FinanceValuation
QoE Haircut
Also known as: QoE adjustment, pre-LOI EBITDA gap
The gap between the founder's assumed EBITDA and the number the buyer's Quality of Earnings firm produces. It reduces the LOI before negotiations even start — same multiple, different EBITDA.
WHY IT MATTERS
Every founder carries a number in their head. The QoE haircut is what happens when a team of forensic accountants replaces that number with one they can document. The founder's add-backs — above-market salary, personal expenses, one-time costs that recur every year — get tested against a documentation standard. Some survive. Most don't. The result is a lower EBITDA, which the buyer multiplies by the same agreed-upon multiple. The LOI comes back at a number that feels like a negotiating tactic but is actually arithmetic. A founder who carried $5.7M in their head and gets a QoE number of $5.0M just lost $4.9M of purchase price at a 7× multiple — before a single deal term was negotiated. The QoE haircut is the buyer's first cut, and it happens before the deduction list even starts. Founders who commission their own sell-side QoE before going to market reduce the haircut by 70–80%, because they resolve the documentation gaps before someone else finds them.