What financial due diligence costs.

A Quality of Earnings report for a lower middle market transaction typically costs between $30,000 and $75,000. Smaller deals with clean books can come in between $15,000 and $30,000. Larger or more complex transactions, including multi-entity structures and cross-border deals, commonly exceed $100,000.

Pricing drivers, roughly in order of impact:

• Data condition. Cash-basis books, unreconciled accounts, and missing periods add hours before analysis begins.
• Number of entities. Each legal entity multiplies reconciliation work.
• Periods covered. Three years is standard, and each additional year adds cost.
• Scope. Whether working capital, proof of cash, and debt-like items are included or priced separately.
• Provider tier. National accounting firms price above regional and boutique providers.
• Timeline. Compressed deadlines carry a premium.

Most providers quote a range rather than a fixed fee, and the range widens when they have not yet seen the data.

For a business under $5 million in EBITDA, expect $15,000 to $40,000 for a scoped Quality of Earnings, and more if the engagement includes working capital, tax, and debt-like items analysis.

The problem this creates for smaller buyers is proportion. On a $3 million purchase price, a $25,000 engagement is close to 1% of the deal, and it is spent before the buyer knows whether the deal is real. Buyers acquiring at this size usually resolve this in one of three ways: negotiate a reduced scope, use a regional provider rather than a national firm, or screen the general ledger first and commission full diligence only on targets that clear the screen.

On a deal that closes, almost always. A QoE routinely identifies adjustments that move purchase price by more than the fee, and lenders generally require one regardless.

The economics are asymmetric in the buyer’s favor on a live deal. At a 5x multiple, finding $50,000 of unsupported add-backs changes price by $250,000 against a $40,000 fee. It also supports the working capital target and surfaces debt-like items that otherwise transfer to the buyer at close.

Where the value breaks down is on deals that do not close. Commissioning full diligence on a target that fails for reasons visible in the ledger is pure loss, and for buyers evaluating many targets that loss compounds. The answer is not to skip diligence. It is to sequence it.

The buyer pays for buy-side diligence, and the seller pays for a sell-side QoE they commission before going to market. Buy-side cost is not usually recoverable if the deal falls apart.

That allocation is what makes broken-deal cost a buyer problem. Sellers increasingly commission sell-side reports to control the earnings narrative early, and buyers should treat a seller-provided QoE as a useful starting document rather than a substitute for their own work. It was prepared by a firm the seller hired, to support the seller’s number.

The largest reduction comes from spending less on deals that never close, not from negotiating a lower rate.

• Screen before you commission. Analyze the general ledger before engaging a firm, so full diligence goes only to targets that survive.
• Arrive with clean data. Providers price partly on data condition, so a reconciled ledger and mapped chart of accounts lowers the quote.
• Scope deliberately. Pay for a full QoE, working capital, and debt-like items where the deal warrants it, not by default.
• Match provider to deal size. A national firm on a $4 million acquisition is usually overpaying for brand.
• Consolidate the request list. Three rounds of seller follow-up costs more than one well-built request.
• Reuse the screen. For platform acquirers running add-ons, one repeatable screening standard beats bespoke work per target.

The cheapest reliable method is to obtain the general ledger and test the seller’s add-back schedule against it, line by line, before commissioning a professional engagement.

Every claimed adjustment gets four questions: does the entry exist, is the amount right, is there documentation, and does a similar item appear in other periods. Most unsupportable add-backs fail one of those without any professional judgment required, because they fail on the arithmetic.

What this does not produce is a report a lender will accept, and buyers should not confuse the two. It produces a decision about whether the deal is worth paying to verify properly. Screen first. Spend second.