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For a small business, what is the average profit margin?I am trying to develop a...

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tomhoe | (Level 1) eNoter

Posted September 21, 2012 at 3:18 AM via web

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For a small business, what is the average profit margin?

I am trying to develop a prototype P & L for a service business of $2,000,000 is sales, and would like to know typical overhead costs.

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ophelious | College Teacher | (Level 1) Educator

Posted September 21, 2012 at 1:23 PM (Answer #1)

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This is a very difficult question to answer with exactitude.  The problem is that the margins will vary quite a bit depending on where your business is operating, what service it provides, what the competition is like, what your compensations packages are like, etc.  That said, there are accepted averages, as long as you realize that they are just that: averages.

"Bizstats" is a good source for this type of information. Assuming you're talking about a service such as a restaurant, overhead would be about 58%.  I've attached a link below so you can check the data on that.

If, instead, you are more interested in a recreation-type business, the numbers change to about 62% overhead.


Note, though, that these are businesses organized as a sole-proprietorship. If you were looking for a corporation, the numbers are different.  That 58% goes up to about 93%, and the 62% changes to about 88%.  I've also given a link below so that you can compare the two sets of expense, SP versus CORP.

 

Sources:

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