Every investor dreams of discovering the next Meta, Uber, or Amazon, but they also know that it's much easier said than done.
With just over 1300 unicorns globally, finding one and attaining this level of ROI requires considerable research, a deep understanding of key market segments and relevant players, and a bit of luck. Dealmakers must recognize the potential of early-stage companies and proactively build relationships with them, all while under the pressure of beating their competition to the punch.
Getting an edge over other successful private equity and venture capital firms means understanding how to identify and connect with prime investment-ready targets faster, earlier, and more effectively. In this guide, you'll gain an insider view of M&A to augment your knowledge of how to research private companies. Let's dive into how to find annual revenue for a private company, ways to discover how much a company is worth, methods of estimating sales, and more.
Is a Private Company’s Revenue Public Information?
While a quick Google search can tell you a lot about a public company, finding operational and revenue information about private companies is a different story. In the US, private companies are not required to report or disclose financial or any other operational information to the Securities and Exchange Commission (SEC) or to the public. However, it's important to understand the two types of private companies:
- Investor-backed: Investor-backed private companies have given some percentage of company ownership to investors in exchange for capital to help grow the business.
- Bootstrapped: Bootstrapped private companies (also referred to as "founder-owned" or "pre-transacted") have not taken any outside funding from investors and are still owned entirely by founders and/or other key internal stakeholders.
To find out how much a company is worth, your research methods will likely change depending on the type of company. For instance, investor-backed private companies will usually announce funding rounds and customer wins that can give firms an idea of their size, growth, and revenue. From there, you can try to get a general idea of how much that company is worth with the founding round amount, stage, and valuation multiples of other similar-sized companies in the same industry.
But bootstrapped private companies often hold their numbers much closer to the vest. What's more, the earlier a company's stage, the more likely you should factor technology, executive experience, key milestones, the competitive landscape, and other types of information into the company valuation. In fact, more firms are beginning to develop proprietary models and projections that use data like this to determine bootstrapped company growth trajectory and investment readiness without readily available revenue data.
Nevertheless, here are some of our best tips for how to find out how much a company is worth.
7 Ways to Find Company Revenue
1. Search Company Databases
When you're trying to find a private company's revenue information, you can use the same research tools you would to try to learn about the company in general, like company databases. There are countless websites that collect information on both public and private companies, such as Crunchbase, AngelList, and PitchBook. Sites like these will sometimes give ballpark revenue estimates or at least offer a range, e.g., $1 - 10 million.
Some of these research tools, such as ZoomInfo, are geared specifically toward providing contact information for employees at a particular company. However, if you're struggling with how to find annual revenue for a private company, simply finding out how many employees they have can be used to estimate revenue, as we'll detail below.
2. Revenue per Employee
If you have access to a company's number of employees, whether it's from the company's website, LinkedIn, Google snippet, Wikipedia article, or company database, you can use that number to get an idea of how much a company is worth.
Using Industry Information
Statista has a wealth of data points, and average revenue per employee by industry is one of them (albeit it's from 2018). Let's say you're looking at a potential investment opportunity in IT with about 500 employees.
Estimated Annual Revenue = [Numbers of Employees] x [Avg. Revenue per Employee]
Given the 2018 number of $810,000 per employee, adjusting for inflation to then get $1,007,870, and multiplying that by 500, you can get an estimated annual revenue of just under $504 million.
Depending on the industry you're interested in, there may be other sites that offer more in-depth or recent information, so it's important to do a fresh search for numbers when you're doing your calculations.
Using Salary Estimates
While salary transparency isn't yet universal, the US Bureau of Labor Statistics (BLS) does publish aggregate salary data, broken down by industry, among a wealth of other data. (That said, it's worth investigating the company's website to see if they publish salaries on their job descriptions.)
Estimated Annual Revenue = [Numbers of Employees] x [Avg. Employee Annual Salary]
Let's say you're trying to estimate annual revenue for a professional services company with 150 employees, and they don't publish salary ranges. Using BLS data for average agency weekly wages of $1,508, multiplying that by 52 to get the annual salary of $78,416, and then multiplying that by the number of employees, you can estimate the company has to make at least $11,762,400 to just cover their employee salaries. Of course, this doesn't include any other operating costs, corporate taxes, etc., so you should only think of this figure as the bare minimum annual revenue.
3. Use Deal Sourcing Platforms
The best method for how to find annual revenue for a private company is through a deal sourcing platform, such as Sourcescrub. There are many ways to estimate annual revenue, each with their own pros and cons. But at the end of the day, it's a lot of time and effort to manually calculate what usually ends up being a somewhat accurate number.
Deal sourcing platforms use several private company data signals to help dealmakers “read between the lines” and better judge the growth potential of any investment opportunity. These data signals can be bucketed into 9 distinct categories:
For example, knowing if and when a private company has increased its number of employees, received industry recognition, and attended key conferences helps answer many important revenue-related questions, such as:
- How quickly is the company hiring and growing?
- Does the company have a product market fit?
- Does the company have a fully developed product?
- Are core teams (finance, marketing, etc.) built out?
- Is the company’s customer base happy and healthy?
Leading deal sourcing platforms will use these signals and inferences to provide revenue estimates for private companies. Data- and tech-savvy firms can also learn how to find the annual revenue for a private company by using these signals to develop proprietary scoring models based on their own investment theses and discoveries.
4. How to Find a Company's Sales Figures via Proxies
Without a clear view or source of funding or revenue, dealmakers can do a bit of extra research and manually calculate a rough estimate of a company's sales figures via proxies of scale: products sold, customers served, number of subscribers, etc. Take Prodigy Snacks, for example, who took one of our spots on a Best of Bootstrapped list for the food & beverage industry.
Like many other companies, they tout specific numbers on their website that are directly derived from how many products they've sold. While their products range in price and don't include tax, shipping, discounts, wholesale pricing, etc., a starter pack of 13 bars costs around $20. With their “13 million wrappers” claim, that gives a very rough estimate of $20 million in sales over the course of their business.
5. Level Up Your Google-Fu
There's a lot more to Google than simply searching for a particular phrase or company name. Google itself offers refinement tools and formatting that will help you search for exactly the information you want.
Let's say you're trying to find presentations about a specific opportunity that may offer revenue information. You could enter "site:companyname.com filetype:ppt ebidta" to find anything hosted on that domain that is a Microsoft PowerPoint file that mentions EBIDTA. Similarly, you could replace the file type with "pdf" or "doc" to potentially find annual revenue for a private company in other documents.
The key is to think outside the box. Rather than search the company site itself, why not search on industry reports or financial sites? There's a wealth of information out there if your searching skills are strong enough to find it.
6. Competition and Industry Comparison
Companies in the same industry that are similar to each other can be used to find a private company's revenue. If your investment opportunity is of a similar size to a publicly traded company, you can use the public company's data to estimate the annual revenue of your target business.
Take Kroger and H-E-B, for example. Both are grocery store chains, but Kroger is publicly traded, while H-E-B is privately owned. As of October 31, 2023, Kroger's 12-month revenue was $147.8 billion. While Kroger has an estimated 465,000 employees, H-E-B has about 30% of that at 145,000 employees.
Using Kroger's annual revenue and dividing it by three, you can first determine H-E-B should have at most $49 billion in revenue. However, private companies are usually valued at a discount, which is based on a number of variables. Considering Forbes listed H-E-B with a revenue of $43.6 billion in its 2023 Largest Private Companies list, this calculation clearly is a viable method.
7. Check the PPP Database
The COVID-19 pandemic did a number on businesses in nearly every industry, but especially those that depend on foot traffic or in-person transactions. To help the US economy stay as stable as it could, the Small Business Administration (SBA) ran the Paycheck Protection Program, offering loans to businesses that needed help to stay in business.
While the program ended in May of 2021, the data about who received loans is all public. The SBA itself has massive CSVs of PPP loan information available to the public, but there are also publications that make the PPP loan information searchable. Databases such as these let you search by a few different fields, including business name or even just industry.
Once you find the business in question, you can see where that business said the money from the loan would go. You can then use that to determine a baseline for the business' minimum operating cost. From there, using either industry averages or known data from competitors, you can use profit margins to estimate the annual revenue of a private company.
Keep in mind, though, that PPP loans were not the only aid offered by the SBA during the pandemic. You can also look for information related to their other relief programs, such as the Economic Injury Disaster Loan (EIDL), Restaurant Revitalization Fund (RRF), and Shuttered Venue Operators Grant (SVOG), to use in your calculations.
Technology to the Rescue
Not all companies post information about themselves (or have it posted/estimated for them). And that information can easily be outdated: They may have changed prices, products, and other key value indicators. Ultimately, the secret to getting a distinct edge in delivering benchmark-beating ROI comes down to where you look for data, what data you look for, and the tools you choose to discover and assess it all.
Sourcescrub uses a combination of advanced technology, artificial intelligence (AI), and human quality control to capture, validate, and connect millions of data points across online and offline sources. The result is a web of insight that not only delivers verified, high-quality company details, but also offers the context necessary to better understand entire industries and derive deeper, less obvious data signals about these companies’ growth intent.
Get started sourcing more profitable private companies with Sourcescrub's deal sourcing platform today by requesting a demo!
