How should founders audit their V/TO Issues List before a Quality of Earnings assessment?

Question

Tyler Smith · Accepted Answer

The Issues List on the Traction side of the V/TO is an essential operational discipline, but left unmanaged, it can inadvertently sabotage a Quality of Earnings (QofE) review.

A common mistake founders make is carrying long-standing, recurring systemic problems on their long-term V/TO Issues List. When strategic acquirers review historical leadership meeting records, open issues that persist for three or four consecutive quarters highlight management negligence or structural operational bottlenecks.

To prepare for exit valuation assessments, conduct a comprehensive audit of your long-term Issues List 12 to 24 months before going to market. Separate operational anomalies from recurring systemic deficiencies. Chronic challenges related to pricing errors, gross margin leakage, or software debt must be converted into formal quarterly Rocks and resolved.

Buyers look for proactive issue resolution capability. A healthy Issues List presented during an audit demonstrates a transparent, decisive management tier that identifies root causes (IDS) and solves them permanently. By demonstrating that operational disputes and operational friction points are aggressively closed rather than deferred, you eliminate red flags that financial auditors use to recommend working capital penalties or escrow holds.