Service 02 · Quality of Earnings Analysis
Understand what
the earnings
actually show
Reported earnings and sustainable earnings are often different things. A quality of earnings analysis surfaces that difference — clearly, with every adjustment identified and explained — so you can assess the business on what it genuinely produces.
What This Delivers
Earnings that hold up to examination
The earnings figure in an information memorandum or management account is a starting point, not an answer. How those earnings were measured, what's been included or excluded, and how consistently they've been produced — these are the questions that matter for valuation and for understanding what you're actually acquiring.
A quality of earnings analysis works through those questions methodically. Each adjustment to reported earnings is identified, its basis explained, and its effect quantified. You leave with a clear view of what the business earns on a recurring, normalised basis — and where that number is less certain than it might first appear.
That view is useful whether you're a buyer setting a price, a seller preparing for scrutiny, or a lender assessing serviceability.
Normalised EBITDA
Recurring earnings identified and separated from one-off items
Full adjustment schedule
Each item noted, reasoned, and disclosed without assumption
Trend analysis
Revenue and margin trends read across multiple periods
Risk flags noted
Areas of uncertainty identified and disclosed clearly
The Challenge
Earnings figures conceal more than they reveal
EBITDA as presented rarely reflects recurring performance
Management adjustments, one-off costs excluded from the headline number, revenue recognised on a timing basis that suits the period — all of these can produce an EBITDA figure that looks attractive but doesn't hold up once the transaction is complete. Understanding what has been adjusted, and why, is fundamental to knowing what you're actually paying for.
Revenue quality is not visible in a single year
A business with one strong year and two ordinary ones looks very different from one with consistent, growing revenue. The composition of revenue — its concentration, its contractual basis, its seasonality — shapes how reliable future earnings are. These patterns only become visible across periods, and they matter considerably for valuation.
Seller adjustments and buyer adjustments often tell different stories
Sellers present their earnings in the most favourable light that accounting allows — that's to be expected. The question is whether the adjustments are supportable, consistently applied, and fully disclosed. An independent quality of earnings review gives buyers the ability to assess those adjustments on their own terms, not just accept the seller's framing.
Our Approach
A measured reading of what the earnings represent
Our quality of earnings work is built around a single question: what does this business earn, on a sustainable basis, when the accounting noise is removed? We approach that question methodically — reviewing multiple periods, reading the notes to the accounts carefully, and treating each proposed adjustment as something that needs to be explained and supported rather than accepted.
The output is an adjusted earnings schedule — typically a bridge from reported EBITDA to normalised EBITDA — with each line item documented. We also note where adjustments are uncertain or where the supporting data is limited, rather than presenting false precision.
Where relevant, we also consider revenue quality — the mix, concentration, and contractual basis of the income — since the level of earnings and the reliability of earnings are distinct questions that both matter.
01
Multi-period earnings review
We read earnings across two to three years (or more where data supports it), identifying trends, inconsistencies, and changes in accounting treatment that affect comparability.
02
Adjustment identification and testing
Each adjustment is assessed individually — whether proposed by the seller or identified by us — and supported or challenged based on the available evidence.
03
Revenue quality assessment
An examination of the mix and character of revenues — customer concentration, contract terms, recurring versus project-based income — within the scope agreed.
04
Normalised earnings bridge
A clear schedule from reported to adjusted earnings, with each item noted and its basis explained, forming the core of the deliverable report.
Working Together
An engagement built around your timetable
Quality of earnings work is often time-sensitive. We structure the engagement to fit the transaction timetable without sacrificing the care the analysis requires.
Step 1
Scope discussion
We talk through what's available in the data room, the transaction timetable, and the specific questions you need the analysis to address.
Step 2
Written proposal
Scope, fee (USD 6,500), and timeline confirmed in writing before work begins. No surprises once the engagement is underway.
Step 3
Analysis and queries
We work through the financial data carefully, raising questions as needed. You're kept informed without being overwhelmed with interim outputs.
Step 4
Report and discussion
The normalised earnings schedule and findings report are delivered, followed by a call to walk through the output with you and any advisers involved.
Investment
A fixed, transparent fee
Quality of earnings analysis is delivered at a fixed price, agreed before work begins. The scope is defined clearly — if additional work is needed, that's discussed and agreed separately.
Fixed Fee
USD 6,500
Agreed in writing prior to commencement
The fee covers the full scope as agreed. No additions without your instruction. Invoiced at project start with agreed payment terms.
What's Included
- Multi-period earnings analysis (typically two to three years)
- Reported to normalised EBITDA bridge with full adjustment notes
- Assessment and challenge of seller-proposed adjustments
- Revenue quality commentary within agreed scope
- Margin and cost structure observations
- Structured written report and debrief call
Our Method
How the analysis is conducted and presented
Every adjustment in the normalised earnings schedule is treated as a claim that needs to be supported. We look for the underlying documents — management accounts, contracts, payroll records, board minutes — that either substantiate or raise questions about each item.
Where an adjustment cannot be fully verified from the data available, we note that clearly. The schedule distinguishes between adjustments we consider well-supported, those that are reasonable but unverified, and those we consider questionable. That distinction is important — it tells you where the normalised number is reliable and where it carries more uncertainty.
The work is typically completed within ten to fifteen business days of full data access, subject to the scope and data completeness agreed at the outset.
Timeline: 10 – 15 business days from data access
Confirmed at the proposal stage. We build the timeline around the transaction schedule, with progress updates if queries arise mid-engagement.
Adjustment grading: supported, reasonable, or questioned
Each item in the bridge is assessed on the evidence available. You don't receive a single normalised number — you receive a view of how reliable each component of that number is.
Deliverable: A schedule built for use in negotiation
The normalised earnings bridge is formatted for straightforward use by you and your financial advisers — in price discussions, financing conversations, or warranty negotiations.
Our Commitment
How we stand behind the work
Fixed fee, fixed scope — no additions without agreement
The USD 6,500 fee covers the scope agreed in writing. If the review surfaces an area that would benefit from additional work, we'll tell you — and you decide whether to extend.
Honest disclosure of uncertainty, not false precision
Where the data doesn't support a definitive view, we say so. A number with a clear caveat is more useful than a number without one.
No obligation from an initial conversation
Getting in touch costs nothing. We're glad to talk through whether quality of earnings analysis is the right tool for your situation before any commitment is made.
Getting Started
A clear path from first contact to report
Quality of earnings work tends to be most useful when engaged early in the diligence process — while there's still time to use the findings in price discussions or to request further information from the seller. If you're already in exclusivity or approaching signing, it's worth talking through what's achievable in the time available.
The first step is a short conversation. From there, a scope and proposal follow within a couple of days. Work begins once the scope is agreed and the data room is accessible.
Explore Other Services
Quality of Earnings Analysis
Understand the earnings before you rely on them
If you're assessing a transaction and need a clear, honest view of what the earnings actually represent, we'd be glad to talk through how we can help.
Start a ConversationNo obligation — just an honest exchange about your situation