Where do these numbers come from?
A quick overview of my research process
Hello to my wonderful 80 new friends reading this, in particular to the 68 new subscribers in the last 24 hours. As a reminder, I’m Andrew Lynch, a small business CFO here in the UK, and Net Income is a breakdown of the interesting coxmpanies I come across. If you like this, please share it. If you don’t like this, why the hell did you subscribe in the first place?
I’ll be the first to admit the UK has its faults.
Brexit, mild alcoholism, colonialism, Philip Schofield, always talking about the weather, constitutional monarchy — any number of reasons why you might not love Blighty.
But we do have one wonderful, wonderful resource: Companies House.
For the uninitiated, Companies House is the government body where every UK company — regardless of size — must file annual financial statements, as well as notifying about changes in ownership, details of directors, and more. The vast majority of this is public information.
So when my Twitter buddy Nik Fuller, an American, sees me sharing a company P&L, he fairly asks:
And the answer is: they’re all from Companies House. It’s a treasure trove of info. If you’re a business nerd like me, it’s incredibly fun.
Companies House also benefits from the UK government’s efforts to digitise lots of its service, so they have an open API that anyone can connect to.
Using that API, credit checking services like Experian or Dun & Bradstreet pull all that data from Companies House, format it nicely, stick it behind a paywall, and make pretty good money.
Which we can see, of course, because they have to file their financial statements with Companies House:
You also get services like Endole and Duedil that allow you to search the whole Companies House database, and filter by size, company type, location, and more.
Long story short: if you’re a business nerd like me, it’s fucking brilliant.
The research process
It’s worth pointing out first that the below is all for privately-held companies. For public companies, research is easy — head to the website, find the tab that says ‘Investors’ or ‘Investor Relations’ and start reading everything you can.
For private companies, it’s a little more complex.
The process starts with the company name. Once you have the company name and number, you can start searching.
It’s worth highlighting here that when I say company name, I’m looking for the legal entity. That’s the legal company name, not the trading name.
Most of the time, finding the company name is easy. It’s on the side of a company’s van, or on a letter or email, or on Google Maps. Most of the time it’s easiest to find on their website. For example, with Dun and Bradstreet, I googled “Dun and Bradstreet”, go to their website, and scroll down to the footer — you usually see something like this:
Bingo. Company is Dun & Bradstreet Limited, and the number is 160043.
Other times it’s slightly harder to find. For example, last week I saw a job ad for a company called Flawless Vape Shop, googled the company, and ended up on their website.
Scrolling down to the website footer, I don’t see a legal company name, just a trading name:
But have no fear! I’m not so easily defeated.
Over to the page that reveals all: the privacy policy.
Under good old GDPR, any company that holds customer data needs a privacy policy — and because it’s a legal agreement, it usually includes a section like this:
Huzzah! The company name is actually Flawless UK Vape Distribution Ltd, company number 10343378.
Failing that, one way is to visit the company’s premises and spot their certificate of Employers’ Liablity insurance. Companies are legally required to hold EL insurance and display their certificate somewhere on their premises, and the certificate will say the name of the company.
This works well for businesses like hotels and fast food restaurants where the company is probably franchised. The sign on the door might say McDonald’s, but the actual operating company is called something else. The biggest one here in Nottingham is Blades Restaurants Ltd:
The financials
To look at the company’s numbers, we can use any number of the services I’ve already mentioned. The downside is that Experian, D&B, Endole, Duedil and other services like it are all pay to play — and in some cases they’re pretty expensive. I just start with good old Companies House.
Let’s look at Flawless Vape first:
All the good stuff is in ‘Filing history,’ then filter to ‘Accounts’ — you can see all the financial statements they’ve filed with Companies House.
I’ll look at the most recent accounts they’ve filed, which is for their financial year ending 30 November 2021, and flick through to see what I find.
One thing I notice when I look at this company is that they haven’t included a full Profit and Loss statement. That’s because the reporting requirements for companies differ depending on size.
For example, if you meet two of the following three criteria, you must produce full accounts including a P&L:
Revenue above £10.2M
Total assets above £5.1M
Total employees of 50 or more
Flawless Vape has assets of £6.9M:
but only 47 employees:
which means their turnover must be below £10.2M, otherwise they’d have had to publish a full P&L.
But even with the data we have — their balance sheet, employee count, and knowing the turnover is below £10.2M — we can start to form a picture of the company.
Extra steps
Those are the basics. Find the company name and number, scope out Companies House, and use whatever info you can in their disclosures to start to form a picture of the business.
To go further, I might look at trade press, local news, LinkedIn, and others. If it’s a B2B company I might even try to get a quote from them (which I did for a portaloo company) to get an idea of pricing.
If I have access to something like Experian, you can also see the list of shareholders and amount of share capital, and the company group structure including parent companies and subsidiaries. This often reveals a tangled web of interest which is fun to chase down.
The last step would be to look at their registered office address on Google Street View. Often these are simply PO boxes, or their accountants’ offices, which aren’t much use — but sometimes, it’s a residential address. If it’s residential, you can look up the property on Rightmove or the UK Land Registry to find out how much it sold for most recently, which could give you a clue as to the wealth of the company owner.
Or it could be totally misleading bollocks. Hard to tell. But that’s the fun of it. It’s like a puzzle you’re trying to piece together over time to give you the full picture of how a business is doing. And it’s all publicly available information.
Like I said, if you’re a business nerd like me, it’s endlessly fascinating.
Carve outs
Inspired by the wonderful Acquired podcast, I’ll also have a small section at the end of every post to share what I’ve been reading and watching recently.
Two book recommendations this time. Firstly, I re-read Phil Knight’s wonderful autobiography Shoe Dog, which correctly is only 1% early family story, 90% struggle, 9% basking in the glory of success. I love this book so much.
Secondly, I’m also reading this biography of Cato, which is excellent. The co-author, Jimmy Soni, also wrote The Founders, a history of the founding of Paypal, which I also highly recommend.
Thanks for reading! If you enjoyed this post, feel free to share far and wide.
Andrew