What Factors Influence the Cost of a Quality of Earnings Report?
Chris Barrett
Introduction
If you’re preparing for a business acquisition, you’ve likely heard that a Quality of Earnings (QoE) report is a must-have in your due diligence toolbox. But how much does it cost, and what exactly determines that price tag?
The cost of a QoE report can vary widely, depending on multiple factors such as the business’s size, industry, structure, and scope of the transaction. At Midwest CPA we believe in transparency, so we’re sharing pricing info with you right here, and in our recent video. Let’s break down the key pricing factors so you can confidently budget for your next deal.
What Is a Quality of Earnings (QoE) Report?
A Quality of Earnings report provides an independent, detailed analysis of a company’s financial performance, with a focus on sustainability, accuracy, and risk factors. Unlike a basic financial statement review, a QoE report helps investors and acquirers evaluate whether reported earnings truly reflect the economic reality of the business.
This report plays a critical role in decision-making—ensuring you don’t overpay, inherit hidden liabilities, or miss out on deal-breaking red flags.
Key Factors That Affect QoE Report Cost
1. Industry Complexity
Certain industries involve unique accounting treatments that require deeper analysis. For example:
- Construction or project-based businesses use percent completion accounting
- SaaS companies might have recurring revenue streams and deferred income
- Restaurants and retailers need detailed inventory tracking and daily sales analysis
These complexities impact how much time and expertise is required to evaluate the company’s true earnings power.
2. Number of Locations or Entities
A business operating from a single location is vastly different from one with multiple sites or entities. Take a restaurant chain with 10 locations, for example—you can’t analyze it as a whole. Each location requires its own financial review, often tripling the workload. More entities also mean more intercompany transactions, reconciliations, and reporting nuances to assess.
3. Carve-Out vs. Standalone Acquisition
If you’re purchasing a carve-out from a larger parent company, things get more complex. Your CPA must identify and separate:
- Shared expenses like marketing, payroll, or administration
- Revenue streams exclusive to the entity being sold
- Overhead allocations and contractual obligations
This often requires custom analysis and additional time, especially when the financials aren’t cleanly segmented.
4. Business Size and Revenue Scope
Naturally, larger businesses have more moving parts. More employees, product lines, customer types, and systems mean it takes more time to evaluate earnings quality.
For instance, a $1.5M annual revenue company will require significantly less scrutiny than a $12M business operating across several verticals. The bigger the business, the bigger the diligence.
QoE Pricing Tiers – What You Can Expect to Pay
Small Deals (Under $2.5M in Revenue)
Cost Range: $12,000 – $15,000
Ideal for simple, single-location businesses
Minimal complexity; faster turnaround
Mid-Sized Deals (Under $10M Enterprise Value)
- Cost Range: $14,000 – $23,000
- Pricing varies depending on the number of locations, carve-outs, and industry specifics
- Best for growing companies with some layered complexity
Larger Deals (Over $10M Enterprise Value)
- Cost range: Starts at $25,000+
- Requires a custom scope of work
- Involves deep financial, operational, and risk reviews
Why Choose Midwest CPA for Your QoE Report?
At Midwest CPA, we operate on a fixed-fee model for all QoE engagements. That means:
No surprises on your invoice
You can ask questions anytime, without worrying about hourly charges
You’ll know upfront exactly what’s included in your report
This gives clients peace of mind and builds a collaborative partnership, not a transactional relationship.
Historically, your options for QoE reports were limited to big firms with high prices and long timelines, or small shops with lower costs but less thoroughness.
Midwest CPA bridges the gap. We deliver the big-firm quality you need at a cost-effective price point designed for independent sponsors, search funds, and small business buyers.
Our niche is small business acquisitions, which means we’re not guessing—we know what works. We are handling deals like this all the time, and know how to guide you through step by step.
Final Thoughts: Budgeting Smart for QoE Reports
A Quality of Earnings report is more than a checkbox—it’s your financial safeguard. Understanding what affects the cost helps you:
Budget wisely
Choose the right provider
Avoid under-scoping the work
Whether you’re eyeing your first small acquisition or tackling a multi-entity deal, Midwest CPA is here to support you with clear pricing, proven expertise, and unmatched diligence. Reach out to us today here! We look forward to working with you.
Disclaimer
The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting, or investment advice. You should consult a qualified legal or tax professional regarding your specific situation.
Frequently Asked Questions
The timeframe can vary depending on the size and complexity of the business, but it typically takes 2 to 4 weeks. Factors such as the availability of financial records and the scope of the analysis can impact the timeline.
No. With a fixed-fee model, your pricing is set. If diligence uncovers red flags and you walk away, you’re not penalized for being thorough.
Absolutely. A QoE provides independent verification, exposes hidden risks, and gives confidence to investors, lenders, and stakeholders—your review is not a substitute.
While some firms offer stripped-down versions, we believe in comprehensive coverage. However, if the deal is simple, certain steps can be executed more efficiently to keep costs reasonable.
