The average U.S. business keeps 9.74 cents of every revenue dollar as net profit, on a January 2026 dataset covering 5,994 American firms. But the all-industry average hides an enormous spread: sector net margins run from below 1 percent in auto parts to more than 25 percent in software.
What is the average profit margin for a small business?
Just under 10 percent at the net line. The widely cited NYU Stern margin dataset, updated in January 2026 across 5,994 U.S. firms, puts the total market at a 37.76 percent gross margin and a 9.74 percent net margin. Gross margin is what is left after the direct cost of delivering the product; net margin is what is left after everything, including overhead, interest, and tax.
Whether that average describes you depends almost entirely on your sector. A restaurant clearing 9 percent net is performing at the national average; a software business clearing 9 percent is underperforming its sector by a wide margin. Use the all-industry figure as a sanity check, never as a target.
Profit margin by industry: the 2026 benchmarks
The table below shows gross and net margins for sectors most relevant to owner-operated businesses, from the same January 2026 dataset. Gross margin tells you about pricing power; net margin tells you what survives your cost structure.
| Industry | Gross margin | Net margin |
|---|---|---|
| Software (system & application) | 71.72% | 25.49% |
| Hotel / gaming | 60.85% | 10.38% |
| Construction supplies | 25.52% | 10.78% |
| Restaurant / dining | 32.24% | 9.37% |
| Transportation | 24.10% | 8.23% |
| Retail (building supply) | 34.22% | 7.84% |
| Business & consumer services | 33.38% | 7.03% |
| Retail (general) | 33.18% | 5.61% |
| Apparel | 56.88% | 3.85% |
| Trucking | 21.19% | 3.79% |
| Healthcare support services | 12.08% | 1.25% |
| Real estate (operations & services) | 32.21% | 1.19% |
| Auto parts | 15.84% | 0.72% |
| Advertising | 36.24% | -0.30% |
| All industries | 37.76% | 9.74% |
Apparel is the clearest lesson in the table. A 56.88 percent gross margin looks extraordinary until you follow it down to a 3.85 percent net margin — rent, markdowns, and inventory carrying costs consume almost all of it. Advertising manages a healthy gross margin and still finishes below zero. High gross margin is not the same as a profitable business.
Why your margin is not your competitor's margin
These benchmarks are built from publicly traded companies, which are larger and more capital-intensive than the typical owner-run business. That cuts both ways. Public firms carry overhead a small operator does not — investor relations, audit, layers of management — but they also buy at volumes a single location cannot match. Treat sector figures as the shape of an industry rather than a precise target for a business of your size.
The Federal Reserve's 2025 Small Business Credit Survey gives the small-business counterpart. Among more than 6,500 U.S. employer firms, 47 percent finished 2024 operating at a profit, 19 percent at break-even, and 34 percent at a loss. Roughly a third of American employer businesses were losing money in a normal year, which is context worth holding next to any industry average.
What margin means when you apply for funding
Underwriters read margin as durability. Two businesses with identical revenue and very different margins present completely different risks, because the thinner one has less room absorbing a slow quarter or a payment schedule. A thin margin does not disqualify you — whole sectors run on them — but it does shape which structures are appropriate and how large a payment your file will support.
This is the practical reason to know your number before you apply rather than after. Our guide to running a break-even analysis shows how much volume a given margin requires to cover fixed costs, and how much you can borrow explains how funders convert your financials into an offer amount.
How to improve a thin margin
Price first, cost second. Because net margin is a small residue of a large number, a modest price increase moves it far more than an equivalent cost cut, and it does not degrade what you deliver. The full playbook is in our guide to improving your profit margin; pair it with the revenue benchmarks by stage to see where your business sits before changing anything.
Financing changes the arithmetic too, in both directions. Equipment that lowers unit cost, inventory bought at a volume discount, or a facility that lets you stop taking expensive rush orders can all lift margin permanently — but only if the repayment schedule fits the cash-flow pattern it produces. The Broker Shop is a funding broker, not a lender: one application is matched to the lenders whose guidelines you meet, so you can compare structures against your actual margin. It is free to apply, and checking your options won't affect your credit score.
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One 2-minute application is matched to the lenders whose guidelines you meet. It's free, and checking your options won't affect your credit score.
See What I Qualify For →The bottom line: The all-industry average net margin of 9.74 percent is a starting point and nothing more, because the same number that signals a healthy restaurant signals a struggling software business, so benchmark against your own sector and your own prior year before you judge it.
Sources: NYU Stern School of Business - Operating and Net Margins by Sector, January 2026 update (5,994 U.S. firms) · Federal Reserve Banks - 2026 Report on Employer Firms (2025 Small Business Credit Survey)
Found these figures useful? You are welcome to cite or link to this page. Suggested attribution: “Small Business Profit Margin by Industry,” The Broker Shop — thebrokershopinc.com/small-business-profit-margin-by-industry.html. Every figure links to its original primary source.