Are my margins shrinking?

Bottomline tracks gross and net margin trends month over month and alerts you when margins decline for two or more consecutive periods.

Is my CAC good or bad relative to my market?

Bottomline compares your customer acquisition cost against industry benchmarks to show whether you are efficient, average, or overpaying.

Am I priced above or below market?

Bottomline compares your average deal size and margins to industry data to indicate whether your pricing is competitive.

What's my gross margin?

Bottomline calculates your gross margin from your accounting data and shows whether it is improving or declining month over month.

What's my net margin?

After all expenses, your net margin tells you how much of every dollar you actually keep. Bottomline tracks this automatically.

How do my margins compare to others in my industry?

You know your margins. But are they good or bad for your industry? A 12% net margin is excellent for a restaurant and mediocre for a SaaS company. Here's how to find the benchmarks that matter for your business.

7 min read

The short answer

How do your margins compare? Calculate your gross and net margins from your P&L, then compare them to industry averages from sources like IBISWorld, BizBuySell, Sageworks (now Abrigo), or your industry trade association. Margins vary enormously by industry, so the benchmark matters as much as your number.

Your margins only make sense in context

A landscaping company with a 42% gross margin is performing well. A software consulting firm with a 42% gross margin has a problem. A restaurant with a 12% net margin is doing great. A digital agency with a 12% net margin is leaving money on the table.

Without industry context, you do not know if your margins reflect strong operations or poor pricing. You might be undercharging and not realize it because 8% net margin “ feels okay.” Or you might be beating your industry by 10 points and not even know to celebrate.

Industry benchmarks also help you identify whether margin problems are specific to your business or affecting everyone. If your gross margin dropped 3 points and the whole industry dropped 3 points (material cost increases, for example), that is market-wide. If only yours dropped, the problem is internal.

Where to find industry margin benchmarks (free and paid sources)

BizBuySell Industry Reports(free). The largest business-for-sale marketplace publishes annual reports with median revenue, cash flow, and margins by industry category. Useful for small businesses under $5M in revenue. Visit bizbuysell.com and look under “Insight Reports.”
IBISWorld (paid, often available through libraries). Detailed industry reports with average profit margins, cost structure breakdowns, and revenue benchmarks by NAICS code. Check if your local library offers free access.
Trade association surveys. Many industry associations publish annual financial benchmarking studies for members. The data is often the most relevant because it comes from businesses very similar to yours.
NYU Stern Margins by Industry(free). Professor Aswath Damodaran publishes annual datasets with gross and net margins by sector. Search “Damodaran margins by sector” for the latest data. More useful for larger businesses but provides directional benchmarks.

How to benchmark your margins step by step

1
Calculate your own margins from the P&L
In QuickBooks or Xero, run a Profit and Loss for the last 12 months. Calculate gross margin (Revenue - COGS) / Revenue and net margin (Net Income / Revenue) for the full year.
2
Find your NAICS code
Your NAICS code identifies your industry for benchmarking. Search census.gov/naics to find yours. This code helps you find the most relevant benchmarks.
3
Look up industry averages
Check BizBuySell, IBISWorld, or your trade association for average gross and net margins in your industry. Note that small business margins often differ from large company averages, so use small business-specific sources when available.
4
Compare and contextualize
Place your margins against the benchmarks. Above average? You have pricing power or operational efficiency. Below average? You may be underpriced, over-staffed, or carrying too much overhead.

Total time: 30-60 minutes. Most of the time is spent finding relevant benchmarks. The P&L calculations take 10 minutes.

Why industry benchmarks are hard to use regularly

Benchmarks are published annually. You get a snapshot, not a trend. Your industry average might have shifted significantly since the last report.
Averages hide wide ranges.The “average” net margin might be 10%, but the top quartile is 18% and the bottom quartile is 3%. Knowing the distribution matters more than the average.

Or see how your margins compare to industry benchmarks automatically

Bottomline connects to your accounting software and compares your margins against industry benchmarks every month:

Margin benchmarking

Your gross margin(Industry avg: 52%)

58%

Your net margin(Industry avg: 11%)

9.2%

Your gross margin beats the industry by 6 points (strong pricing or cost control). But your net margin trails by 1.8 points, suggesting overhead is higher than peers. Look at G&A expenses.

From a real Bottomline report. Your margins compared to industry benchmarks with specific context.

Bottomline uses your industry classification to pull relevant benchmarks and shows you where you sit. Not just “above or below average” but which specific area (pricing, COGS, overhead) is driving the difference.