We want to order a sell-side Quality of Earnings report, but we know we have operational inefficiencies. How do we use our weekly leadership meetings to identify and resolve these value-limiting issues before the auditors arrive?

Question

Tyler Smith · Accepted Answer

A sell-side Quality of Earnings assessment will expose every operational and financial crack in your business. Do not wait for the auditors to hand you a list of problems. Instead, use your weekly Level 10 Meeting to proactively run these issues through the IDS process. Look closely at your weekly Scorecard for red flags like inventory variances, high customer churn, or fluctuating gross margins. Put these structural bottlenecks on your Issues List and solve them permanently. For example, if your gross margin is inconsistent, use IDS to determine if the cause is poor pricing discipline, rising vendor costs, or waste in production. Assign a Rock to a leadership team member to fix the root cause. By systematically identifying and solving these operational drag factors before you launch the Quality of Earnings process, you ensure that the auditor's report reflects a clean, high-performing operation. This proactive cleanup prevents buyers from using minor operational inefficiencies as leverage to renegotiate your purchase price or demand a larger earn-out during negotiations.