How Much Does a Quality of Earnings Report Cost?

# How Much Does a Quality of Earnings Report Cost?

$5,000 to $50,000-plus. That is the range you will find if you call ten different QoE providers today. For most lower middle market deals -- the $1M to $30M acquisitions that make up the bulk of the market -- you should expect to pay somewhere between $5,000 and $20,000. At Bedrock, we charge a flat fee of $6,000 to $12,000 depending on complexity.

The reason the range is so wide has nothing to do with the work itself being unpredictable. It has everything to do with who you hire and how they bill. A Big 4 firm running the same engagement as a focused boutique will charge three to five times more -- not because their analysis is three to five times better, but because their overhead is.

If you are reading this, you are probably under LOI, your lender or partner just told you to get a Quality of Earnings report, and you are trying to figure out what this should actually cost before you start making calls. This post will give you the real numbers.

What Drives QoE Cost Up or Down

The price of a QoE report is not random. Five factors drive it, and understanding them will help you evaluate quotes and spot providers who are padding the bill.

Deal Size and Revenue Complexity

A business doing $1.5M in revenue with one product line and clean QuickBooks books is a fundamentally different engagement than a $25M company with three revenue streams, 200 SKUs, and a mix of subscription and project-based income. More revenue means more transactions to test, more adjustments to evaluate, and more areas where earnings quality can hide.

Industry

Some industries have straightforward financials. A single-location dental practice with fee-for-service revenue is simpler to analyze than a construction company with percentage-of-completion revenue recognition, backlog analysis, and WIP schedules. Industries with complex revenue recognition, heavy inventory, or regulatory requirements take more time.

Quality of the Seller's Books

This is the single biggest variable most providers will not tell you about upfront. If the seller has a competent bookkeeper, reconciled bank accounts, and clean financial statements, the engagement moves fast. If we are working with shoe-box accounting, unreconciled accounts, and commingled personal expenses, the team spends hours just getting to a baseline before the real analysis begins.

I have seen engagements that should have been $8,000 turn into $15,000 projects because the seller's books were a disaster. The best way to avoid this as a buyer: ask the seller for their last two years of financials and bank statements before you sign the LOI. If what you receive is disorganized, budget for the higher end of any quote you get.

Timeline

Standard turnaround for a QoE report is two to three weeks. If you need it in seven business days because your LOI is expiring, expect to pay a rush premium of 25-50%. This is true across providers. Fast work requires pulling team members off other engagements, and that has a cost.

Buy-Side vs. Sell-Side

Buy-side QoE reports (ordered by the buyer) and sell-side reports (ordered by the seller before going to market) cover similar ground but serve different purposes. Sell-side reports are sometimes slightly less expensive because the seller controls the information flow and can prepare documents in advance. Buy-side reports often involve more back-and-forth with a seller who may not be fully cooperative.

QoE Cost by Deal Size

Here is what you should expect to pay for a Quality of Earnings report based on the size of the acquisition. These ranges reflect what boutique and mid-market QoE providers charge. Big 4 and large regional firms will be significantly higher -- I cover that comparison below.

| Deal Size (Enterprise Value) | Typical QoE Cost | Turnaround | Notes | |---|---|---|---| | $1M - $3M | $5,000 - $8,000 | 2 weeks | Common for SBA 7(a) acquisitions. Simpler businesses, often single-location. | | $3M - $5M | $6,000 - $10,000 | 2-3 weeks | Most common deal size for first-time buyers and search fund acquisitions. | | $5M - $10M | $8,000 - $15,000 | 2-3 weeks | Increased complexity. Multiple revenue streams, more employees, more adjustments. | | $10M - $30M | $12,000 - $25,000 | 3-4 weeks | Lower middle market. May involve multiple entities, earn-outs, working capital analysis. | | $30M+ | $25,000 - $50,000+ | 4-6 weeks | Upper middle market. Often requires specialized industry knowledge, multi-entity consolidation. |

At Bedrock, we focus on the $1M to $30M range and price engagements between $6,000 and $12,000, flat fee. Our pricing holds because we scope engagements tightly, Will McCurdy leads every engagement personally, and we do not carry the overhead of a 500-person firm.

A real example: a buyer came to us after getting quoted $22,000 from a large regional firm for a QoE on a $4.5M HVAC acquisition. We scoped the same engagement -- two years of financials, full EBITDA normalization, working capital analysis, key adjustments -- and priced it at $7,500, flat. The report was delivered in 14 business days.

Hourly vs. Flat-Fee Pricing Models

Most QoE providers price one of two ways. The model they use will tell you a lot about how the engagement will go.

Hourly Billing

The traditional approach. The firm quotes a range -- say $15,000 to $25,000 -- based on an estimated number of hours, then bills you for actual time spent. Partner time bills at $400-$600 per hour. Senior associates at $200-$350. Staff at $125-$200.

The problems with hourly billing for QoE work:

- You do not know your final cost until the engagement is over. That $15,000 estimate quietly becomes $28,000 because the seller's books took longer than expected, or because a junior associate spent 12 hours on something a senior person would have finished in three. - You are penalized for the seller's disorganization. If the seller takes a week to produce documents, the clock keeps running on follow-up emails, status calls, and re-scoping. - There is no incentive for efficiency. The firm makes more money the longer the engagement takes. That is a misaligned incentive when you are trying to close a deal on a timeline.

Flat-Fee Billing

The firm quotes a fixed price. You pay that price. If the engagement takes longer than expected, that is the firm's problem, not yours.

Flat-fee QoE work requires the provider to be good at scoping engagements. You cannot quote a flat fee if you do not know what you are getting into. Providers who offer flat fees have typically done enough engagements to accurately predict the work involved based on deal size, industry, and the quality of available financials.

At Bedrock, every engagement is flat fee. We scope the work during an initial consultation, quote a fixed price, and that is what you pay. If the seller's books are messier than expected, we absorb that. If we finish early, you do not pay less -- but you also never pay more.

| Pricing Model | Typical Range ($5M deal) | Cost Certainty | Risk to Buyer | |---|---|---|---| | Hourly (Large firm) | $18,000 - $35,000+ | Low -- final bill unknown | High -- overruns common | | Hourly (Boutique) | $10,000 - $18,000 | Medium -- tighter scoping | Medium | | Flat Fee (Boutique) | $6,000 - $12,000 | High -- price is the price | Low |

Big 4 / Large Firm vs. Boutique QoE Providers

If you call PwC, Deloitte, EY, or KPMG for a QoE on a $5M acquisition, you will likely get one of two responses: they will either decline the engagement because it is too small for their practice, or they will quote $30,000 to $50,000.

Large regional firms -- the BDOs, RSMs, Grant Thorntons of the world -- will take the engagement, but you are still looking at $20,000 to $35,000 for a deal in the $3M to $10M range.

Here is the thing nobody tells you: the actual work product is not dramatically different. A QoE report from a Big 4 firm analyzing a $5M landscaping company covers the same ground as one from a specialized boutique. Revenue quality, EBITDA adjustments, working capital, customer concentration, owner dependency -- the analysis is the analysis.

What you are paying for at a large firm is brand name, a 40-page report instead of a 20-page report (the extra 20 pages are boilerplate), and a team of six people where only one of them has done more than a handful of QoE engagements.

| Factor | Big 4 / Large Regional | Specialized Boutique | |---|---|---| | Cost ($5M deal) | $25,000 - $50,000 | $6,000 - $12,000 | | Who does the work | Junior staff, reviewed by partner | Senior practitioner, hands-on | | Turnaround | 4-6 weeks | 2-3 weeks | | Communication | Through a manager layer | Direct access to lead CPA | | Report length | 30-50 pages (heavy boilerplate) | 15-25 pages (all substance) | | Deal size comfort | $50M+ is their sweet spot | $1M - $30M is their sweet spot | | Pricing model | Hourly, overruns common | Often flat fee |

I spent years at PwC and RSM before starting Bedrock. I have been on both sides. The large firm model works well for $100M+ transactions where the complexity genuinely requires a large team. For a $3M to $30M deal, you are paying large-firm overhead for small-deal work.

Why the Cheapest QoE Is Not Always the Best Deal

I just spent several hundred words explaining why you do not need to pay Big 4 prices. Now let me explain why you should not hire the cheapest provider you can find, either.

A QoE report exists to protect you from buying a business that is worth less than you think. The stakes are not small. If the QoE misses a $200,000 EBITDA adjustment on a $4M deal valued at a 4x multiple, you are overpaying by $800,000. That is not a rounding error. That is your down payment.

Red flags in low-cost QoE providers:

- No CPA credential. Some "due diligence consultants" offer QoE-like reports without actually being CPAs. Your lender may not accept the report, and the analysis may miss accounting-specific issues. - Templated reports with no real analysis. If the provider is quoting $2,500 for a QoE, they are likely running your financials through a template and not doing the investigative work that catches real problems. They will normalize owner compensation and call it a day. - No experience in your deal's industry. A provider who has never analyzed a construction company will miss percentage-of-completion issues, backlog risk, and bonding capacity -- problems that a generalist will not even think to look for. - No direct access to the analyst. If you cannot get the person actually doing the work on the phone to discuss findings, you are buying a commodity report, not an advisory engagement.

The right QoE provider costs enough to do the work properly and saves you multiples of their fee by catching problems before you close. A $7,500 report that identifies $150,000 in unsustainable revenue is worth ten times what you paid for it.

What You Should Expect for $6,000 to $12,000

At Bedrock's price point, here is exactly what is included in every engagement:

Financial Analysis

- Two to three years of income statement normalization - Full EBITDA adjustment schedule with supporting documentation - Revenue quality analysis -- sustainability, concentration, trends - Gross margin analysis by product line or service category - Operating expense review and normalization

Working Capital

- Net working capital calculation and trend analysis - Working capital peg recommendation for the purchase agreement - Seasonal adjustment analysis where applicable

Balance Sheet Review

- Asset quality assessment - Debt and debt-like items identification - Off-balance-sheet liability review - Related party transaction analysis

Deliverables

- Detailed QoE report (typically 15-25 pages of substantive analysis) - Normalized EBITDA bridge with every adjustment explained - Management discussion call to walk through findings - Direct access to Will McCurdy throughout the engagement -- not a junior associate, not a call center

What Is Not Included (and When It Costs More)

- Tax due diligence (separate engagement, typically $3,000-$5,000 additional) - IT or operational due diligence - Legal due diligence (that is your attorney's job) - Environmental or compliance assessments

For a detailed breakdown of the types of adjustments we analyze, see our post on common QoE adjustments.

For a broader overview of what a QoE report is and why it matters, start with our complete QoE guide.

Next Steps

If you are under LOI or evaluating an acquisition and need a QoE report, here is what to do right now:

1. Gather the seller's financials. Two to three years of income statements, balance sheets, and tax returns. Bank statements for the most recent 12 months. If you do not have these yet, request them before you call any QoE provider.

2. Know your timeline. When does your LOI expire? When does your lender need the report? A standard engagement takes two to three weeks. If you need it faster, say so upfront -- it affects scoping and pricing.

3. Get two to three quotes. You now know the ranges. If someone quotes you $30,000 for a $4M deal, you know you are paying large-firm overhead. If someone quotes you $2,500, you know you are getting a template, not an analysis.

4. Ask who will actually do the work. Not who the partner is on the engagement -- who is going to be in the financials every day. At Bedrock, the answer is Will McCurdy, personally, on every engagement. At a large firm, the answer is usually a second-year associate.

5. Book a consultation. Ours is free, takes 15 minutes, and you will leave with a flat-fee quote and a clear scope of work. No pressure, no follow-up sales sequence. Schedule a consultation here.

You are making a decision that involves hundreds of thousands -- sometimes millions -- of dollars. The QoE report is the single most important piece of financial due diligence you will commission. Spend enough to get it done right. Do not spend more than you have to.