A quality-of-earnings review examines how reported results translate into supportable earnings. Agree on the scope with the accountant; it is not automatically an audit, a valuation or a guarantee of future cash flow.
Define the engagement and evidence
Ask what periods, records, reconciliations and procedures are included and who may rely on the work. Identify whether the review is buyer-side, seller-side or lender-requested. An engagement name alone does not tell you what was tested.
Provide books, tax records, settlements, bank activity and explanations through controlled access. The reviewer needs sufficient detail to trace material questions. Missing exports or inconsistent accounting should be recorded as limitations rather than assumed harmless.
Examine how sales become earnings
Review revenue timing, member billing, refunds, prepaid obligations and fleet collections. Distinguish successfully billed recurring accounts from trial or complimentary counts. A rising signup chart does not establish growing collected revenue.
Analyze seasonal patterns, service mix and concentration where records support them. Keep definitions and periods consistent. A proposed price increase or customer acquisition campaign belongs in a forecast rather than the historical earnings result.
Challenge normalization on both sides
Test owner adjustments and related-party costs against documents and the buyer's required operating roles. Identify expenses that may be missing or unusually low, including rent, management and recurring maintenance. Normalization can decrease as well as increase reported profit.
Separate SDE, EBITDA and other metrics explicitly. The bridge should explain how interest, depreciation, owner compensation and replacement costs are handled. Keep property and equipment scope visible before comparing transaction multiples.
Read findings with the rest of diligence
Review cash conversion, working capital and potential obligations alongside the headline adjusted number. Discuss material limitations and follow-up with the accountant. Equipment, legal, tax and environmental work still need the appropriate separate scope.
Book a call with Jason to decide what financial questions the transaction must answer. A well-scoped review can organize negotiations and lender discussions, but it does not establish the price or remove the need to investigate a particular wash.
Your decision worksheet
Use these questions to identify the records and decisions that matter to this topic. Bring the open items to your conversation; detailed documents can follow through an agreed private process.
| Question to resolve | Evidence to bring | Why it matters |
|---|---|---|
| What did the engagement actually test? | Accountant scope, procedures, periods and reliance terms. | Distinguish this review from an audit or valuation. |
| What normalization is documented? | Adjustment bridge and support for replacement costs. | Recognize both upward and downward changes to reported earnings. |
| What data limitations remain? | Missing exports, inconsistent accounting and open explanations. | Keep uncertainty visible rather than treat the headline as certified. |
| What other diligence must continue? | Equipment, property, contract and tax reviewer lists. | Do not let a financial report replace separate professional scopes. |
Sources & evidence
- IRS: sale of a business
Asset categories and purchase-price allocation; not a tax calculation. - SBA: buying an existing business or franchise
Acquisition preparation and differences between independent and franchised businesses. - SBA: 7(a) acquisition financing
Program uses and lender-led eligibility; not an approval or equity quote.
Links checked for this editorial pass on October 14, 2026. General reference material does not establish a site’s revenue, value or eligibility. Examples are illustrative where labeled.
Continue your preparation
- How to value an Illinois car wash
- Reading a car wash P&L as a buyer
- Cap rates and earnings multiples: use the right denominator
Explore an earnings and cash-flow scenario, then book a call to review your questions.
Discuss your next step
Share your wash format, county and whether you’re buying or selling. Detailed business records can follow through an agreed private process.
Book a confidential consultation ↗