Ed WeeksFounder & M&A Advisor, Weeks Consulting Group · Founder & M&A Advisor | Lower Middle Market at Weeks Consulting Group

Quality of Earnings: How Seller Prep Can Protect Your Price #shorts

17 Oct 2026 · 1 min

Watch on YouTube

0:52

In this short advisory, the speaker explains that sellers who skip quality‑of‑earnings (QoE) preparation often lose value to buyers when working‑capital adjustments and QoE findings are applied at signing. He illustrates the financial impact with a simple calculation: at a 6× multiple, a $150,000 rejected add‑back reduces the purchase price by $900,000. The speaker then highlights a new SBA regulation effective October 1, which requires lenders to commission an independent QoE report for business acquisitions of $3 million or more; a seller‑commissioned report does not satisfy the rule. Moreover, lenders must base loan sizing on the earnings supported by that independent report, applying a stricter 1.25× coverage requirement. The overall message is that proactive seller‑side QoE preparation can protect the transaction price and ensure compliance with the updated SBA lending standards.

Chapters

The choice is whether you see the findings first. I talked recently with a quality of earnings provider who works both sides of deals. He's seen a lot of buy-side engagements over the last 18 months where the seller did no prep work and value moved toward the buyer. Many realized they needed it near signing, when working capital and quality of earnings findings hit the purchase agreement. Here's the math: at 6 times, $150,000 of rejected add-backs is $900,000 off your price. That's an illustration, not a promise. Since October 1st, SBA lenders must order their own independent quality of earnings report when the business purchase price is $3 million or more. A report you commission as the seller doesn't satisfy that rule. And, the lender has to use the earnings that report supports when it sizes the loan, now at a stricter 1.25 times coverage.