Seller readiness

What will diligence find in your numbers?

Seventeen questions drawn from what actually moves the number on lower-middle-market deals. Answer them and you get the specific findings a buyer’s advisor is likely to raise, ranked by how much they tend to cost. Nothing is sent anywhere.

Built from the patterns we see across the Quality of Earnings engagements we run each year. It is a preparation guide, not a Quality of Earnings report and not an assurance engagement.

Prefilled with an example business

How the books are kept

Are your books maintained on an accrual basis? Cash-basis books cannot show receivables or deferred revenue, so a buyer converts them first.

AccrualCash

Are your books on a cloud platform? Read access to a cloud ledger shortens diligence from weeks of document requests to a couple of days.

CloudDesktop

Have you changed accounting systems in the last three years? A migration inside the period under review distorts the trend line and can contaminate the working capital benchmark.

YesNo

Do ledger entries identify the customer? Without customer detail, revenue concentration cannot be demonstrated. It gets assumed instead.

YesOften blank

Has your accounts receivable ledger been cleaned in the last year? Uncollectable invoices carried forever inflate days sales outstanding and overstate the working capital the business appears to need.

YesNo

Is inventory physically counted, or is the balance carried forward? A balance that sits unchanged for months has not been counted, and we replace it with an estimate.

CountedCarriedNo inventory

Owner and related parties

Do you own the premises the business operates from? Rent you charge yourself gets replaced with a market rate based on the lease a buyer will actually sign.

YesNo

Is your insurance priced through a franchise or group arrangement? A new single owner is frequently quoted materially more, and that difference belongs in the earnings picture.

YesNo

Are family members on the payroll? Adjusted to a market rate for work genuinely performed, or removed entirely. This is expected, not an accusation.

YesNo

Do personal expenses run through the business? Vehicles, travel, meals, memberships. Each one needs documentation to survive as an add-back.

YesNo

Are there loans between the business and you or a related company? These are debt-like items, cleared from proceeds at close rather than assumed by the buyer.

YesNo

Revenue and customers

What share of revenue comes from your largest customer? Above roughly a quarter draws structural attention, particularly if the relationship is new or runs through you personally.

Under 15%15 to 25%Over 25%

Do you bill any work before performing it? Deposits and staged billing create deferred revenue. Invoiced is not earned, and a year-end invoice can flatter a period.

YesNo

Is any income in your top line non-operating? Sublease income and rental receipts get backed out before earnings or debt service coverage mean anything.

YesNo

Compliance exposure

Do you engage contractors in roles that resemble employment? Misclassification is an unrecorded liability, and it can push a buyer toward an asset purchase rather than a share purchase.

PossiblyNo

Is sales tax reconciled between what you collected, recorded and remitted? Unremitted amounts are debt-like. Tax recorded through the profit and loss overstates both revenue and expenses.

YesNot regularly

Do your add-backs sum to the adjusted earnings figure you present? When the components do not reconcile to the headline, the first question stops being about the adjustments.

YesNot sure

Most of this is fixable, but not quickly

Cleaning receivables, documenting add-backs and moving relationships off you personally all take months, which is why the cheapest time to find these things is before a buyer does. Once you are under exclusivity, the same findings become price adjustments rather than housekeeping.

Book a 30 minute call See how a QoE engagement runs

This tool is a preparation guide. It is not a Quality of Earnings report, it provides no assurance, and it is not a substitute for advice on your specific circumstances. Treewalk does not provide audit or attest services.

Enter your search terms and press ENTER

QoE Readiness Check

What will diligence find in your numbers?

Most of this is fixable, but not quickly