What is the Average Profit for a Small Business?

In this post, we’ll break down the average profit for small businesses, why that number often misses the full picture, and how to use real data to guide smarter decisions. If you're running a business between $3 million and $20 million in revenue, you're likely far beyond "average"—but still wondering how your profit margins stack up, and where there's room to improve.

Key Takeaways

• Net profit margins for small businesses average 7–10%, but vary widely by industry

• Revenue doesn't equal success—profit is the real measure of performance

• Most companies can boost margins by improving pricing, efficiency, and cost control

• High-growth companies often accept lower profits temporarily—but not forever

• Understanding your own numbers beats chasing benchmarks

The Reality Behind “Average” Profit

The average small business in the U.S. earns a net profit margin of around 7% to 10%, according to industry data. But let’s pause for a second—because “average” can be dangerously misleading.

A solo freelancer with no employees might report a 90% margin. A construction firm with $15 million in revenue might run lean at just 5%. Some industries, like accounting or real estate, enjoy higher margins. Others, like manufacturing or restaurants, operate with tighter spreads.

So, what does that mean for you? If you’re comparing your company to some generic “average” profit figure, you might miss the point entirely. Your goal isn’t to be average—it’s to be aligned. Aligned with your business model, your strategy, and your growth plan.

What’s a Healthy Profit Margin?

For a business between $3M and $20M, a healthy net profit margin typically falls in the 10–15% range. Top-performing companies often push beyond 20%. On the other hand, companies going through scaling, reinvestment, or turnaround phases may fall below 5% for a period of time—but that’s not sustainable long-term.

Here’s a general rule of thumb:

But margin alone isn’t enough. You also need to understand how you earn that profit: What’s your gross margin? How much labor are you using? What’s your return on capital?

Why High Revenue Can Be Misleading

A $10 million business that nets $300,000 is actually less efficient than a $4 million business that nets $500,000. That’s why, at Coltivar, we emphasize margins and return metrics—not just revenue growth.

We see many founders chase top-line numbers, thinking that more sales will automatically lead to more profit. But in reality, profit doesn’t scale unless your systems do. If your cost structure grows as fast as your revenue, you’re just running faster on a treadmill.

Instead, the most successful companies grow strategically—protecting their margins, improving their pricing, and optimizing their operations as they expand.

Benchmarks by Industry

Profit margins vary dramatically by industry. Here’s a quick look at average net profit margins by sector (these are ballpark figures and can shift year to year):

• Accounting and Legal Services: 15–25%

• Construction: 5–10%

• Manufacturing: 4–9%

• Restaurants and Hospitality: 3–6%

• Professional Services: 12–20%

• Retail (Brick & Mortar): 2–6%

• Software / SaaS: 15–30% (after scaling)

Use these numbers as a reference point—but always adjust based on your specific business model, customer mix, and growth strategy.

How to Beat the Average

If your profit margins are below average—or below your own expectations—the good news is that you don’t need a massive overhaul. You need a few smart changes in the right places. Here are a few areas we always review with clients at Coltivar:

• Pricing: Are you charging based on value or cost? Small price increases can lead to major profit gains

• Gross Margin: Are your direct costs eating into your profits? Review COGS and supplier contracts regularly

• Overhead: Is your back office lean, or are you carrying unnecessary complexity and expense?

• Customer Segments: Are you serving the most profitable accounts—or just the loudest?

• Labor ROI: Is your team aligned with the work that actually drives margin and growth?

These aren’t hypothetical levers. These are real, trackable changes that drive real profit.

When Lower Profit Is Okay (Temporarily)

Not every business should chase high margins all the time. There are seasons when lower profit is part of a larger strategy—like investing in new markets, building infrastructure, or launching new products.

The key is to be intentional. If your margins are low, you should know exactly why—and how long that will last. Set milestones. Monitor return on investment. And most importantly, have a plan for when profitability becomes the priority again.

Profit is optional in the short term. But it’s essential in the long term.

Final Word: Know Your Number, Then Beat It

If you’re a founder of a growing company, the average profit margin is a useful reference—but it’s not your goal. Your goal is to build a company that works: for your customers, your team, and your future.

That means having financial visibility, setting realistic targets, and tracking the right metrics—not just revenue, but return. With the right insights and systems, you can go from “I think we’re doing okay” to “we know we’re performing—and we know how to improve.”

Want to benchmark your business and build a path to stronger profit?
Book a Strategy Review and let’s find your profit levers.