market deals. Every add-back gets a verdict, every dollar of EBITDA traces to bank statements, and the finished file is built to survive the credit committee.
Exhibit B: add-back review
FY24
Owner compensation adjustment
+$185,000
AcceptedTied to the payroll register. Replacement salary benchmarked.
Legal fees, marked one-time
+$148,000
RejectedAppeared in each of the last three fiscal years. Recurring.
Vehicle and travel
+$36,000
ReducedPersonal-use portion documented at $19,400. Remainder is operating cost.
Seller's adjusted EBITDA
$1,512,000
Verified adjusted EBITDA
$1,347,400
$164,600 of claimed earnings did not survive review. At this deal's 3.8 multiple, that is $625,000 of purchase price.
Who does the work
A team of CFAs, ex-bankers, and McKinsey management consultants
The people who write the verdicts have spent their careers on the other side of this table: underwriting the credit, building the models, and sitting in the diligence rooms where a bad add-back either gets caught or gets paid for. Between them they have overseen more than 800 transactions.
Your engagement is staffed from that bench. The analyst who builds your file is the one who walks you through the findings, and the verdicts do not change based on who is paying for the report.
800+
Transactions overseen, cumulative
5 days
From complete data to a QoE Lite
The deliverable
A report where every number shows its work
You get a written report and the complete Excel workbook behind it: every reconciliation, every schedule, every flagged transaction. Nothing arrives as a conclusion you have to take on faith.
Adjusted EBITDA bridge
Reported earnings to adjusted earnings, one step per adjustment, each step tied to the document that supports it. The number your price is built on, shown with its work.
Add-back verification
Every add-back on the seller’s schedule gets a verdict: accepted, reduced, or rejected, with the evidence written next to it. No line survives on the broker’s say-so.
Proof of cash
Bank deposits reconciled to recorded revenue, month by month, for every account. On the Comprehensive tier the proof extends to the filed tax returns, a three-way tie between bank, books, and IRS.
Revenue quality
Customer concentration, retention, seasonality, and whether growth came from price or volume. A single customer at 28% of revenue changes what the business is worth.
Working capital analysis
A normalized working capital target computed from the trailing twelve months, so the peg you negotiate is a number you can defend rather than a number you were handed.
Findings log
Every issue we hit, logged with severity and dollar impact. The log is the negotiation agenda: each entry is either a price adjustment, a rep, or a walk-away.
Pricing
Three tiers, all flat
No hourly billing and no scope surprises. The price you see is the price the engagement letter says. Start wherever the deal actually is: still deciding, under LOI, or in front of a lender.
Pre-LOI Screen
Is this deal worth an LOI? Answered before you commit to anything.
$299
Flat. Delivered in 2 business days.
- Adjusted EBITDA recomputed from the seller’s own numbers
- Every claimed add-back flagged: likely to survive, likely to fail
- Revenue and margin trend, plus concentration risk where the data shows it
- A written view on whether the asking multiple is defensible
- No LOI required, and no bank statements needed to run it
This is a screen, not a Quality of Earnings report, and it will not satisfy a lender or the SBA requirement. If you move forward, the full $299 credits toward a QoE Lite or Comprehensive booked within ninety days.
Screen a dealQoE Lite
Are the earnings real? Answered before you spend on full diligence.
$2,899
Flat. Delivered in 5 business days from complete data.
- Adjusted EBITDA analysis with a verdict on every add-back
- Proof of cash against bank statements, month by month
- Monthly revenue and margin trend analysis
- Findings log with severity and dollar impact
- PDF report plus the full Excel workbook behind it
SBA Appendix 15 scope
Comprehensive QoE
The full diligence file for deals under LOI and loans a committee will underwrite.
$9,799
Flat. Delivered in 10 business days from complete data.
- Everything in QoE Lite
- Three-way cash proof: bank statements to books to filed tax returns
- Revenue quality and customer concentration analysis
- Working capital analysis with a recommended peg
- Balance sheet review including debt-like items
- Scoped to SBA SOP 50 10 8.1 Appendix 15
- Scoping call up front, findings walkthrough when the draft lands
Every engagement is covered by our money-back guarantee. Not sure which tier fits? Send us the deal and we will tell you, including when the honest answer is you do not need the bigger one.
Shopping around, as you should be? We put every provider we know of in one comparison table with their published prices, including the ones cheaper than us.
Buying with an SBA loan? A QoE may no longer be optional.
From October 1, 2026, SOP 50 10 8.1 requires an independent Quality of Earnings report on SBA change of ownership deals at or above three million dollars, and every mandated report has to include a cash proof reconciling bank statements to the books and the filed tax returns. That reconciliation is the slowest part of a manual engagement, and it is the part we automated first.
On those deals the SOP requires the lender to commission the report, so point your lender at us and we will handle the engagement on their paper. For what the new rules actually say, thresholds, exemptions, and what they do to your price, read our plain-English breakdown of the SBA QoE requirement.
The engagement
Three steps, no ceremony
01
Send the data
Monthly financials, bank statements, and tax returns through a secure upload link. Broker data-room exports are fine. We confirm the set is complete within one business day.
02
We build the file
Every month reconciled bank to books, every add-back traced to source documents, every finding logged with its dollar impact as we go.
03
Read the verdicts
The written report and the full workbook, delivered together. Comprehensive engagements include a findings walkthrough call, and we stay reachable while you negotiate.
Why this costs a fraction of the usual quote
Not because the bench is cheaper. The same CFAs and ex-bankers work your file at $2,899 that would work it at a firm quoting five figures. What changed is where their hours go.
Most of a traditional QoE invoice is reconciliation labor: analysts tying bank statements to ledgers by hand, billed by the hour at senior rates. We spent three years building software that does that layer. So the hours you pay a CFA for are spent on the part that actually requires one: which add-backs survive, what the findings mean, and what they should do to your price.
The scope is not lighter and the people are not junior. The hours are just spent where they count.
Frequently asked questions
Who actually does the analysis?
A team of CFAs, ex-investment bankers, and former McKinsey management consultants who have overseen more than 800 transactions between them. Your engagement is staffed by a senior analyst from that bench, not handed to a junior and reviewed at the end. The person who builds your file is the person who walks you through the findings.
What is the Pre-LOI Screen, and when should I use it?
It is a fast, cheap read on a deal you are still deciding about. Send the CIM or the seller’s financials and within two business days you get the adjusted EBITDA recomputed, every claimed add-back flagged as likely to survive or likely to fail, and a written view on whether the asking multiple is defensible. It is not a Quality of Earnings report and it will not satisfy a lender or the SBA requirement. It answers one question: is this deal worth an LOI and the diligence spend that follows? If you go forward, the full price credits toward a QoE Lite or Comprehensive booked within ninety days.
What do you need from us to start?
We typically work directly with the seller to perform our automated onboarding process. This generally includes monthly profit and loss statements and balance sheets for the periods under review, bank statements for every operating account, and filed tax returns. Exports from QuickBooks, Xero, or a broker’s data room all work. We send a secure upload link at kickoff, and turnaround starts when the data set is complete.
How long does it take?
QoE Lite is delivered within five business days of complete data. Comprehensive engagements are delivered within ten business days. If something in the data extends that, you hear about it in the first two days, not at the deadline.
What is the difference between QoE Lite and Comprehensive?
Lite answers one question: are the earnings real? It verifies adjusted EBITDA and proves revenue against bank deposits. Comprehensive is the full diligence file a lender expects: the cash proof extends to filed tax returns, and it adds revenue quality, customer concentration, working capital, and balance sheet review, scoped to SBA SOP 50 10 8.1 Appendix 15.
Does your involvement end when the report lands?
No. You get a walkthrough of the findings while the draft is still fresh, and we stay reachable through the negotiation. A finding you cannot use in the room is not worth much, and the questions that decide a price are the ones that come up three days after delivery when the seller’s advisor pushes back on a rejected add-back. That is part of the engagement rather than a tier above it.
Do you work buy-side or sell-side?
Both, on the same standard. A buy-side report tells you what the earnings really are before you pay for them. A sell-side report finds the problems before the buyer’s diligence team does, while there is still time to fix or explain them. The verdicts do not change based on who is paying.
Is a Quality of Earnings report the same as an audit?
No. An audit opines on whether financial statements follow GAAP. A QoE asks a different question: how much cash does this business actually generate, and will it continue? For an acquisition, the QoE question is the one your price depends on.
Will my lender accept the report?
The report is independent, evidence-cited, and scoped to what credit committees ask for. On SBA deals at or above three million dollars, the SOP requires the lender to commission the QoE, so on those deals we work on the lender’s engagement directly. Have your lender contact us and we will take it from there.
What size deals do you cover?
Purchase prices from five hundred thousand up through one hundred million dollars. Main street and SBA-financed acquisitions are the core of the practice and the reason the tiers are priced the way they are, but the bench came out of investment banking and consulting, and the work scales: we have run engagements on deals up to eighty million dollars.
Why is the price a fraction of what diligence firms quote?
Not because the bench is cheaper or the scope is lighter. Most of a traditional QoE invoice is reconciliation labor: analysts tying bank statements to ledgers by hand, billed by the hour at senior rates. We built software that does that layer, so every hour you pay a CFA for goes to the work that actually needs one: which add-backs survive, what the findings mean, and what they should do to your price. Same scope, same people, fewer billed hours.
Have a deal in diligence?
Send us the financials or the CIM and we will tell you which tier fits, what we would look at first, and exactly when you would have the report.