What Is a Good Operating Profit Margin for Business?
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A good operating profit margin (also known as operating margin or operating profit percentage or operating income margin) typically falls between 10% and 20%. A 10% margin is generally considered average, 15–20% is strong, and anything above that is excellent.
But margins aren’t one-size-fits-all.
What’s considered a “good” margin in retail might be disappointing in tech. What really matters is how your margin compares within your industry and whether it's improving over time.
In this guide, we’ll break down what defines a good operating margin, what affects it, how it varies by industry, how to calculate it — and why it’s one of the most important numbers for running a healthy business.
Quick Recap:
- A 10% operating profit margin is considered good. 15–20% is strong, and anything beyond is excellent.
- There isn't a one-size-fits-all margin. What’s considered a “good” margin in retail might be disappointing in tech.
- What matters more is that your margin is stable or improving over time. A margin that’s improving quarter over quarter is often a stronger signal than one impressive spike.
What Is a Good Operating Profit Margin?
Generally speaking, a 10% operating profit margin is considered average. 15–20% is strong, and anything beyond is excellent.
But there’s no one-size-fits-all “ideal” margin—it varies by industry.
For instance, a SaaS company with low overhead might regularly hit margins over 20%, while a retail brand may sit closer to 5–10% due to higher costs.
The key here is to judge your operating margin in context. Compare it to others in your niche, and look at trends over time. A margin that’s improving quarter over quarter is often a stronger signal than one impressive spike.
Further Reading
Operating Profit Margin Benchmark by Industry
Here's a breakdown of average operating profit percentage across major industries:
Consumer Goods & Retail
- Apparel: 8.73%
- Furn/Home Furnishings: 6.51%
- Household Products: 18.38%
- Office Equipment & Services: 8.17%
- Packaging & Container: 9.79%
- Paper/Forest Products: 10.13%
Further Reading
Food & Beverage
- Beverage (Alcoholic): 22.85%
- Beverage (Soft): 20.01%
- Food Processing: 11.97%
- Restaurant/Dining: 15.96%
Construction & Materials
- Building Materials: 13.34%
- Construction Supplies: 15.13%
- Engineering/Construction: 5.57%
- Homebuilding: 15.52%
Technology & Electronics
- Computer Services: 6.06%
- Computers/Peripherals: 22.65%
- Electrical Equipment: 7.15%
- Electronics (General): 8.15%
Healthcare
- Healthcare Products: 14.81%
- Hospitals/Healthcare Facilities: 12.45%
Energy & Environment
- Coal & Related Energy: 10.97%
- Green & Renewable Energy: 21.60%
- Environmental & Waste Services: 14.89%
Finance & Insurance
- Financial Services (Non-bank & Insurance): 16.33%
- Insurance (General): 16.43%
These are general benchmarks from NYU study. Your actual margin can vary depending on scale, geography, business model, and cost structure.
Further Reading
Factors that Affect Operating Profit Margin
Several factors can impact operating income margin:
1. Price-to-Value Fit
Your pricing only supports a healthy operating margin when it aligns with what customers are willing to pay and covers your costs. If you underprice to stay competitive without managing your COGS and expenses, your margin suffers.
Learn 9 pricing strategies to protect your margin in 2025.
2. Product Cost Control (COGS)
Cost of Goods Sold (COGS) includes everything that goes into producing or sourcing what you sell. When raw material prices rise, suppliers become less efficient, or logistics costs spike, it directly reduces your operating profit.
Here’re tips to lower your COGS and more - all designed to improve your profit margin.
Further Reading
3. Operational Expense Management
Your operating expenses like salaries, rent, software, and marketing should scale smarter, not just bigger. If these grow faster than your revenue, your operating margin will decline.
Further Reading
4. Scalable Cost Structure
Businesses with scalable infrastructure — such as automation, optimized supply chains, or fixed-cost leverage — often see margins expand over time. If every growth milestone adds the same cost burden, you’re likely stuck with flat or shrinking margins.
Further Reading
What is Operating Profit Margin and How to Calculate?
Operating profit margin is a ecommerce metric that shows a company’s revenue remains after covering its operating costs, expressed as percentage. It excludes interest and taxes, so you get a clean look at how efficient your core operations really are.
The formula:
Knowing that your operating profit (also known as operating income) = Revenue – COGS – Operating Expenses
This metric is often used to evaluate how well a company is being managed. A stable or improving operating margin usually signals strong cost control and efficient operations. If your operating margin is consistently low or declining, it’s a signal to re-evaluate your cost structure or pricing.
Further Reading
Why is Operating Profit Margin Important?
Operating profit margin provides a clear picture of how well your company is performing based on its core operations — without outside costs like interest and taxes.
By tracking and improving your operating profit margin, you can:
- Make smarter financial decisions like knowing when to reinvest, where to cut costs, or how much room you have to scale.
- Spot red flags early, such as declining margins may point to rising expenses, supply chain issues, or pricing misalignment before they impact your bottom line.
- Stay resilient, use strong margins as a buffer during slow seasons or economic uncertainty.
Track Your Profit Margin Effortlessly
In a market that rewards efficiency, knowing your operating margin helps you stay sharp, focused, and profitable. Tracking it over time helps you stay grounded in the health of your operations, not just the excitement of revenue.
Knowing what a good operating margin looks like is just the beginning. The real impact comes from tracking it regularly—and acting on what you find.
With TrueProfit, you get real-time visibility into your margins. TrueProfit helps Shopify sellers by tracking net profit, operating margin, and more in real time —so you’re never in the dark about your business’s financial health and make smarter decisions every step of the way.
Operating Profit Margin FAQs
Is Operating profit margin good or bad
An operating profit margin isn't inherently good or bad—it depends on your industry, business model, and financial goals. A high margin means your core operations are efficient and profitable, while a low margin may signal high operating costs or pricing issues.
Is 20% operating margin good?
Yes, a 20% operating margin is generally considered strong. It means the company keeps $0.20 in operating profit for every $1 of revenue. However, what's considered “good” depends on the industry. For example, software companies may aim higher, while retail typically runs on thinner margins.
What is the ideal value of operating profit margin?
There’s no one-size-fits-all “ideal” margin—it varies by industry. In general:
- 5% = low
- 10% = average
- 20% or higher = excellent
What matters more is that your margin is stable or improving over time.
Is 30% profit margin too high?
Not necessarily. A 30% operating margin could reflect strong pricing power, operational efficiency, or low overhead—common in high-margin industries like software or consulting. However, if it’s unusually high compared to your peers, it’s worth analyzing to ensure it’s sustainable.
What is a bad operating profit percentage?
Margins below 5% are often considered weak, especially if they’re declining or inconsistent. A bad margin may signal rising costs, poor pricing strategy, or operational inefficiencies that could threaten profitability.
Is 40% profit margin good?
Yes, a 40% operating profit margin is excellent and typically seen in industries with low variable costs and high scalability—like SaaS or digital products. For most businesses, hitting this level means they’ve mastered cost control and value delivery.
Is a high operating profit margin good?
Yes, a high operating profit margin is generally a good sign. It means your business is efficiently managing its operating costs and keeping more profit from each dollar of revenue—before taxes and interest.
What is the rule of 40 operating margin?
The Rule of 40 is a benchmark used mostly in SaaS. It says a company’s revenue growth rate plus its operating margin should equal or exceed 40%. For example, if you're growing at 25% and have a 15% operating margin, you meet the rule.
Is operating profit the same as EBITDA?
Not quite. Operating profit (or operating income) is revenue minus operating expenses. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) adds back depreciation and amortization. EBITDA is often higher and used to assess cash flow potential.
What is a 30% operating profit margin?
It means your business retains 30 cents in operating profit for every dollar of revenue. That’s considered a very strong margin and typically indicates high efficiency and solid pricing power.
What is a good operating profit margin for a small business?
For small businesses, a 10–15% operating margin is generally healthy. However, the “good” range still depends on your sector. Service-based small businesses may see higher margins than product-based ones due to lower overhead.
What is an EBITDA margin?
EBITDA margin measures earnings before interest, taxes, depreciation, and amortization as a percentage of revenue. It’s a way to evaluate a company’s operating profitability before accounting for non-cash or external costs.
Harry Chu is the Founder of TrueProfit, a net profit tracking solution designed to help Shopify merchants gain real-time insights into their actual profits. With 11+ years of experience in eCommerce and technology, his expertise in profit analytics, cost tracking, and data-driven decision-making has made him a trusted voice for thousands of Shopify merchants.
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