Published: January 2026
Most SME owners have no idea whether their business is performing well. They see revenue coming in, bills getting paid, and assume things are fine. But without benchmarks, you are flying blind.
The uncomfortable truth is that "healthy" looks completely different depending on your industry and business model. A cafe running 3% net profit might be doing well. A consulting firm at the same percentage would be in serious trouble.
This guide gives you the numbers to compare against, so you can finally answer the question: am I ahead, behind, or just average?
Without context, your numbers mean nothing. You might think your 35% gross margin is excellent until you discover competitors run at 55%. Or you might stress over 10% net profit when that is actually top quartile for your sector.
The figures in this article are based on ATO small business benchmarks, updated March 2025 with 2022-23 data. These benchmarks are directional guides rather than strict rules. Check the ATO website for your specific ANZSIC code.
These benchmarks apply most reliably to businesses between $750,000 and $5 million revenue. Below or above that range, the dynamics shift significantly.
Gross margin is your revenue minus direct costs of delivery. It tells you how much remains to cover wages, overheads, and profit. Here is what healthy looks like across common industries:
Key insight: Hospitality businesses often show decent gross margins but thin net margins because wages consume so much. The difference between a cafe and a consultancy at similar revenue is structural, not effort-based.
Wages are usually the biggest expense after cost of goods sold. The healthy range sits between 25% and 40% of revenue, including the current superannuation rate of 12% from 1 July 2025.
Here is how it breaks down:
Aha moment: Everyone obsesses over gross margin, but wage leverage is where the real gains hide. A 4% reduction in wages as a percentage of revenue drops straight to your bottom line.
Overheads include rent, utilities, insurance, software, and administration. These costs continue regardless of work volume.
Target between 15% and 25% of revenue. Leaner businesses, particularly remote or low-infrastructure models, can run at 10% to 15%. If your overheads exceed 25%, conduct a line-by-line audit for subscriptions you do not use, space you do not need, or services you could renegotiate.
Net profit is what remains after all costs, including your salary. Here is how to interpret yours:
For every $100 of revenue in a healthy service business, here is roughly where it goes:
At $1 million revenue with 5% net margin, you are making just $50,000 in actual profit. If you also took $150,000 salary, your total return is $200,000.
The uncomfortable question: A senior employee role pays $150,000 to $180,000 with zero risk, no capital invested, and weekends off. Is the stress and risk of ownership actually worth it, or have you bought yourself a demanding job?
Consider two businesses, both turning over $1.2 million annually.
Bella's Cafe achieves 62% gross margin, but wages consume 42% because cafes are labour-intensive. Overheads take 18%. Net profit is just 2%, or about $24,000. Bella works 60 hours a week.
CodeCraft IT Consultancy achieves 70% gross margin with a leveraged team. Wages are 28%, overheads 12%. Net profit is 18%, or $216,000. The owner works 45 hours a week.
Same revenue. $192,000 difference in profit. The difference is structural leverage and team model, not how hard either owner works.
Small changes compound quickly:
What gross margin should my business aim for?This depends on your industry. Service businesses should target 50% to 70%. Trades should aim for 35% to 50%. Retail typically falls between 25% and 45%. Compare to others in your specific sector rather than using a universal target.
What percentage of revenue should go to wages?Most healthy businesses keep wages between 25% and 40% of revenue, including 12% superannuation. Above 40% is usually a stress point indicating structural issues.
What is a good net profit margin for an Australian SME?A net profit margin of 10% to 15% is considered healthy. Below 5% is fragile, while 15% to 25% indicates strong performance. The right target depends on your industry and growth stage.
How do I compare my business to industry benchmarks?Export your profit and loss data from Xero or QuickBooks. Calculate your key ratios, then compare to ATO small business benchmarks for your ANZSIC industry code.
Why is my profit margin low even though revenue is growing?Growing revenue often masks margin problems. Check whether wages and overheads are growing faster than revenue, and whether you have been discounting or experiencing scope creep.
Open your accounting software right now. Calculate your actual gross margin for the last 12 months. That single number tells you more about your business health than almost any other metric, and it takes two minutes to find.
Scale Suite provides embedded finance and bookkeeping services for Australian SMEs. Rather than quarterly meetings, our team integrates into your daily operations through Slack, giving you real-time visibility into margins, wages, and profitability.
We help business owners understand their numbers, benchmark against industry standards, and identify exactly where to focus for maximum profit improvement. Our clients range from $500,000 startups to businesses turning over $10 million.
Source: ATO small business benchmarks (March 2025 update, 2022-23 data)
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