The short answer
Judge a QoE provider on seven things: how much QoE work they've done, how much of it is with first-time and self-funded buyers on deals under $5 million, whether their scope covers what matters most on your deal, how likely they are to find fraud if it's there, whether they'll help you make the hard call, whether you'd trust them with your largest investment decision, and whether the price reflects real work.
Then ask every firm one question: what percentage of your QoE deals do you recommend the buyer not do, and why?
Why this choice matters more than it looks
Under LOI, you're about to make an irreversible, personally guaranteed bet, usually with most of the price borrowed. The seller and the broker are paid when the deal closes. The lender is protected by a government guarantee. You are the only person at the table whose house is on the line.
The QoE provider is often the only party whose job is to find what's wrong. That's why the choice matters, and why it's hard: every firm says it's thorough.
Seven ways to judge a QoE provider
1. QoE experience
How many quality of earnings engagements have they done, and for how long? QoE is its own discipline. It isn't a tax return and it isn't an audit. You want a firm that does this work every week, not one that fits it in around tax season.
2. Experience with first-time and self-funded buyers on small deals
Ask what percentage of their deals are under $5 million, and how many of their clients are buying their first business with a personal guarantee. A firm built for private equity deals ten times your size has different instincts. Small businesses have their own patterns — owner expenses run through the company, books kept for taxes, cash, family on payroll — and the buyer has different stakes.
3. Scope coverage
Name the three things you most need answered on this deal. Then ask how their scope covers each one. Common ones: are the earnings real, does the cash in the bank match the revenue in the books, and what will working capital need to be on day one. If their standard scope doesn't reach your top three, it's the wrong scope.
4. Fraud detection
If fraud or a major problem existed in this business, how likely are they to find it? Ask how they work:
- Do they review the general ledger itself, or only summary reports?
- Do they accept spreadsheets the seller built, or require files exported from the accounting system?
- Do they tie the books to the bank statements?
- Do they test documents — invoices, payroll records — behind the numbers?
On one deal the bank had already underwritten a $4 million loan on a business that was break-even. The fake revenue had passed through QuickBooks, the bank statements and the tax returns. It came apart when the seller couldn't produce ten invoices. (Proof of Cash: How a Seller Faked $1M in EBITDA)
5. A partner for the hard stuff
Findings arrive mid-deal. Then you have to decide what to do: close, renegotiate, restructure, or walk. When complex issues come up, will they go beyond the standard analysis and help you make the right call — or hand over a report and leave?
6. Trust
The simplest test: do you trust this person to guide the largest investment decision of your life? Talk to the person who will actually form the opinion, not just the person who sells the engagement. At Guardian, you get Elliott on your deal. No B-Team.
7. Price
Cheap means cheap. Thorough costs money.
The cost of a QoE is mostly time and judgment: how much work gets done, and how experienced the person doing it is. Digging into the ledger, asking the seller hard questions and waiting for real answers takes time. A low price usually means less of it — believing the data the seller provides, skipping the ledger, accepting one-off files that can't be traced back to the books. Compare what you're getting, not just what you're paying. See: What Does an ETA Quality of Earnings Cost?
The types of firms you'll meet
Audit and tax CPA firms. Trained to confirm that numbers tie and returns are filed correctly. Necessary skills, but that training is about whether the accounting follows the rules, not whether you should buy the business. Ask whether anyone on the team has bought or run a company.
Low-cost QoE shops. Built to finish fast and get paid. Low fees come from doing what's easy: taking the seller's data at face value, skipping the general ledger, accepting files that don't come from the accounting system.
The lender's recommended firm. Often capable. But the firm was recommended by a party whose risk is not your risk. More on that below.
Operator-led firms. Run by people who have bought businesses themselves and read the financials the way a buyer with a personal guarantee does. Guardian is built this way: Elliott Holland has been a private equity investor, an independent sponsor and a self-funded searcher, with 15+ years in small-business deals.
The two questions that tell you the most
Ask every firm on the first call:
- "What percentage of your QoE deals do you recommend the buyer not do?"
- "What are the key reasons you recommend a deal not be done?"
The number itself matters less than what's behind it. Think about what the answer tells you:
- A very low rate. If a firm almost never tells a buyer to walk, ask yourself what that implies: that nearly every seller it meets is honest and nearly every deal is sound. Is that what you've seen in your search so far?
- A higher rate. That can mean the firm looks hard enough to find problems and is willing to say so, even when the buyer, the broker and the lender all want to close.
- No answer at all. A firm that doesn't know its own rate isn't tracking the one outcome that matters most to you.
Then listen to the reasons. Can they name them? Can they give you a real example of each, and explain how they found it? A firm that can support its answer with specifics has looked. A firm that can't, probably hasn't.
A firm that has never told a buyer to walk writes reports; it doesn't make calls.
Other questions worth asking:
- Who will form the opinion on my deal, and how do I reach them during diligence?
- What share of your deals are under $5 million, with first-time or self-funded buyers?
- Do you review the general ledger? Do you tie the books to the bank?
- What do you need from the seller, and what do you do if they won't provide it?
- How long will it take, and when will I get your first read? (Guardian's QoEs take 2–4 weeks.)
- Can I see a sample report? (Guardian's Sample QoE Report)
"Why not the firm my lender recommended?"
Because your lender isn't taking on the risk. On an SBA loan, the government is guaranteeing your lender. You're the only one with a personal guarantee.
The lender's question is whether the loan meets its rules. Yours is whether this is the right business to bet your financial freedom on, at this price. A firm chosen to satisfy the lender answers the lender's question. Hire the firm that answers yours.
Red flags
- A quote before they've asked anything about the business.
- They work from summary reports or seller-built spreadsheets, not the general ledger.
- No bank tie-out in scope.
- The person you meet won't be the person doing the work.
- They can't tell you how often they recommend against a deal, or why.
- "Lender-ready" is the main selling point.
- Any compensation tied to the deal closing.
FAQ
What should I look for in a quality of earnings provider? QoE experience, experience with first-time and self-funded buyers on deals under $5 million, a scope that covers your top three questions, the ability to find fraud, help with the hard decisions, someone you trust, and a price that reflects real work.
What should I ask a QoE firm on the first call? What percentage of their deals they recommend the buyer not do, and the key reasons why.
Should I use the QoE firm my lender recommends? Not by default. On an SBA loan the government guarantees your lender; you're the one with the personal guarantee. Hire the firm that works for you.
Is a cheaper QoE good enough on a small deal? Compare scope, not price. Cheap QoEs tend to believe the seller's data because digging takes time and costs money.
When should I hire the QoE firm? As soon as the LOI is signed, so the first findings land before you spend heavily on the purchase agreement.
Have a signed LOI?
You get Elliott on your deal. No B-Team.
Related: How to Verify Seller Add-Backs Before You Close · What Does an ETA Quality of Earnings Cost? · Open Letter to Any Fool Considering Skipping Their QoE · Sample QoE Report
