Guidance on QofE

December 12, 2024

by a searcher from Portland State University in Seattle, WA, USA

Hello world! I am new to this community and excited to start this journey.

I was wondering if you had thoughts/recommendations around:
1. When is a QofE needed? Are there instances when you don’t require it?
2. Do you have recommendations for providers that do QofE?
3. What should I look for when vetting a QofE provider?
4. What are the price ranges I should expect?

Thanks everyone in advance!

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Reply by a searcher
from Georgetown University in Boulder, CO, USA

Hi @Ana - I interviewed nine QoE firms for my deal <$1M MVE. https://www.searchfunder.com/post/recommendation-for-qoe-service

The Seller's financials appeared to me to be very clean, and that was confirmed by my QoE provider. In retrospect, I likely *could* have gotten away without it, considering that the books passed even my initial smell test. However, the QoE provided by the firm I chose - ProSolve CPA with @AsadJan - was incredibly insightful and is helping me to keep my eyes on certain expense/revenue mixes that I likely would have missed.

Of the nine firms I interviewed, prices ranged from $2000 - $25000, and almost all of them were very solid teams that I could have chosen, so my brief and very limited recommendation is to invest in what you DON'T know. If you look at the financials and only partly know what's going on, or if you need to satisfy lenders' or investors' knowledge, invest higher in QoE. If you're financially/accounting/spreadsheet inclined but still want the analysis, there are "lite" QoE versions available on the lower end of the range.

Hope this helps.

Reply by a searcher
from Harvard University in Cambridge, MA, USA

1. I insist on it more and more, but you may not always need the full QofE. There are two main components - the databook/analysis and the report. I would always get at least a databook to get an external/professional set of eyes on the numbers. I find that QofE providers are particularly helpful in understanding NWC, and in fact they will often pay for themselves in NWC negotiations. You may not need the full written report if your lenders don't require it, though it does help a lot with investors and you learn about the business yourself as you read it. The way I see it, if you're going to spend millions on a business, you should spend some money to make sure you get it right.
2. I've had very good experiences with Kalos (Canadian firm, but they do work on US deals). KNAV is also very supportive of the community.
3. It depends on your objective, but I would say credibility is important - particularly if banks/investors require it or will see it. For example, even if you're not going with a big 4 firm, it can't hurt if the people at the firm you're going with were ex-big 4. I once passed on a Nigerian firm people told me did "good work for cheap" because I felt nobody would trust it (accurately, as it turned out, since a month later they got indicted by the SEC).
4. You can get decent work done starting around $8-10K for the databook, then an additional $10-15K for the full report. It goes up from there and you can pay $40-50K or more for a full QofE if you want a "brand."

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