Quality Of Earnings

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?

Rich Hall

Rich Hall Group, LLC

Business Advisor | CEPA Family Business Expert


Originally Published on https://www.richhallgroup.com/blog

Rich Hall Certified Exit Planning Advisor | Business Advisor | Baby Boomer

Rich is a Certified Exit Planning Advisor (CEPA) and business advisor with substantial experience in business coaching, advising, leadership development, business valuation, value acceleration, succession planning, and more. Rich is also a certified Baby Boomer!

​He is a member of Silver Fox Advisors, facilitates CEO Roundtables and nationwide mastermind groups. He was recognized as one of the Top 15 Coaches in Houston in 2022.

​Rich earned his undergraduate degree in Management Science from Georgia Tech, his MBA from the University of Houston, and his CEPA certification from the Exit Planning Institute.

He is the proud father of three sons, Jeremy, Mark, and Daniel, the grateful husband to his wife Jamie, and best friends with Bucky and Riley (dogs).