Average profit margins by industry as of 2023

Average Profit Margins by Industry (2023)

So now that we know the difference between gross and net profit margins, what is a good profit margin to have for your business?

Here are the average profit margins by industry as of 2023:

Industry Gross Profit Margin Net Profit Margin
Advertising 26.20% 3.10%
Apparel 53.04% 7.06%
Auto 14.25% 3.96%
Alcoholic Beverages 47.99% 5.07%
Broadcasting 45.22% 10.40%
Business & Consumer Services 31.80% 4.97%
Computer Services 27.24% 3.42%
Computers/Peripherals 36.88% 18.72%
Drugs (Biotechnology) 62.25% -0.62%
Drugs (Pharmaceutical) 67.35% 11.03%
Education 47.90% 7.17%
Electrical Equipment 33.53% 7.26%
Electronics (Consumer & Office) 32.41% 7.08%
Electronics (General) 28.40% 7.02%
Engineering/Construction 13.45% 1.81%
Entertainment 41.94% 3.86%
Farming/Agriculture 13.61% 6.03%
Financial Svcs. (Non-bank & Insurance 85.08% 32.33%
Food Processing 27.00% 8.44%
Food Wholesalers 14.85% 0.69%
Furniture 29.74% 7.64%
Green & Renewable Energy 62.92% -19.78%
Healthcare Products 59.04% 12.92%
Heathcare Information and Technology 52.49% 16.64%
Hotel/Gaming 55.45% -28.56%
Household Products 50.13% 12.45%
Machinery 35.42% 10.79%
Office Equipment & Services 33.40% 2.55%
Precious Metals 52.43% 14.48%
Publishing & Newspapers 42.65% 3.55%
Restaurant/Dining 31.52% 12.63%
Software (Entertainment) 64.45% 29.04%
Software (Internet) 61.00% -10.36%
Software (System & Application) 71.59% 19.66%
Tobacco 62.87% 20.58%

 

“Gross Profit Margin” Definition

Gross profit margin is a metric that measures profit by taking “total sales revenue” and subtracting it by the “cost” to make the product (COGS). For example, if you sell a ham and cheese sandwich for $4 and the ingredients cost $1 to make, the gross profit margin is 75% regardless of tax, labor or electricity costs.

How to Calculate Gross Profit Margin

The formula for calculating gross profit margin is:

Gross Profit Margin = (Net Sales – COGS) / Net Sales

  • Net Sales means the total revenue generated from all sales. Make sure to factor in refunds, discounts and allowances.
  • COGs means “cost of goods sold” which means the cost of producing those goods E.g. it cost me $1 to make the ham and cheese sandwich.

Example of Gross Profit Margin:

You run a restaurant that generated $600,000 in revenue from food sales.

The “cost of goods sold” (i.e. the cost of the ingredients) was $180,000.

Your gross profit margin is: ($600,000 – $180,000) / $600,000 = 0.7

Therefore your gross profit margin is 70%. This amount is quite normal for profitable restaurants.

Gross vs. Net Profit Margin

Net profit margin takes everything into account including operating costs (employee payroll, electricity bills, equipment costs etc.), taxes and other miscellaneous expenses.

Gross profit margin only takes into account the cost of goods required to make the product.

The formula for calculating net profit margin is the same as gross profit margin, except you add in those additional costs:

Net Profit Margin = (Revenue – Costs) / Revenue

Example of Net Profit Margin:

Your restaurant generated $600,000 in revenue from food sales.

The “cost of goods sold” (i.e. the cost of the ingredients) was $180,000.

The taxes and operating costs from rent, staff, electricity, equipment, kitchen utensils was $390,000

Your net profit margin is: ($600,000 – $180,000 – $390,000) / $600,000 = 0.05

Therefore your net profit margin is 5%.

Whilst 70% is a common gross profit margin for restaurants, most restaurants only have a net profit margin of 2-5%. This is the amount the owner makes.

 

 

Continue at:  https://www.polymersearch.com/blog/profit-margin-by-industry

The text above is owned by the site above referred.

Here is only a small part of the article, for more please follow the link

Also see:

www.manostaxx.com

 

Manostaxx
Manostaxx – Industrial Management Consulting

 

See: https://manoxblog.com/2023/11/19/advertising-guidance-for-medicinal-cannabis-products/

 

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *