Founder Data ReportThe Profit Margin You’re Measuring Yourself Against Belongs to a Public Company
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The benchmark everyone quotes comes from 5,994 listed corporations. You are not one of them, and comparing yourself to them will make a healthy business look like a failing one.
Quick answer: The most-quoted margin benchmark — roughly 9.7% net — comes from NYU Stern’s dataset of 5,994 US publicly traded firms (January 2026). It is a real number and a poor yardstick for a private business between $5M and $25M, because those companies have different scale, tax structure, leverage and, critically, no owner’s compensation running through the P&L. The spread also matters more than the average: net margin runs from 1.32% in grocery to 30.45% in semiconductors. Your industry, not the average, is the comparison.
- The 9.7% net-margin benchmark is public-company data — 5,994 listed firms.
- Industry spread runs 1.32% (grocery) to 30.45% (semiconductors).
- Aggregate gross margin is 37.76%; pre-tax operating margin about 14%.
- Private-company margins differ on scale, leverage, tax and owner compensation.
- Your own salary sits inside your net margin. It does not sit inside theirs.
- Compare against your industry and your own trend, not the market average.
Where the benchmark actually comes from
Type “average profit margin” into anything and you will land on a version of the same dataset — Aswath Damodaran’s margin tables at NYU Stern, updated each January. It is excellent data, maintained rigorously, and freely available. It is also a survey of publicly traded corporations, which is not the business you are running.
That distinction is not academic. A listed company reports management compensation as an expense above the net line. In an owner-operated business, what you pay yourself, what you leave in, and how you structure it all move that number — which is why two identical businesses can report very different margins depending on nothing but the owner’s choices.
Source: Aswath Damodaran, NYU Stern School of Business, “Operating and Net Margins” dataset, updated January 2026 — 5,994 US publicly traded firms.
A grocery operator running 2% is doing well. A software business running 2% is in trouble. The single averaged figure tells you nothing about either, and yet it is the number most owners carry in their head when they judge their own performance.
A benchmark from a company a thousand times your size is not a standard. It is a distraction with a decimal point.
The three numbers actually worth knowing
Gross margin is the honest one — it tells you whether what you sell makes money before overhead, and it is the most comparable figure across company sizes. The market aggregate sits near 37.8%. Pre-tax operating margin, around 14%, tells you whether the business supports its own structure. Net comes last and is the most distorted by choices that have nothing to do with performance.
Source: Aswath Damodaran, NYU Stern School of Business, “Operating and Net Margins” dataset, updated January 2026 — 5,994 US publicly traded firms.
What to compare yourself against instead
Three comparisons are worth more than the market average. Your own trend — is this year’s gross margin better than last year’s on the same mix? Your industry band rather than the aggregate. And your margin excluding owner compensation, which is the number a buyer or a lender will calculate anyway, and the closest honest read on whether the business itself works.
Illustrative of the owner-compensation effect on reported net margin. Benchmark basis per Source: Aswath Damodaran, NYU Stern School of Business, “Operating and Net Margins” dataset, updated January 2026 — 5,994 US publicly traded firms.
None of this makes the benchmark useless. It makes it context. The mistake is treating a figure drawn from listed corporations as a grade on a business you own, run and pay yourself from — and then making decisions, sometimes painful ones, against a standard that was never measuring you.
Frequently Asked Questions
What is a good net profit margin for a small business?
There is no single figure. The widely quoted ~9.7% aggregate comes from NYU Stern's dataset of 5,994 publicly traded US firms, where net margin ranges from 1.32% in grocery to 30.45% in semiconductors. Compare against your industry band and your own trend rather than the aggregate.
Why do public-company margins not apply to my business?
Scale, leverage, tax structure and accounting policies all differ — and owner compensation runs through a private company's P&L in a way it does not for a listed corporation. Two identical private businesses can report different net margins based on how the owner pays themselves.
What is the average gross margin?
The aggregate gross margin across NYU Stern's January 2026 dataset is 37.76%, with pre-tax operating margin near 14%. Gross margin is the most comparable of the three across company sizes.
Which margin should I actually watch?
Gross margin, tracked against your own history on a comparable sales mix. It shows whether what you sell makes money before overhead, and it is the least distorted by structure and owner decisions.
What margin will a buyer or lender use?
They will normalise your earnings by adding back owner compensation and one-time items. Calculating that figure yourself gives you the closest honest read on whether the business works independently of you.
Published by The Lonely Entrepreneur — the community and coaching platform for entrepreneurs who are building alone. lonelyentrepreneur.com
This article is for educational purposes and is not a substitute for professional financial or legal advice.