How much profit does a small business make?
The typical US small business runs a 7–15% net margin, so a $500,000-revenue business nets $35,000–$75,000 before owner compensation adjustments. Professional services clear 15–30%; restaurants and grocery operate on 3–8%; software and licensing businesses can exceed 40%.
Net margin by small-business sector (2026)
| Sector | Net margin | On $500K revenue |
|---|---|---|
| Professional services | 15–30% | $75K–$150K |
| Trades / contracting | 8–18% | $40K–$90K |
| Ecommerce | 5–12% | $25K–$60K |
| Restaurants | 3–8% | $15K–$40K |
| Retail storefront | 3–9% | $15K–$45K |
| Software / digital products | 25–55% | $125K–$275K |
How to read this table
- Software / digital products sits at the top of the table (25–55%) — $125k–$275k. If your situation looks like this row, plan against the upper half of the range rather than the midpoint.
- Restaurants anchors the bottom (3–8%) — $15k–$40k. Treat this as the conservative case you should still be profitable at.
- The gap between the top and bottom row is roughly 18×. That spread is why a single blended average is close to useless here — pick the row that matches your setup instead of averaging the column.
- Most rows are ranges, not single figures. The low end usually reflects a weaker month, a softer audience geography, or an unoptimised setup; the high end reflects a well-run, well-targeted operation of the same size.
- With 6 reference points in the "net margin by small-business sector (2026)" table, the fastest way to use this page is to find the closest row, take its net margin, then stress-test it ±30% before you build a plan on it.
Context
Net margin comparisons break down when owner pay is handled differently across businesses. Many small companies run the owner's compensation through profit, which inflates margin, while others pay a full salary first and report a thinner number for the same underlying economics. The right normalisation is seller's discretionary earnings: net profit plus owner salary plus one-off and personal expenses. That is the figure buyers, lenders and valuation multiples actually use, and it is the only way to compare a solo consultancy against a ten-person shop.
What moves this number
Owner compensation treatment
Whether the owner's pay sits above or below the profit line changes reported margin by 10–20 points on identical economics. Normalise to seller's discretionary earnings before comparing anything.
Fixed cost base
Rent, insurance and salaried staff set the break-even point. A business with a low fixed base survives a soft quarter that would close a heavily-loaded competitor.
Customer concentration
When the top client exceeds a quarter of revenue, both cash flow and sale value are discounted. Diversification is worth real margin.
Cash conversion cycle
Days of inventory plus receivables minus payables decides how much working capital the business needs to fund the same revenue.
Methodology
Sector margin bands from aggregated small-business financial benchmarks, normalised to seller's discretionary earnings and cross-checked against the RevenueLab profit margin and valuation calculators.
Assumptions and caveats
- Figures are pre-tax and assume the owner is paid a market-rate salary unless a row says otherwise.
- Sector benchmarks hide wide local variation in rent, wages and demand.
- This page was last reviewed on 2026-08-12. Ranges are updated as new data lands, so re-check before using them in a contract or a plan.
- Use these numbers as a starting range, not a guarantee — your own historical data always beats a benchmark.
Frequently asked questions
How much profit does a small business make?
The typical US small business runs a 7–15% net margin, so a $500,000-revenue business nets $35,000–$75,000 before owner compensation adjustments. Professional services clear 15–30%; restaurants and grocery operate on 3–8%; software and licensing businesses can exceed 40%.
Which option pays the most in the net margin by small-business sector (2026) table?
Software / digital products, at 25–55% ($125K–$275K). That row represents the strongest case in this dataset, so use it as an upper bound rather than an expectation.
What is a realistic low-end figure?
Restaurants at 3–8% ($15K–$40K). Plan your costs so the low end still works, then treat anything above it as upside.
Why do the numbers vary so much?
The spread between the highest and lowest row is about 18×. Owner compensation treatment and fixed cost base explain most of that gap — see the drivers section above for the full list.
Where do these numbers come from?
Sector margin bands from aggregated small-business financial benchmarks, normalised to seller's discretionary earnings and cross-checked against the RevenueLab profit margin and valuation calculators.
How can I estimate my own number instead of using a benchmark?
Use the Profit Margin Calculator on RevenueLab — it takes your own inputs and returns a figure specific to your setup, which is always more accurate than a published range.
Model your own numbers
More answers in this category
- What multiple do small businesses sell for?
- How much does a laundromat make per month?
- How much does a vending machine make per month?
- How much does a food truck make a year?
Last updated 2026-08-12.