What is a good profit margin for a small business? Check yours in three steps

A good profit margin for a small business depends on what the business does. The ABS’s latest figures, for 2024–25, show operating profit averaging about 12% of sales across Australian industries. That runs from around 5–7% in retail and cafés to about 13% for trades and 20–28% in professional and health services. Work out your net margin excluding GST and after paying yourself a market wage, then compare it with your industry and with your own last three years.

That last condition is where most owners go wrong, and it’s where most benchmark articles stop. Here’s how to do the whole check properly.

Gross vs net profit margin: which one are you comparing?

Before you compare your margin with anyone’s, make sure it’s the same kind of margin. Owners regularly set their gross margin against someone else’s net figure and come away feeling either brilliant or doomed.

	Gross profit margin	Net profit margin
Formula	(Revenue − cost of sales) ÷ revenue	Net profit ÷ revenue
Costs taken off	Stock, materials, direct labour, freight on sales	Everything: rent, admin, insurance, software, interest, depreciation
Typical café	60–70%	Single digits
Answers	Does each sale earn enough?	Does the whole business earn enough?

How to calculate net profit margin: take net profit from your profit and loss and divide it by revenue, both excluding GST, then multiply by 100. Use a full financial year or the last 12 months. One good December can make any single month look great.

If your gross margin is the weak point, that’s a pricing and costs job, and our page on improving gross profit margin walks through the levers. This feature is about the bottom line.

Average profit margin by industry in Australia (2024–25)

The best current yardstick is the ABS’s Australian Industry release, published in June 2026. It reports sales and operating profit before tax for every industry. Divide one by the other and you get a net margin. Sales are measured excluding GST, so it lines up with your own P&L.

Industry (ABS subdivision)	Operating profit ÷ sales, 2024–25
Food retailing (grocers, butchers, bottle shops)	4.7%
Food and beverage services (cafés, restaurants, takeaway)	6.7%
Building construction	7.3%
Other store-based retailing	8.0%
Road transport	8.9%
Computer system design and IT services	10.4%
Repair and maintenance (mechanics, appliance repair)	12.3%
Construction services (plumbers, electricians, other trades)	12.8%
Personal and other services (hair, beauty, laundries)	16.0%
Professional, scientific and technical services (excluding IT)	19.7%
Medical and other health care services	27.5%
All selected industries	12.0%

Our calculation from ABS Australian Industry 2024–25, Table 1. Figures include businesses of every size.

Two things jump out. Businesses that sell products on thin margins (food retail, cafés, builders) rarely see double digits, because so much of every dollar passes straight through to suppliers. Businesses that mostly sell their own skills (clinics, accountants, engineers) keep far more, because their main cost is people, and in a small practice some of those people are the owners.

That second point matters more than any number in the table.

Why tiny businesses look twice as profitable

The same ABS release splits the data by how many people a business employs. Look at the margins:

Industry division	0–4 employees	5–19 employees
Construction	13.6%	9.8%
Retail trade	9.7%	6.3%
Accommodation and food services	17.2%	6.2%
Professional, scientific and technical services	24.6%	9.1%
Other services	24.2%	10.3%
All selected industries	21.1%	10.5%

Our calculation from ABS Australian Industry 2024–25, Table 5.

The micro businesses aren’t twice as good at business. The ABS’s methodology notes explain that the drawings of working proprietors and partners are excluded from wages, and profit is measured before appropriations to owners. In a business of one to four people, the owner is often doing a third or more of the work and none of it shows up as a cost. Their “profit” is really their wage.

The ATO’s small business benchmarks work the same way. When the ATO works out total expenses to turnover, it subtracts payments to associated persons, and its own worked example counts the owner’s wages and super as one of those payments. So 100% minus the benchmark gives you roughly the margin before the owner is paid.

That’s fine if you know it. It’s dangerous if you don’t, because a sole trader showing 20% can feel comfortably ahead of the 12% average while earning less per hour than the junior they’re thinking of hiring.

The owner’s-wage test: an illustrative salon

Here’s an illustrative example: a hair and beauty salon run by a working owner with four stylists and an apprentice. The owner works full time on the floor and runs the books, and pays themselves through drawings, not wages.

Line (excluding GST)	Amount	% of revenue
Revenue	$620,000	100%
Products and colour consumables	$74,400	12%
Staff wages and super	$260,400	42%
Rent and outgoings	$80,600	13%
Card fees, software, insurance, utilities, marketing	$49,600	8%
Depreciation and interest	$12,400	2%
Net profit before owner’s pay	$142,600	23.0%

Total expenses come to 77% of turnover. That sits at the edge of the ATO’s 2023–24 benchmark for beauty services turning over more than $400,000, which runs from 77% to 88%. On paper, a 23% margin beats the ABS’s 16% for personal services by a distance.

Now pay the owner what it would cost to replace them. Suppose a salon manager doing the same job would cost $80,000 plus 12% super, which is $89,600. (Use the Fair Work Pay and Conditions Tool to find the award rate for your industry, then add what you’d really have to pay to attract someone good.)

• Net profit before owner’s pay: $142,600
• Less a market wage plus super: $89,600
• True business profit: $53,000, or 8.5% of revenue

The “healthy 23%” is really 8.5%. That’s thin but respectable for a people-heavy service business, and it’s the honest number to manage. It also changes the decisions. At 23%, a quiet month feels like a dip. At 8.5%, two quiet months and a stylist resigning can wipe out the year.

The fix is usually price, not cost. Lifting service prices by 5% adds about $31,000 of revenue with almost no extra cost, which takes the true margin from 8.5% to roughly 12.9%. Try your own numbers in the price rise calculator, and see how to pay yourself for setting the owner’s wage itself.

If you’re looking at margins because you’re weighing up a fit-out, an extra chair or a second site, check your options with us. Your credit score isn’t touched just for asking.

Good net profit margin for a café, a trade business or a practice

Cafés and restaurants. The ABS figure for food and beverage services is 6.7%. In the ATO’s own worked example for comparing your business, a coffee shop turning over about $705,000 is expected to spend 86% to 93% of turnover. That leaves 7% to 14% before the owner takes anything. A café clearing 8–10% after a market wage for the owner is doing well. One at 3% is running on the owner’s unpaid weekends.

Trades. Construction trade services averaged 12.8% across all business sizes in 2024–25. For a sole-trader electrician or plumber, the before-wage figure will often be 30% or more, because almost everything left is the owner’s labour. Do the wage test. If what’s left after a market wage is under 5%, your hourly rate or call-out fee probably hasn’t kept up with costs.

Professional and health practices. Margins of 20% or more are normal across these industries, but they’re driven by principals who own the practice and bill most of the hours. Once you replace the principal’s time with an employed professional at market rates, low to mid teens is a good result.

Is my profit margin good? A three-step test

1. Clean the number. Use 12 months of figures excluding GST. Take out one-off items such as an insurance payout, a grant or a big asset sale. Count every owner’s time at a market wage plus 12% super.
2. Compare with the right benchmark. Use the ABS figure for your industry as a sense check, and the ATO benchmark for your industry and turnover band if you want a closer match. Remember both of them leave out the owner’s pay.
3. Compare with yourself. A margin that has gone from 9% to 11% to 13% over three years tells you more than any industry average. A slide from 13% to 9% tells you something has changed, usually price, mix or wages, and it’s worth finding it before the next BAS.

Then turn the margin into a target that drives your week. Your break-even point shows the sales you need to cover costs, and margin is one of the numbers every owner should know for good reason.

What your margin means when you want to borrow

Margin is the first number any lender reads, because it shows how much of each sale is left to service a repayment. A business clearing a true 10% on $800,000 of sales has $80,000 of room. One clearing 3% has $24,000 and very little buffer. A steady or rising margin tells a lender the business can carry a loan through a quiet quarter. A falling one prompts questions, so be ready to explain the cause and the fix.

Plenty of owners work through these numbers and find the business is healthier than they thought, just short of the cash to make its next move. That move might be new equipment, stock ahead of a busy season, a fit-out that lets you charge more, or a buffer while a price rise beds in. That’s the point where we come in.

We look at unsecured, cash-flow and line-of-credit options for trading businesses, typically $5,000 to $500,000, and property-secured loans from $20,000 to $5,000,000. The enquiry takes about a minute. There’s no credit check at that stage, so your file stays exactly as it was. We won’t send your details to a crowd of lenders either, so you won’t spend the afternoon fielding calls from people you’ve never heard of. A real person who understands margins and P&Ls reads your answers and gives you a call. Please fill the form in accurately, with your turnover, what you need and what it’s for, so the first conversation is about real options.

Let’s see what your margin can support →