How to Choose a QoE Provider

A New Tool for Main Street Deals#

Until recently, quality of earnings reports were a private equity tool. Middle-market and large-cap buyers commissioned them as a matter of course - the deal sizes justified the cost, and the accounting firms serving those transactions had decades of established methodology.

Small business acquisitions operated differently. Buyers relied on their own review of tax returns, maybe a conversation with the seller's accountant, and a general sense of whether the numbers felt right. For a $500K deal with clean books, that was often enough.

That's changed. As SBA lending has grown and deal sizes in the lower middle market have increased, more buyers and lenders have recognized the financial risks of acquiring a business without independent verification. QoE reports are now common in SBA transactions - but the market serving the $500K-$5M segment is still maturing. The providers are there. The standards are not.

And that creates a comparison problem. Unlike audits or compilations, QoE reports follow no uniform set of procedures. There's no required deliverable format, no mandated scope, no certification body ensuring consistency. Two providers quoting on the same deal may be proposing fundamentally different work - and their proposals may not make that obvious.

This article gives you a framework for making that comparison. And the comparison matters: in data from over 300 QoE engagements by Tonnesen Accounting Services, nearly 6 in 10 deals had seller's discretionary earnings that came in lower than advertised. The provider you choose determines whether you catch that before closing - or after.

First: Know What You're Shopping For#

Before comparing providers, get clear on what "QoE" means in practice - and where the boundaries blur.

A quality of earnings report is financial due diligence. It verifies that the seller's reported earnings are real, recurring, and sustainable. That's the core. But the edges aren't clean. Many providers include some level of customer and supplier concentration analysis. Others treat it as separate commercial work. The depth depends on the provider and the engagement.

This matters because providers use different names for overlapping services. "Quality of Earnings," "Financial Due Diligence," and sometimes just "Due Diligence" can describe meaningfully different scopes. A firm calling its service "Due Diligence" may include operational elements. A firm calling it "QoE" almost certainly focuses on financials - but how far it extends into adjacent areas like customer analysis or working capital depends entirely on who you hire.

Ask what's included. Don't assume the name tells you.

The Non-Negotiable: Proof of Cash#

If you take one thing from this article, make it this: ask every provider whether they include proof of cash.

Here's why it matters. Every piece of financial analysis in a QoE report - EBITDA adjustments, revenue trends, working capital calculations - depends on the underlying numbers being real. Bank statements are the one financial record the seller can't easily fabricate. They come from a third party. They're verifiable. Proof of cash takes those bank statements and reconciles them line by line against the business's reported revenue and expenses.

When the bank deposits match the reported revenue, you have a foundation you can trust. The financials aren't necessarily perfect, but they aren't fabricated. Every insight the QoE provider builds from there - adjustments, trend analysis, working capital assessment - sits on solid ground.

When they don't match, you've found something. Maybe it's an innocent timing difference. Maybe it's unreported cash transactions. Maybe it's outright fraud. Either way, you've identified a gap that changes how you evaluate the deal.

Without proof of cash, a QoE provider is taking the seller's financials at face value and reorganizing them. They might produce a polished report with detailed EBITDA adjustments and thoughtful analysis - but all of it rests on data they never independently verified. The insights may be sharp. They may also be built on fiction.

Not every provider includes proof of cash in their standard scope. Some skip it entirely. Some charge extra for it. This should be your first filter when comparing firms.

But don't stop at whether they include it. Ask what standard they hold themselves to. Joshua Tonnesen, CEO of Tonnesen Accounting Services, targets reconciliation within 1% of deposits and 1% of withdrawals. "We don't always get there, but we typically do," he says.

The point isn't that every provider needs to hit the same number. Proof of cash is a reconciliation exercise, and like any reconciliation, there's a point of diminishing returns. What matters is that the provider approaches it with objective rigor - a stated target, a clear process, and transparency about where gaps remain. A reconciliation that lands at 95% still gives you a strong foundation and points to the specific line items where you need further explanation from the seller. That's the whole point. Every other piece of analysis in the report builds on this verification. Without it, you're trusting the seller's numbers on faith.

What's Actually in the Report#

Here's where comparison gets hard. The QoE market doesn't have standardized tiers, even though it might look that way from the outside.

The same principle applies to scope labels. Providers often describe their service as "QoE Lite" or "Full-Scope QoE." Those labels sound meaningful, and they might be when comparing two tiers offered by the same firm. But across firms, they don't map to anything consistent. As Tonnesen puts it: "There is no real difference between a 'QoE lite' and a 'QoE' - every provider is different. I recommend people take sample reports from the providers they're considering and compare from there."

That's the right instinct. One provider's "lite" engagement may include proof of cash, forward projections, and a lender-ready deliverable. Another provider's "full scope" engagement may skip the forward projections but include a working capital peg and management interviews.

Instead of asking "lite or full," ask what specific procedures the provider performs. Here's what to compare:

Core procedures to ask about:

Tonnesen's own practice illustrates the point. "I hold our report up against full-scope QoE reports offered by other firms, and we do a lot of things they don't - like a built-in projection model," he says. "The labels don't tell you much. What matters is what's actually in the report."

Not every procedure on this list is relevant to every deal. A detailed inventory analysis matters for a distribution company but adds nothing to a professional services firm. Customer concentration analysis is critical when a business has three major clients. It's less useful for a dental practice with 2,000 patients. Working capital deep dives matter when the business carries significant receivables - less so for a car wash.

The best providers tailor their scope to the business being analyzed rather than running every procedure on every deal. When comparing firms, ask which procedures they include by default and which they add based on the specific business.

What Drives Cost#

QoE pricing in the SBA market typically falls between $5,000 and $30,000, with most engagements for deals under $5M landing in the $7,500-$15,000 range.

Deal size alone doesn't determine price. A $10,000 QoE can be used on a $500K deal or a $50M deal. The process and deliverable are largely standard - what changes is the complexity of the specific business, the scope of procedures , and the organizational structure of the provider performing the analysis.

What actually drives pricing:

• Complexity of the business. Multiple locations, mixed revenue streams, inventory-heavy operations, or unusual accounting practices all increase the work required. A single-location service business with clean QuickBooks is faster to analyze than a multi-entity manufacturing company with cash transactions.
• Industry. A restaurant with significant cash transactions requires different procedures than a SaaS company with recurring subscription revenue. Some industries have standard risk areas that require more testing.
• Quality of the seller's records. Clean, organized financials with bank statements ready to go means faster turnaround and less work. Shoebox receipts and missing records mean more hours.
• Scope of procedures. More procedures - working capital analysis, projection models, customer concentration deep dives - means more work, which means higher cost. But a provider charging less isn't necessarily doing less. They may have built more efficient processes.
• Provider overhead and team structure. A solo CPA with low overhead prices differently than a firm with multiple layers of review. Both can produce excellent work.

A common rule of thumb in the buyer community: spend no more than 0.3% of deal size on QoE. That puts you at roughly $6,000 on a $2M deal or $15,000 on a $5M deal. It's a guideline, not a rule. Complexity, industry, and the seller's record-keeping all shift what's appropriate.

How You Pay Matters#

Fixed-fee arrangements dominate buyer preference - hourly billing creates scope creep anxiety and misaligned incentives. But within fixed-fee, structures vary:

• Single fixed fee: Pay the full amount, get the full report.
• Phased engagement: Phase 1 covers preliminary EBITDA analysis at a fraction of the total cost. If the deal breaks, you stop here. Phase 2 is full diligence, triggered only if Phase 1 looks promising.
• Split billing: 50% upfront covering the preliminary report, 50% on final delivery.

Phased structures reduce your risk on deals that die early. Ask what happens to your money if the deal falls apart before the report is finished. Not every provider offers a partial refund or a stop-the-clock option.

How to Evaluate a Provider#

Most buyers find QoE firms through lender referrals, community forums, or word of mouth from other buyers and advisors. The referral network is circular - lenders recommend QoE providers, QoE providers recommend attorneys, attorneys recommend lenders. That can be helpful, but it also means you're often seeing the same small set of names without a way to compare them side by side.

VerSquare's Due Diligence provider directory gives you a structured starting point - verified providers with reviews from other SBA buyers with insights from their actual deal experiences. It's designed to make the comparison process transparent rather than referral-dependent.

Once you have a few names, evaluate them across these criteria:

1. Track record with similar deals. Has this firm done QoE work on SBA-sized transactions in your deal's range? A great provider for $50M PE deals is genuinely wrong for a $2M Main Street acquisition. The methodology differs (EBITDA vs. SDE), the deliverables differ (PE memo vs. lender-ready format), and the communication style differs.

2. The specific individuals doing your work. Not the firm - the people. Who will review your deal? What's their background? How many similar engagements have they completed? A large firm might assign your $2M deal to a junior associate to do the bulk of the work before final review by the expert. Is that a pro or a con? Ultimately, that's up to you to decide.

3. Request a sample report. This is the single most important evaluation artifact. Can you read it? Could you use the findings to renegotiate price or walk away from the deal? If the sample report is opaque or reads like an academic exercise, the final product will too.

4. Ask about client calls. Will the provider walk you through the report? Can you call them with questions as you work through the findings? A QoE report can be 30-50 pages of financial analysis. For a first-time buyer, having someone explain what the adjustments mean, where the risks are, and what to push back on in negotiations can be as valuable as the report itself.

5. Clarify all fees upfront. Understand the payment structure - fixed vs. phased vs. milestone. Ask about update and roll-forward costs. Ask what happens if the deal dies mid-engagement. Get the full picture of what you'll pay, not just the headline number.

Turnaround and Capacity#

Time kills deals. Most QoE engagements in the SBA market take 2-4 weeks. Your LOI-to-close window is usually 60-90 days, which means provider turnaround directly compresses or expands every other timeline in your deal.

But quoted turnaround and actual turnaround aren't the same thing - and the biggest variable often isn't the provider.

Tonnesen puts it simply: "We advertise 2-4 weeks for our QoE. But the biggest variable in turnaround is the seller's responsiveness, not our team."

Your QoE provider needs bank statements, tax returns, financial records, and answers to follow-up questions from the seller. A seller who takes two weeks to provide documents adds two weeks to your timeline regardless of how fast the provider works.

So yes, ask providers you are considering about their current capacity - how many active engagements they have and when they can get started. But also ask yourself about how responsive the seller has been so far. If you're already getting slow or incomplete replies during the LOI negotiation, that pattern will continue during diligence. Consider this when evaluating whether a provider's quoted timeline is realistic for your specific deal.

Under LOI, delays compound. A two-week slip in your QoE timeline doesn't just cost you two weeks. It pushes back your lender's underwriting, your attorney's document review, and potentially your closing date. Be prepared, and choose wisely to be able to move forward quickly on the analysis.

The Stakes Are Real#

Getting this comparison wrong has consequences that go well beyond the cost of the report itself. And the data shows how often sellers' numbers don't hold up.

Across 300+ QoE engagements, Tonnesen Accounting Services tracked what their analysis found relative to the seller's advertised SDE:

Read that again: in nearly 6 out of 10 deals, SDE came in lower than the seller claimed. In 1 out of 5, the gap was large enough to kill the deal outright.

What does that look like? A business listed at $2.5M based on $500K in adjusted EBITDA that actually generates $350K once you strip out one-time revenue and expenses that aren't really personal. That's a $750K overvaluation - financed with personally guaranteed SBA debt.

The QoE provider you choose determines whether you catch these problems before you sign or after you own the business.

Making Your Decision#

One more distinction worth noting: your QoE provider and your ongoing CPA don't have to be the same firm. Some providers bundle pre-close diligence with post-close accounting. That continuity can be valuable - the team that dug into the financials already understands the business when they take over the books. But don't choose a weaker QoE provider because they offer bundled accounting. Pick the best firm for the diligence work. You can always find a CPA for ongoing operations separately.

Start with proof of cash. Compare scope procedure by procedure. Evaluate the people, not the brand. Ask about client calls and hidden fees. Then check capacity against your timeline.

The framework works. Use it.