"Is my profit margin good?" depends entirely on your industry. A 5% net margin is thriving in grocery retail but disastrous in SaaS. Here are benchmarks across the sectors most relevant to founders and small businesses.
Gross margin benchmarks
| Sector | Typical gross margin |
|---|---|
| SaaS / software | 65–85% |
| Professional services | 40–70% |
| E-commerce | 25–45% |
| Manufacturing | 25–35% |
| Retail (physical) | 20–35% |
| Restaurants / food | 60–70% (food cost) |
Net margin benchmarks
| Sector | Typical net margin |
|---|---|
| SaaS / software | 10–30%+ |
| Professional services | 10–20% |
| E-commerce | 2–8% |
| Retail | 2–6% |
| Restaurants | 3–9% |
The Rule of 40 for SaaS
For SaaS companies, the Rule of 40 (revenue growth rate + profit margin ≥ 40%) is more useful than pure margin. A company growing 60% can justify a −20% margin. One growing 10% should be at 30%+ margin.
Calculate your specific margins with the profit margin calculator.