QoE (Quality of Earnings)

Definition

An accounting review that verifies the earnings you are paying for.

Why It Matters

It is the single most-skipped and most-regretted diligence spend, because the earnings are the whole basis of the price and the seller's bookkeeping is not neutral. A good one routinely moves the price by more than it costs, catching revenue booked before it was earned, add-backs that will not survive you, and customer concentration a clean P&L hides.

In numbers: A single $40,000 add-back that does not survive the review is worth $120,000 of price at a 3x multiple, which is the arithmetic that decides whether the engagement pays for itself.