Average profit margin by industry for small businesses
Reviewed Sep 28, 2026 Internal Revenue Service, Statistics of Income; ratios computed by InterObservers How we verify
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What is a good profit margin depends on the industry: the average profit margin by industry for sole proprietors ran from 1.9% in accommodation, food services, and drinking places to 39.7% in professional, scientific, and technical services in tax year 2023. Computed by InterObservers from IRS Statistics of Income totals retrieved September 28, 2026; a sole proprietor's net income includes the owner's pay.
Headline finding
All nonfarm sole proprietorships kept 18.3% of business receipts as net income in tax year 2023. S corporations: 7.3% (tax year 2022); partnerships: 9.5% of receipts as ordinary business income (tax year 2023). Computed by InterObservers from IRS totals as net income less deficit (sole proprietorships and S corporations) and ordinary business income (partnerships), each divided by business receipts. (Source: IRS Statistics of Income)
What the IRS data shows
- Cost of goods sold took 35.1% of receipts in accommodation, food services, and drinking places, the sector with the lowest sole proprietorship margin (1.9%), against 12.5% in professional, scientific, and technical services, the highest (39.7%). Tax year 2023; in both sectors the owner's own pay is inside net income. (Source: IRS Statistics of Income)
- Payroll took 18.3% of receipts in accommodation, food services, and drinking places, the highest share of any classified sector. Payroll is salaries and wages plus the cost of labor in cost of sales (IRS Table 1); all nonfarm sole proprietorships: 8.5%. (Source: IRS Statistics of Income)
- Cost of goods sold was 62.4% of receipts in wholesale trade (merchant wholesalers). The highest cost of goods share of any classified sector (unclassified establishments are not a sector); all nonfarm sole proprietorships: 27.1%. (Source: IRS Statistics of Income)
- 68.8% of sole proprietorship returns showed a net income. 21,411,462 of 31,125,909 nonfarm returns in tax year 2023 (share computed by InterObservers); the rest reported a loss. (Source: IRS Statistics of Income)
Your industry's cost structure
All nonfarm industries: where each dollar of receipts went (sole proprietorships, tax year 2023)
Shares of business receipts, industry totals divided by industry totals, computed by InterObservers from IRS Statistics of Income Table 2. Payroll (salaries and wages plus cost of labor): 8.5%. The bars need not add up to exactly 100% (IRS: receipts minus deductions may not equal net income). S corporations in this industry: net margin 7.3% (tax year 2022).
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What is a good profit margin?
It depends on the industry. In the IRS tax data a good profit margin for a restaurant and a good profit margin for a consulting practice are very different numbers: for tax year 2023, all nonfarm sole proprietorships kept 18.3% of receipts, accommodation, food services, and drinking places 1.9% and professional, scientific, and technical services 39.7%. S corporations, which deduct the pay of their officers, kept 7.3% in tax year 2022.
So compare your margin with your own industry's row, and remember what the IRS figure includes: for a sole proprietor the net income is also the owner's pay. Among sole proprietorships that made money, net income was 31.4% of receipts (tax year 2023); the 18.3% average includes the returns with a loss.
Profit margin by industry: sectors and industries
Sales (business receipts) of sole proprietorships and the share of them kept as net income or spent on cost of goods, payroll and rent, tax year 2023, with the S corporation net margin where the IRS prints a matching row (tax year 2022). Sectors first; the industries of each sector follow.
All industries, farming, mining, utilities, construction and manufacturing (6 rows)
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| All nonfarm industries | $2,063.2 billion | 18.3% | 27.1% | 8.5% | 3.3% | 7.3% |
| Agriculture, forestry, hunting, and fishing | $30.0 billion | 2.9% | 35.8% | 7.5% | 2.0% | 3.5% |
| Mining | $12.4 billion | 15.0% | 26.0% | 8.1% | 1.2% | 23.3% |
| Utilities (NAICS 22) | $1.9 billion | 9.6% | 18.4% | 10.6% | 3.2% | 6.0% |
| Construction (NAICS 23) | $382.5 billion | 14.8% | 35.7% | 11.0% | 1.5% | 5.3% |
| Manufacturing | $46.2 billion | 7.1% | 45.5% | 13.2% | 4.3% | 8.1% |
Trade, transportation and information (4 rows)
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Wholesale trade (merchant wholesalers) | $75.2 billion | 8.5% | 62.4% | 4.1% | 1.9% | 5.1% |
| Retail trade | $199.5 billion | 4.1% | 59.4% | 6.6% | 3.5% | 4.5% |
| Transportation and warehousing | $200.1 billion | 8.2% | 8.1% | 4.2% | 3.7% | 6.1% |
| Information (NAICS 51) | $16.6 billion | 24.6% | 14.3% | 6.1% | 3.2% | 17.2% |
Finance, real estate, professional and business services (4 rows)
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Finance and insurance (NAICS 52) | $121.2 billion | 20.2% | 34.0% | 4.5% | 1.7% | 19.1% |
| Real estate and rental and leasing (NAICS 53) | $109.0 billion | 24.3% | 18.5% | 4.5% | 2.3% | 15.1% |
| Professional, scientific, and technical services (NAICS 54) | $250.2 billion | 39.7% | 12.5% | 8.0% | 2.6% | 12.9% |
| Administrative and support and waste management and remediation services | $119.3 billion | 19.8% | 16.2% | 11.3% | 2.5% | 7.2% |
Education, health care, leisure and other services (6 rows)
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Educational services (NAICS 61) | $16.8 billion | 29.4% | 5.4% | 7.0% | 7.5% | 13.0% |
| Health care and social assistance (NAICS 62) | $147.5 billion | 34.9% | 4.7% | 14.0% | 4.7% | 11.4% |
| Arts, entertainment, and recreation (NAICS 71) | $62.9 billion | 21.6% | 12.9% | 5.5% | 4.9% | 15.0% |
| Accommodation, food services, and drinking places | $84.8 billion | 1.9% | 35.1% | 18.3% | 6.1% | 4.8% |
| Other services | $164.8 billion | 18.9% | 19.3% | 7.8% | 7.9% | 8.4% |
| Unclassified establishments | $22.3 billion | 10.9% | 66.7% | 0.9% | 1.0% | no S corporation row |
Agriculture, forestry, hunting, and fishing: 2.9% net margin, 4 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Agriculture, forestry, hunting, and fishing | $30.0 billion | 2.9% | 35.8% | 7.5% | 2.0% | 3.5% |
| Animal production (including breeding of cats and dogs) | $2.5 billion | -25.3% | 20.5% | 4.6% | 2.3% | no S corporation row |
| Forestry and logging (including forest nurseries, timber tracts) | $8.7 billion | 4.3% | 35.2% | 9.1% | 1.6% | no S corporation row |
| Fishing, hunting, and trapping | $3.0 billion | 6.9% | 16.7% | 2.6% | 3.8% | no S corporation row |
| Support activities for agriculture and forestry (NAICS 115) | $15.8 billion | 5.9% | 42.2% | 8.0% | 1.9% | no S corporation row |
Mining: 15.0% net margin, 3 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Mining | $12.4 billion | 15.0% | 26.0% | 8.1% | 1.2% | 23.3% |
| Oil and gas extraction (NAICS 211) | $7.2 billion | 12.0% | 27.9% | 5.7% | 1.2% | no S corporation row |
| Other mining | $941 million | 5.4% | 40.3% | 13.6% | 1.0% | no S corporation row |
| Support activities for mining (NAICS 213) | $4.3 billion | 22.1% | 19.8% | 10.9% | 1.2% | no S corporation row |
Construction: 14.8% net margin, 3 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Construction (NAICS 23) | $382.5 billion | 14.8% | 35.7% | 11.0% | 1.5% | 5.3% |
| Construction of buildings | $113.9 billion | 13.2% | 45.0% | 10.5% | 1.2% | 4.3% |
| Heavy and civil engineering construction (NAICS 237) | $10.9 billion | 11.2% | 46.2% | 15.6% | 1.6% | no S corporation row |
| Specialty trade contractors | $257.8 billion | 15.7% | 31.2% | 11.1% | 1.6% | 6.0% |
Manufacturing: 7.1% net margin, 19 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Manufacturing | $46.2 billion | 7.1% | 45.5% | 13.2% | 4.3% | 8.1% |
| Food manufacturing (NAICS 311) | $10.0 billion | -1.2% | 52.5% | 12.7% | 5.4% | 4.9% |
| Textile and textile product millsIRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $656 million | 13.4% | 30.7% | not shown by IRS | 6.0% | no S corporation row |
| ApparelIRS flag **: data combined to prevent disclosure | $1.4 billion | 3.0% | 36.1% | 32.1% | 9.9% | no S corporation row |
| Leather and allied productsIRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $721 million | 14.3% | 41.5% | not shown by IRS | not shown by IRS | no S corporation row |
| Wood products | $3.4 billion | 13.1% | 52.3% | 13.6% | 1.7% | no S corporation row |
| Paper productsIRS flag *: small sample, use with caution | $158 million | -0.3% | 55.4% | 8.7% | 6.3% | no S corporation row |
| Printing and related support activities (NAICS 323) | $1.7 billion | -2.6% | 38.4% | 9.7% | 6.2% | 6.9% |
| Petroleum and coal productsIRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $141 million | 34.0% | 25.4% | not shown by IRS | not shown by IRS | no S corporation row |
| Chemical manufacturing (NAICS 325)IRS flag **: data combined to prevent disclosure | $3.0 billion | 13.3% | 45.2% | 11.0% | 3.9% | 7.4% |
| Plastic and rubber products | $885 million | 6.1% | 54.0% | 30.9% | 5.8% | no S corporation row |
| Nonmetallic mineral products | $1.8 billion | 14.4% | 36.6% | 12.7% | 5.0% | no S corporation row |
| Primary metal industriesIRS flag *: small sample, use with caution | $697 million | 16.2% | 60.3% | 11.2% | 0.8% | no S corporation row |
| Fabricated metal products | $5.5 billion | 9.8% | 41.2% | 15.3% | 4.3% | no S corporation row |
| Machinery | $2.2 billion | 16.7% | 25.5% | 8.4% | 6.4% | no S corporation row |
| Computer and electronic productsIRS flag *: small sample, use with caution | $740 million | -0.2% | 51.1% | 13.2% | 5.2% | no S corporation row |
| Electrical equipment, appliances, and componentsIRS flag *: small sample, use with caution | $1.6 billion | 9.3% | 41.6% | 13.3% | 3.2% | no S corporation row |
| Transportation equipment | $1.8 billion | 3.5% | 41.5% | 6.5% | 1.4% | no S corporation row |
| Furniture and related productsIRS flag *: small sample, use with caution | $2.2 billion | 8.9% | 37.0% | 11.6% | 4.9% | no S corporation row |
| Miscellaneous manufacturing | $7.5 billion | 7.3% | 51.1% | 15.0% | 2.7% | 9.5% |
Wholesale trade (merchant wholesalers): 8.5% net margin, 3 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Wholesale trade (merchant wholesalers) | $75.2 billion | 8.5% | 62.4% | 4.1% | 1.9% | 5.1% |
| Durable goods, including machinery, woods, metals, etc. | $34.1 billion | 7.5% | 61.0% | 4.2% | 2.2% | no S corporation row |
| Nondurable goods, including food, fiber, chemicals, etc. | $29.2 billion | 6.6% | 67.6% | 4.9% | 1.9% | no S corporation row |
| Wholesale electronic markets and agents and brokers | $11.9 billion | 15.9% | 53.4% | 2.2% | 1.0% | no S corporation row |
Retail trade: 4.1% net margin, 11 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Retail trade | $199.5 billion | 4.1% | 59.4% | 6.6% | 3.5% | 4.5% |
| Motor vehicle and parts dealers (NAICS 441) | $45.6 billion | 3.6% | 74.1% | 4.7% | 2.4% | no S corporation row |
| Building material and garden equipment and supplies dealers (NAICS 444) | $10.7 billion | 7.7% | 60.9% | 8.0% | 1.8% | 8.5% |
| Food and beverage stores | $36.4 billion | 4.3% | 59.9% | 10.0% | 3.5% | no S corporation row |
| Furniture and home furnishing retailers | $4.3 billion | 0.3% | 59.2% | 9.4% | 7.9% | no S corporation row |
| Electronic and appliance retailers (including computers)IRS flag *: small sample, use with caution | $2.7 billion | 5.5% | 51.7% | 7.3% | 5.7% | no S corporation row |
| General merchandise retailers (NAICS 455) | $14.6 billion | 3.4% | 48.8% | 2.6% | 1.8% | 3.9% |
| Health and personal care retailers (NAICS 456) | $10.3 billion | 0.9% | 50.7% | 6.3% | 4.1% | 5.8% |
| Gasoline stations (NAICS 4571) | $13.5 billion | 2.0% | 81.2% | 4.9% | 1.2% | no S corporation row |
| Clothing and accessories retailers | $12.5 billion | -2.8% | 46.8% | 5.9% | 7.3% | no S corporation row |
| Sporting goods, hobby, book, and music retailers | $8.0 billion | 5.2% | 51.9% | 8.2% | 4.1% | no S corporation row |
| Miscellaneous store retailers | $41.0 billion | 7.5% | 46.6% | 6.9% | 4.5% | no S corporation row |
Transportation and warehousing: 8.2% net margin, 10 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Transportation and warehousing | $200.1 billion | 8.2% | 8.1% | 4.2% | 3.7% | 6.1% |
| Air and rail transportation | $2.3 billion | -21.2% | 23.7% | 8.1% | 2.3% | no S corporation row |
| Water transportation (NAICS 483) | $1.2 billion | -1.3% | 43.7% | 14.5% | 2.0% | no S corporation row |
| Truck transportation | $114.4 billion | 10.1% | 9.3% | 5.2% | 3.3% | 5.5% |
| Taxi, limousine service, and ridesharing service | $44.2 billion | 6.3% | 0.9% | 0.5% | 5.0% | no S corporation row |
| Other transit and ground transportationIRS flag **: data combined to prevent disclosure | $7.9 billion | 5.5% | 8.7% | 6.4% | 4.2% | no S corporation row |
| Pipeline transportation (NAICS 486)IRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure; S corporation figure: IRS small sample flag * | $171 million | -0.6% | not shown by IRS | not shown by IRS | not shown by IRS | -6.6% |
| Scenic and sightseeing transportation (NAICS 487) | $692 million | -36.3% | 39.4% | 15.7% | 5.1% | no S corporation row |
| Support activities for transportation (including motor vehicle towing) | $8.8 billion | 9.2% | 25.0% | 8.0% | 2.6% | no S corporation row |
| Couriers and messengers (NAICS 492) | $19.2 billion | 9.0% | 3.2% | 2.4% | 2.8% | no S corporation row |
| Warehousing and storage facilities | $1.1 billion | -7.2% | 21.4% | 9.8% | 14.2% | no S corporation row |
Information: 24.6% net margin, 5 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Information (NAICS 51) | $16.6 billion | 24.6% | 14.3% | 6.1% | 3.2% | 17.2% |
| Motion picture and sound recording | $6.5 billion | 23.8% | 6.8% | 5.2% | 4.3% | no S corporation row |
| Publishing industries | $1.5 billion | 18.2% | 23.7% | 12.1% | 4.2% | 16.1% |
| Broadcasting and content providers and telecommunicationsIRS flag **: data combined to prevent disclosure | $5.1 billion | 23.7% | 18.9% | 7.9% | 3.0% | no S corporation row |
| Data processing, hosting, and related servicesIRS flag **: data combined to prevent disclosure | $1.4 billion | 23.7% | 6.3% | not shown by IRS | 1.9% | no S corporation row |
| Web search portalsIRS flag *: small sample, use with caution | $2.1 billion | 34.6% | 24.5% | 4.5% | 1.0% | no S corporation row |
Finance and insurance: 20.2% net margin, 10 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Finance and insurance (NAICS 52) | $121.2 billion | 20.2% | 34.0% | 4.5% | 1.7% | 19.1% |
| Credit intermediation and related activities (NAICS 522) | $3.7 billion | 18.3% | 19.6% | 4.8% | 2.3% | no S corporation row |
| Securities, commodity contracts, and other financial investments | $75.3 billion | 14.1% | 51.9% | 3.2% | 1.0% | no S corporation row |
| Investment banking and securities intermediation (NAICS 52315)IRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $3.0 billion | 16.5% | 34.1% | 3.0% | 1.7% | no S corporation row |
| Commodity contracts intermediation (NAICS 52316)IRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $683 million | -3.7% | 54.8% | not shown by IRS | 1.0% | no S corporation row |
| Securities and commodity exchanges (NAICS 5232)IRS flag *: small sample, use with caution | $5.3 billion | 1.8% | 77.2% | 0.9% | 0.4% | no S corporation row |
| Other financial investment activities (investment advice) | $66.3 billion | 15.2% | 50.7% | 3.5% | 1.0% | no S corporation row |
| Insurance agents, brokers, and related activities | $41.9 billion | 31.3% | 3.2% | 6.7% | 2.9% | no S corporation row |
| Insurance agencies and brokerages | $33.1 billion | 36.1% | 2.5% | 7.5% | 3.1% | no S corporation row |
| Other insurance related activities and other financial vehicles | $8.7 billion | 12.8% | 5.6% | 3.7% | 2.1% | no S corporation row |
| Funds, trusts, and other financial vehicles (NAICS 525)IRS flag *: small sample, use with caution | $291 million | 40.1% | 0.3% | 0.8% | 0.5% | -10.1% |
Real estate and rental and leasing: 24.3% net margin, 14 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Real estate and rental and leasing (NAICS 53) | $109.0 billion | 24.3% | 18.5% | 4.5% | 2.3% | 15.1% |
| Real estate | $100.0 billion | 27.2% | 17.6% | 4.4% | 2.1% | 16.8% |
| Lessors of real estate (including miniwarehouses and self storage) | $5.0 billion | -5.1% | 13.1% | 4.5% | 4.6% | no S corporation row |
| Offices of real estate agents, brokers, property managers, and appraisers | $66.3 billion | 35.0% | 9.0% | 3.7% | 2.2% | no S corporation row |
| Other activities related to real estate (NAICS 53139) | $28.8 billion | 14.9% | 38.1% | 5.9% | 1.6% | no S corporation row |
| Rental and leasing services | $8.8 billion | -9.2% | 28.8% | 5.9% | 5.1% | no S corporation row |
| Automotive equipment rental and leasing (NAICS 5321) | $1.9 billion | -18.2% | 27.3% | 3.3% | 3.1% | no S corporation row |
| Consumer electronics and appliances rental (NAICS 53221)IRS flag *: small sample, use with caution | $158 million | 6.7% | 24.2% | 8.9% | 1.1% | no S corporation row |
| Formal wear and costume rental (NAICS 532281) | $0 | not shown by IRS | not shown by IRS | not shown by IRS | not shown by IRS | no S corporation row |
| Video tape and disc rental (NAICS 532282)IRS flag **: data combined to prevent disclosure | not shown by IRS | not shown by IRS | not shown by IRS | not shown by IRS | not shown by IRS | no S corporation row |
| Home health equipment rental (NAICS 532283)IRS flag **: data combined to prevent disclosure | $21 million | -14.4% | 11.3% | 35.8% | 7.1% | no S corporation row |
| Recreational goods rental (NAICS 532284)IRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $417 million | -27.0% | 12.2% | not shown by IRS | 21.6% | no S corporation row |
| All other consumer goods rental (NAICS 532289)IRS flag **: data combined to prevent disclosure | $1.1 billion | 3.1% | 18.8% | 7.5% | 7.8% | no S corporation row |
| General rental centers and other consumer goods rentalIRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $1.3 billion | 12.7% | 35.2% | not shown by IRS | 7.5% | no S corporation row |
| Commercial and industrial machinery and equipment rental and leasing (NAICS 5324) | $4.0 billion | -14.3% | 32.2% | 8.9% | 2.8% | no S corporation row |
| Lessors of nonfinancial intangible assets (except copyrighted works) (NAICS 533)IRS flag *: small sample, use with caution | $165 million | 37.7% | 27.8% | 0.5% | 0.0% | no S corporation row |
Professional, scientific, and technical services: 39.7% net margin, 17 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Professional, scientific, and technical services (NAICS 54) | $250.2 billion | 39.7% | 12.5% | 8.0% | 2.6% | 12.9% |
| Legal services (NAICS 5411) | $43.2 billion | 43.8% | 8.8% | 10.4% | 3.8% | no S corporation row |
| Offices of certified public accountants | $4.2 billion | 44.8% | 0.5% | 16.7% | 3.2% | no S corporation row |
| Other accounting services (NAICS 541219) | $11.7 billion | 39.3% | 4.5% | 7.1% | 3.5% | no S corporation row |
| Architectural, engineering, and related services (NAICS 5413) | $21.4 billion | 31.9% | 16.9% | 11.0% | 2.7% | no S corporation row |
| Architectural services (NAICS 54131) | $8.9 billion | 17.3% | 19.0% | 13.4% | 4.2% | no S corporation row |
| Engineering services (NAICS 54133) | $8.7 billion | 41.8% | 19.7% | 8.7% | 2.0% | no S corporation row |
| Drafting, building inspections, and geophysical surveyingIRS flag *: small sample, use with caution | $2.7 billion | 50.1% | 3.0% | 6.5% | 0.6% | no S corporation row |
| Surveying and mapping (except geophysical) services (NAICS 54137)IRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $638 million | 31.2% | 0.8% | not shown by IRS | 0.9% | no S corporation row |
| Testing laboratoriesIRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $516 million | 22.7% | 28.3% | 45.9% | 1.1% | no S corporation row |
| Specialized design services (NAICS 5414) | $14.3 billion | 30.3% | 30.0% | 3.6% | 2.0% | no S corporation row |
| Computer systems design services (NAICS 541512) | $16.8 billion | 37.0% | 14.0% | 12.1% | 2.5% | no S corporation row |
| Other professional, scientific, and technical services (NAICS 5419) | $138.6 billion | 40.8% | 12.0% | 6.5% | 2.1% | no S corporation row |
| Management, scientific, and technical consulting services (NAICS 5416) | $67.1 billion | 50.2% | 6.3% | 5.8% | 1.7% | no S corporation row |
| Scientific research and development services (NAICS 5417) | $1.9 billion | 36.8% | 13.3% | 7.0% | 2.5% | no S corporation row |
| Advertising and related services | $13.6 billion | 27.4% | 24.8% | 8.3% | 2.0% | no S corporation row |
| Market research and public opinion pollingIRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $1.1 billion | 27.2% | 8.9% | not shown by IRS | 2.1% | no S corporation row |
| Other miscellaneous servicesIRS flag **: data combined to prevent disclosure | $54.9 billion | 33.0% | 15.8% | 7.0% | 2.6% | no S corporation row |
Administrative and support and waste management and remediation services: 19.8% net margin, 3 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Administrative and support and waste management and remediation services | $119.3 billion | 19.8% | 16.2% | 11.3% | 2.5% | 7.2% |
| Management of companies and enterprisesIRS flag *: small sample, use with caution | $525 million | -188.6% | 67.0% | 15.6% | 1.3% | no S corporation row |
| Administrative and support services | $114.4 billion | 21.2% | 15.7% | 11.2% | 2.6% | 7.3% |
| Waste management and remediation services | $4.3 billion | 7.8% | 24.1% | 12.3% | 2.1% | 7.0% |
Health care and social assistance: 34.9% net margin, 15 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Health care and social assistance (NAICS 62) | $147.5 billion | 34.9% | 4.7% | 14.0% | 4.7% | 11.4% |
| Ambulatory health care services (NAICS 621) | $111.4 billion | 36.3% | 5.4% | 13.7% | 4.8% | no S corporation row |
| Offices of physicians (except mental health specialists) | $27.9 billion | 46.1% | 4.6% | 12.1% | 3.3% | no S corporation row |
| Offices of physicians, mental health specialists | $6.4 billion | 55.1% | 5.5% | 8.3% | 4.0% | no S corporation row |
| Offices of dentists (NAICS 6212) | $18.0 billion | 27.1% | 4.7% | 25.6% | 4.2% | no S corporation row |
| Offices of chiropractors (NAICS 62131) | $3.6 billion | 33.4% | 5.2% | 13.2% | 9.1% | no S corporation row |
| Offices of optometrists (NAICS 62132) | $3.8 billion | 18.1% | 26.2% | 21.7% | 7.8% | no S corporation row |
| Offices of mental health practitioners and social therapists | $19.2 billion | 50.9% | 1.4% | 6.7% | 4.8% | no S corporation row |
| Offices of podiatrists (NAICS 621391)IRS flag *: small sample, use with caution | $963 million | 42.6% | 15.6% | 11.5% | 4.0% | no S corporation row |
| Outpatient care centers and other miscellaneous health practitioners | $13.6 billion | 33.1% | 8.1% | 8.8% | 6.6% | no S corporation row |
| Medical and diagnostic laboratories | $1.4 billion | 16.6% | 13.6% | 10.1% | 5.8% | no S corporation row |
| Home health care services | $14.0 billion | 12.7% | 4.0% | 17.6% | 5.2% | no S corporation row |
| Other ambulatory health care services (including ambulance services, blood, and organ banks) | $2.5 billion | 24.2% | 5.5% | 11.4% | 4.4% | no S corporation row |
| Hospitals | $1.3 billion | 16.6% | 0.4% | 34.1% | 5.1% | no S corporation row |
| Nursing and residential care facilities | $9.1 billion | 14.9% | 3.4% | 24.1% | 4.8% | no S corporation row |
| Social assistance | $25.7 billion | 36.7% | 2.0% | 10.5% | 4.1% | no S corporation row |
Arts, entertainment, and recreation: 21.6% net margin, 3 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Arts, entertainment, and recreation (NAICS 71) | $62.9 billion | 21.6% | 12.9% | 5.5% | 4.9% | 15.0% |
| Performing arts, spectator sports, and related industries (NAICS 711)IRS flag **: data combined to prevent disclosure | $47.5 billion | 26.5% | 9.2% | 3.7% | 3.8% | no S corporation row |
| Museums, historical sites, and similar institutions (NAICS 712)IRS flag *: small sample, use with caution; IRS flag **: data combined to prevent disclosure | $341 million | 18.7% | 31.8% | not shown by IRS | not shown by IRS | no S corporation row |
| Amusement, gambling, and recreation industries (NAICS 713) | $15.1 billion | 6.2% | 24.1% | 11.5% | 8.5% | 11.0% |
Accommodation, food services, and drinking places: 1.9% net margin, 5 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Accommodation, food services, and drinking places | $84.8 billion | 1.9% | 35.1% | 18.3% | 6.1% | 4.8% |
| Accommodation | $7.6 billion | -13.0% | 10.1% | 13.7% | 4.6% | 9.7% |
| Travel accommodation (including hotels, motels, and bed and breakfast inns) | $5.9 billion | -11.6% | 11.8% | 14.9% | 2.9% | no S corporation row |
| RV (recreational vehicle) parks and recreational camps | $1.0 billion | 4.9% | 4.3% | 11.0% | 2.4% | no S corporation row |
| Rooming and boarding houses | $658 million | -54.0% | 4.4% | 7.8% | 23.0% | no S corporation row |
| Restaurants (full & limited service) and drinking places | $77.2 billion | 3.4% | 37.5% | 18.8% | 6.3% | 4.3% |
Other services: 18.9% net margin, 7 industries
| Industry | Sales, tax year 2023 | Net profit margin | Cost of goods sold | Payroll | Rent | S corporation net margin, tax year 2022 |
|---|---|---|---|---|---|---|
| Other services | $164.8 billion | 18.9% | 19.3% | 7.8% | 7.9% | 8.4% |
| Auto repair and maintenance | $41.3 billion | 8.0% | 35.8% | 10.5% | 5.5% | no S corporation row |
| Automotive mechanical and electrical repair and maintenance | $22.0 billion | 7.5% | 36.0% | 9.7% | 6.1% | no S corporation row |
| Automotive body shops | $9.6 billion | 11.4% | 39.0% | 10.9% | 2.7% | no S corporation row |
| Other auto repair and maintenance (including oil change, lubrication, and car washes) | $9.6 billion | 5.5% | 32.2% | 11.9% | 6.8% | no S corporation row |
| Miscellaneous repairs | $24.4 billion | 13.2% | 30.7% | 9.4% | 3.3% | no S corporation row |
| Personal and laundry services | $95.9 billion | 24.4% | 9.8% | 6.4% | 10.3% | 10.8% |
| Religious, grantmaking, civic, professional, and similar organizationsIRS flag *: small sample, use with caution | $3.1 billion | 40.7% | 2.9% | 1.5% | 1.6% | 26.0% |
Source: IRS Statistics of Income Nonfarm Sole Proprietorships Tables 1 and 2 and Form 1120-S Table 6.1. Ratios computed by InterObservers from the IRS totals.
Method and caveats
These figures are general information, not financial or tax advice.
Period and n: nonfarm sole proprietorships, tax year 2023 (31,125,909 returns); S corporations (Form 1120-S), tax year 2022 (5,266,702 returns); partnerships, tax year 2023 (4,575,280 partnerships). 18 sectors plus unclassified establishments and 132 industries with sole proprietorship figures (one more industry is listed without figures: the IRS combined it with other industries to prevent disclosure). Retrieved September 28, 2026.
- Owner pay is not deducted for sole proprietors.
So a sole proprietorship margin is what the owner kept, pay included, and is not comparable with a corporate margin.“Salaries paid to owners are neither deducted as wages paid on Schedule C nor included as wages received on Form 1040, U.S. Individual Income Tax Return.”
- S corporations deduct officer compensation.
S corporation data are one tax year older (2022): the 2023 Corporation Complete Report is not published yet.“Salaries, wages, stock bonuses, bonds, and other forms of compensation were included in this deduction item if they were identified as having been paid to officers for personal services rendered.”
- Totals, not a typical business. Every ratio is computed by InterObservers from the official IRS SOI totals with the formula shown; it is an aggregate (industry total over industry total), not a typical or median business. Large businesses weigh more than small ones.
- Sampling.
Cells the IRS flags "*" (small sample) are shown with a note; cells deleted to avoid disclosure ("d") are shown as not shown by IRS.“Since the data presented in this article are estimates based on a sample of returns filed, they are subject to sampling error.”
- Formulas. Net profit margin = net income less deficit / business receipts; cost of goods sold = cost of sales and operations / receipts; payroll = (salaries and wages + cost of labor) / receipts (IRS Table 1); rent = rent on machinery and equipment + rent on other business property, over receipts. Other deductions in the chart = total deductions minus cost of goods sold, salaries and wages and rent (computed by us). Source tables: IRS SOI nonfarm sole proprietorship statistics.
- Industry labels. The IRS tables print industry labels, not NAICS codes. We show the labels as printed; a NAICS code appears only where the official 2022 NAICS title matches the IRS label exactly. The sector context (survival and SBA loans) uses our match of each IRS sector to a NAICS sector.
- Context figures. Survival: BLS Business Employment Dynamics, national, by sector (data through March 2025). SBA: charge-off rate of closed 7(a) loans approved in FY2016 to FY2020, computed by InterObservers as charged off / (charged off + paid in full); active loans are not counted, so it is not a default probability.
How the Desk handles sources and computed figures: methodology.
Download the data
For developers: Employer Desk API documentation.
SOURCE: IRS, Statistics of Income Division, Sole Proprietorship Returns 2023, March 2026 Source: IRS, Statistics of Income Division, 2022 Publication 16, September 2025. Source: IRS, Statistics of Income Division, Partnerships, April 2025. Ratios computed by InterObservers from the IRS SOI tables. Free to reuse with attribution and a link to this page.
Questions people ask
What is the average profit margin for a small business?
In the IRS data, all nonfarm sole proprietorships kept 18.3% of business receipts as net income in tax year 2023, S corporations 7.3% in tax year 2022, and partnerships reported 9.5% of receipts as ordinary business income in tax year 2023. These are industry totals divided by industry totals, computed by InterObservers, not the margin of a typical business.
Which industries have the highest profit margins?
Among sectors in the IRS data, professional, scientific, and technical services had the highest sole proprietorship margin (39.7%) and accommodation, food services, and drinking places the lowest (1.9%) in tax year 2023. Cost of goods sold was 12.5% of receipts in the first and 35.1% in the second. In a sole proprietorship the margin includes the owner's own pay.
Why are sole proprietor margins higher than S corporation margins?
A sole proprietor cannot deduct a salary for the owner, so the owner's pay stays inside net income. An S corporation deducts compensation of officers (3.4% of receipts in tax year 2022), and cost of goods sold was 59.5% of S corporation receipts against 27.1% for sole proprietorships (IRS Statistics of Income). The two margins measure different things and should not be compared directly.
How much of revenue goes to payroll?
For all nonfarm sole proprietorships, payroll (salaries and wages plus the cost of labor) was 8.5% of receipts in tax year 2023 (IRS Statistics of Income). It varies widely by industry; pick yours in the tool above. Many sole proprietorships have no employees at all.
Where does this data come from?
From IRS Statistics of Income tables: Nonfarm Sole Proprietorships Tables 1 and 2 (tax year 2023), the Corporation Complete Report Table 6.1 for Form 1120-S (tax year 2022) and All Partnerships Table 1 (tax year 2023). The IRS publishes the totals; the ratios are computed by InterObservers.
Sources (7)
- IRS SOI: Nonfarm Sole Proprietorship Statistics (tax year 2023)
- IRS SOI: Corporation Complete Report, Form 1120-S Table 6.1 (tax year 2022)
- IRS SOI: Partnership statistics by sector or industry (tax year 2023)
- IRS SOI Bulletin: Sole Proprietorship Returns, Tax Year 2022
- IRS Publication 16: Corporation Income Tax Returns Complete Report
- U.S. Bureau of Labor Statistics: Business Employment Dynamics, establishment age and survival
- U.S. Small Business Administration: 7(a) and 504 FOIA data
Checked Sep 28, 2026 · How we verify every rule · Report an error
General information, not legal advice. Not a substitute for the advice of an attorney. This page is for general information only and isn’t legal, financial or tax advice. Laws vary by state and change; check the official source or talk to a qualified professional about your situation. Report an error