A sell-side quality of earnings report is not a document that argues for the seller. If it were, no buyer would give it any weight, and it would be worth nothing.
A buy-side engagement works through our quality of earnings checklist.
Sell-side scope changes the fee too; see quality of earnings report cost for what drives it.
What it actually does is remove the buyer’s excuse to retrade.
The retrade is a discovery event
Price gets renegotiated after the letter of intent because the buyer found something. Not usually something dishonest — an add-back that will not survive, revenue recognized on a convention the buyer does not accept, working capital that has been managed down into the sale process, a customer concentration nobody flagged.
The moment of leverage is the surprise. A buyer who discovers a $300,000 earnings problem in week five has both a reason to reprice and a reason to distrust everything else in the file. The same $300,000, disclosed and documented in the book, is a line item that gets discussed once.
That is the entire economic case for sell-side work, and it is why the analysis has to be genuinely adversarial to be worth commissioning. An advisor who produces a flattering schedule has spent the client’s money buying a document the buyer will discard.
What the buyer is going to do anyway
Assume the buyer runs a full-period reconstruction of cash receipts and disbursements, ties it to the income statement and the tax return, and reads every add-back back to support. Increasingly they will — and where SBA financing is involved at $3 million or more of purchase price, from October 1, 2026 they are required to, with the resulting earnings figure driving the lender’s coverage calculation.
The items that most often move price:
- Owner compensation normalization. What it actually costs to replace the owner, not what the owner chose to pay themselves.
- Rent to a related party. Below-market rent to an entity the seller owns inflates EBITDA and does not transfer.
- Personal expenses run through the business. Defensible as add-backs when documented, indefensible when asserted.
- Revenue timing. Cash-basis or hybrid books with a single December adjusting entry can reshape a trailing twelve months substantially.
- Merchant settlement and the top line. Card deposits arrive net of fees on a lag; reconciling to net deposits understates revenue and misstates margin.
Detail on the last two: four things that break a proof of cash.
Timing: before the book, not after
The adjusted earnings figure in the confidential information memorandum should be the figure that survives diligence. If the analysis runs after the book is out, a problem found is a problem repriced in public, in front of every buyer in the process.
Running it first also gives the banker something more useful than a number: a documented basis for the number, which is what converts a negotiation about price into a negotiation about facts.
On cost
Published comparisons put sell-side scope at roughly 40 to 60 percent of an equivalent buy-side engagement in some framings, and modestly higher in others where the deliverable must withstand several buyers rather than one. Both are true depending on scope.
For deals in the lower middle market the arithmetic has been the obstacle rather than the logic. A traditional engagement at $25,000 and up is difficult to justify on a business selling for a few million, which is why sell-side verification has been the exception rather than the norm at that size. Automating the reconstruction changes that: our published price is $10,000 flat for a full proof of cash plus GAAP-formatted financial statements, returned within 24 and 48 hours of data ingestion respectively.
For bankers running a process
The practical value is fewer surprises, a shorter path from LOI to close, and a defensible answer when a buyer’s advisor challenges an adjustment. On a recent engagement we processed 431 manually scanned bank statements across 36 bank accounts, extracted 29,823 transactions, and reconciled at a 99.4% average match rate — with every figure traceable back to the statement line behind it.
Get in touch to scope a sell-side engagement, or to talk about running verification across a pipeline rather than one deal at a time.