How to Find Financials for a Private Company

Most people give up before they even start because the lack of available data for private firms seems daunting. However, if you want to become successful in business, whether for investment purposes, partnerships, or even competitive research, you need to become resourceful.

1. Start with the basics: Talk to the Company

It might sound overly simple, but the first step should always be directly asking the company itself. Private companies aren’t obligated to disclose financials, but some are willing to share key data, especially if you’re a potential investor, partner, or vendor. Create a dialogue. Start by building trust and establishing why you need the data.

Questions to Ask:

• How is revenue growth trending over the past three years?
• Can they provide a general overview of their cost structure and profit margins?
• Do they have any debts or liabilities that are growing?

Some companies may offer detailed financials voluntarily, others might only provide limited information. This step is often a starting point, not a solution.

2. Use Industry Comparisons

If the company is tight-lipped, the next strategy involves making comparisons to similar businesses. This is where industry data, benchmarking tools, and understanding key financial metrics come into play. You can access reports from industry analysts, trade associations, or research organizations.

For example, say you're evaluating a medium-sized tech company. You could:

• Compare its size, revenue model, and market niche with publicly available financials of similar-sized public companies in the same industry.
• Use third-party data aggregators like PitchBook, PrivCo, or CB Insights to gather industry metrics, including average profit margins, revenue multiples, and costs. This can give you a broad view of where the private company might fall.

3. Talk to Competitors

Surprisingly, competitors can be a goldmine of information. By networking with competitors at industry events or even conducting informal interviews, you can glean important details about their understanding of the company's financial health.

4. Use Credit Reports

Private companies may not share their financials, but they often rely on credit for their operations. Credit reports, available from services like Dun & Bradstreet, can offer valuable financial data.

Dun & Bradstreet's reports typically include:

• Creditworthiness scores: A reflection of the company's ability to meet financial obligations.
• Business liabilities: Including debt loads, loan history, and repayment history.
• Industry data comparisons: Which allow you to compare the financial health of the company with others in the same sector.

Pro Tip: Accessing a company’s UCC filings (Uniform Commercial Code) is another way to check if the company has secured loans using assets as collateral. It’s a telling indicator of financial health, revealing debts or funding rounds.

5. Use M&A and Investment Activity Data

If the company has ever been involved in mergers, acquisitions, or private equity deals, you might be able to find financial data tucked away in those transactions. Private companies, especially in growth stages, often disclose some financial information to attract investors. Websites like PitchBook or Crunchbase may contain snippets of data related to any rounds of venture capital or private equity funding.

In these cases, you can get an approximate value of the company based on how much investors paid for shares, whether the company underwent an acquisition, or sold a majority stake.

6. Use Government Filings

Although private companies aren’t required to file financials with the SEC, they still need to submit certain documents to government agencies. For instance:

• If the company has employees, it files quarterly tax returns with the IRS. Publicly available tax lien data can sometimes offer insights into tax debts or issues with unpaid obligations.
• If the company sells products in other countries, international filings like VAT filings can provide revenue data.

7. Legal Filings and Court Records

If the company has been involved in any lawsuits or disputes, court filings can be a great source of financial information. This often includes details on assets, liabilities, and any financial strain that might have contributed to legal troubles.

8. Ask the Company’s Stakeholders

If the company won’t divulge its financials directly, talking to key stakeholders can help. This could include:

• Suppliers: They often have an idea of how timely a company is with payments, which could indicate cash flow problems.
• Employees or former employees: Sites like Glassdoor or even LinkedIn can provide insider perspectives from employees who may inadvertently reveal financial issues or discuss rapid growth.

Pro Tip: Use LinkedIn to find former employees who may be more willing to talk. When reaching out, position your request as research-oriented, not intrusive.

9. Search for Media Mentions or Investor Presentations

In some cases, private companies may have publicly shared data in interviews or presentations at industry events, especially if they were aiming to raise investment or visibility. Google News searches, trade journal articles, or event presentations from platforms like Slideshare can sometimes contain financial data in summary form.

10. Examine Publicly Available Financials of Related Entities

Lastly, sometimes financial clues come from looking at related entities. If the private company is a subsidiary or part of a larger conglomerate, the parent company’s financials may provide useful insights. Look for:

• Consolidated financial statements that may include breakdowns of subsidiaries.
• Segment reporting, which could show the contribution of each business line or geographic region.

11. Don’t Overlook Secondary Data

Other useful methods to explore a private company’s financial health can involve looking at non-traditional sources such as:

• Social media metrics: A growing follower base and engagement could be a proxy for growth, especially in industries like retail or tech.
• Real estate holdings: Information about property transactions or leases can provide clues about capital expenditure and asset values.

Conclusion

In the end, gathering financial information for a private company is like piecing together a puzzle. There’s no one-stop-shop, but by leveraging multiple sources—directly from the company, through third-party aggregators, or by using creative, indirect methods—you can often paint a surprisingly accurate picture of a company's financial health.

With persistence, attention to detail, and resourcefulness, you can uncover enough data to make informed decisions, even when the financials aren’t served up on a silver platter.