Takeaway shops are among the least profitable small businesses, but financial advisors of a similar size often make significant gains, according to new benchmarks of small and medium enterprise performance.
First-of-its-kind research from the University of Melbourne and Chartered Accountants Australia New Zealand, released this week, shows what low, average, and high profitability looks like across dozens of SME categories.
The report is intended to help accountants understand how their clients compare to their peers.
But it also serves as a useful tool for entrepreneurs, helping them understand how their sector is performing — and if their own business could be doing better.
According to data collected by the Australian Bureau of Statistics between 2017-2018 and 2021-22, the least profitable small business sectors, based on net operating profit, include:
Even so, there is considerable variation in the data.
Cafes operating in the 90th percentile of performance can expect to earn profits of almost $155,000, but those in the bottom 25th percentile could expect profits of $4,507.
Small cafes in the ‘very low’ category, in the bottom 10th percentile, show average losses of more than $16,400.
By contrast, some of the most profitable SME enterprises are:
The report suggests the disparity between small business types can be explained by barriers for entry into those fields.
“Industry sectors with high entry-level requirements and costs, as well as those based on services rather than high-volume products tend to show higher profitability once established,” it said.
The data breakdown goes beyond profitability alone, detailing average sales, gross margins, wage expenses, return on assets (ROA) and return on equity (ROE), giving accountants and entrepreneurs a wide range of metrics on which to judge their performance.
The figures are graded between microbusinesses (four or fewer employees), small businesses (5-19 employees) and medium businesses with upwards of 20 staff.
Business owners and accountants can access the report here.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
