Every private equity professional can define a quality of earnings analysis. Far fewer can define a GTM due diligence, which is odd, because the two sit either side of the same question. A QoE asks whether the earnings you are being shown are real. A GTM due diligence asks whether the business can produce them again. Confusing the two, or assuming one covers the other, is how growth cases get underwritten on evidence that was never designed to support them.
A QoE validates the past. A GTM due diligence underwrites the forecast. The first is an accounting exercise, the second a commercial one, and no amount of the first will substitute for the second.
What a quality of earnings analysis actually does
A QoE takes reported earnings and works out what is genuinely there. It normalises for one-off items, corrects revenue recognition, strips out owner costs that will not persist, tests working capital, and arrives at an adjusted EBITDA a buyer can rely on. It is precise, well-established work, and it is the right instrument for the job it does.
What it is not designed to do is form a view on whether the commercial function can deliver the plan. A QoE will tell you that last year’s £14m of revenue was real. It has no opinion on whether the £22m in year three is achievable, because that is not an accounting question. The evidence required to answer it — how deals are won, whether pricing holds, who actually owns the customer relationships, whether the pipeline means anything — sits outside the general ledger entirely.
This is not a criticism of QoE providers. It is a scoping problem that belongs to the buyer.
What a GTM due diligence actually does
A GTM due diligence assesses the machinery that produces revenue: the proposition and whether the market still wants it, how demand is created, how interest converts, whether customers stay and grow, and whether the whole thing is run with owners, data and a rhythm rather than heroics.
It is an inside-out exercise. Where a commercial due diligence looks outward at market size, competitive position and customer perception, a GTM due diligence looks inward at capability. The distinction matters because a business can sit in an attractive market with a defensible position and still be structurally incapable of capturing the growth the model assumes.
The output is a view on whether the plan is deliverable, what would have to be true for it to be, and a prioritised set of workstreams to make it so. That last part is the practical difference: a QoE closes when it hands over a number, whereas a GTM DD is only useful if it hands over something to do.
Side by side
| Quality of earnings | Commercial due diligence | GTM due diligence | |
|---|---|---|---|
| Question | Are the earnings real? | Is the market attractive and is the company positioned in it? | Can this business capture the growth in the plan? |
| Direction | Backward, at the ledger | Outward, at the market | Inward, at the engine |
| Primary evidence | Accounts, contracts, working capital | Market data, competitor analysis, customer interviews | CRM, pricing data, pipeline, the commercial team itself |
| Run by | Accountants | Strategy consultants | Commercial operators |
| Typical output | Adjusted EBITDA | Market view and growth case | Capability verdict and a costed plan |
| Answers “what do we do on Monday?” | No | Rarely | Yes, that is the point |
Read across the bottom row. Three workstreams, three genuinely different questions, and only one of them produces something the business can act on after completion.
Where the gap opens up
The gap appears whenever the value thesis depends on commercial improvement rather than market growth — which in mid-market private equity is most of the time. A model that assumes the company simply rides its market can be underwritten on a QoE and a CDD. A model that assumes better pricing, higher win rates, lower churn or a new segment cannot, because none of those assumptions is tested by either piece of work.
The pattern we see most often runs like this. The CDD confirms an attractive market. The QoE confirms the historic numbers. Both are correct. The growth case rests on commercial execution that neither workstream examined, and the first genuine test of it comes several months after completion, when the plan meets a team that has never operated that way.
Ask what percentage of the growth in your model comes from the market growing, and what percentage comes from the company performing better than it does today. If the second number is material, you need commercial capability evidence, and neither a QoE nor a market-facing CDD will produce it.
The same fact, read three ways
A worked example makes the difference concrete. Take a single finding available to all three workstreams: the business raised list prices 8% last year and revenue per customer rose 3%.
- The QoE reads it as revenue quality. Is the uplift recurring or one-off? Has it been recognised in the right period? Does it persist into the current year, and should the run-rate be adjusted? The conclusion is a number.
- The CDD reads it as pricing power. Can this market bear price? What did competitors do? Is there headroom against substitutes? The conclusion is a view on positioning.
- The GTM DD reads it as commercial control. The gap between 8% and 3% is five points that were given away at the point of sale. Who authorised those discounts, under what policy, and is the dispersion widening? The conclusion is a workstream with an owner and a number attached.
All three readings are correct and none is redundant. But only the third produces something to do, and the five-point gap is invisible to the other two: the QoE sees a clean uplift, the CDD sees a market that took a price rise, and neither has cause to look at transaction-level realisation.
How to scope all three without duplicating
These workstreams overlap less than people expect, and the overlaps that do exist are usually productive rather than wasteful.
- Customer contracts. The QoE reads them for revenue recognition and commitment. The GTM DD reads the same contracts for pricing behaviour, discount authority and renewal terms. Same documents, different questions, worth sharing the extraction.
- Customer interviews. A CDD interviews customers about the market and the competitive set. A GTM DD wants a smaller number of deeper conversations, including with customers who left. Coordinate the outreach; management will not thank you for three separate approaches to the same accounts.
- Revenue data. The QoE needs it clean and reconciled. The GTM DD needs it cut by cohort, segment, channel and rep. Agreeing one extract up front saves a fortnight.
On sequencing: a GTM due diligence is most valuable when it starts early enough to change the price or the plan, and least valuable when it is commissioned to confirm a decision already made. Two to four weeks is a realistic window, running alongside rather than after the financial work.
Frequently asked questions
Does a quality of earnings analysis cover commercial risk?
No. A QoE tests whether reported earnings are accurate and sustainable, which is an accounting question. Commercial risk in the forecast, such as whether pricing holds or whether the sales team can convert at the assumed rate, sits outside its scope.
Do I need both a commercial due diligence and a GTM due diligence?
It depends on where the growth in your model comes from. If the case rests on market growth and position, a commercial due diligence may be sufficient. If it rests on the company executing better than it does today, you need a view on commercial capability, which is what a GTM due diligence provides.
How long does a GTM due diligence take?
Typically two to four weeks, running in parallel with financial diligence rather than after it. The binding constraint is usually access to the CRM and to customers rather than analysis time.
Can the same provider do the QoE and the GTM due diligence?
Rarely well. They require different disciplines: one is performed by accountants working from the ledger, the other by commercial operators working from the CRM, the pricing data and the team. The evidence bases barely overlap.
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