By Chris Kent | Profit Acceleration Partners | August 2026
Here’s a question I ask almost every business owner I sit with for the first time:
“Do you know your gross margin right now, without having to look it up?”
Most can’t answer it. And these aren’t struggling businesses. Some are turning over $2 million, $3 million, more. They’ve been operating for years. They work hard, they know their industry, and they have a reasonable handle on their finances.
But gross margin? Blank stare.
That’s a problem. Because gross margin is the number that tells you more about the health of your business than almost anything else.
Revenue Lies. Margin Tells the Truth.
Revenue is easy to get excited about. A full order book feels good. A record month feels great. But revenue without margin is just busy work.
Here’s a simple example. Two businesses, both turning over $1.5 million.
Business A has a gross margin of 42%. That means $630,000 left after delivering their product or service, to cover overheads, pay themselves, and generate profit.
Business B has a gross margin of 28%. Same revenue, but only $420,000 left to work with.
That’s a $210,000 difference, from identical top lines. Same hustle. Completely different outcome.
Margin is where the real story is. And if you’re not watching it closely, you’re making every other business decision without the most important piece of information you have.
What’s a Healthy Margin for Your Industry?
One of the most common questions I get is: “Is my margin any good?” The honest answer is, it depends on your industry. Here are some rough benchmarks for Australian SMEs:
Professional services (consulting, coaching, advisory): 60–75%
Recruitment: 20–35%
Trade services (plumbing, electrical, building): 35–50%
Retail: 40–60%
Hospitality: 65–75% (before labour)
B2B product sales: 30–50%
These aren’t hard rules, they vary based on your business model, how you price, and how you calculate margin. But they give you a reference point for an honest conversation with yourself. If you’re sitting well below your industry benchmark, there are usually three culprits.
The Three Most Common Margin Killers
The first is under-pricing. You’re not charging what the market will bear, either because you’re competing on price by default, or because you’ve never properly tested whether customers would pay more. Most would.
The second is supplier costs that haven’t been reviewed. It’s surprisingly common for business owners to be paying the same supplier prices they negotiated years ago, while costs have crept up everywhere else. A quick audit of your top suppliers can recover margin quickly.
The third, and this one catches a lot of people out, is calculating markup instead of margin. They’re not the same thing and confusing them means you’re consistently under-pricing without realising it.
Quick check: if your cost is $100 and you want a 30% margin, your price should be $142.86 not $130. The difference compounds across every sale you make.
Start Monitoring It Monthly
The fix isn’t complicated. It starts with knowing your number and then watching it every single month.
Set up a simple tracker. Gross margin this month versus last month versus the same month last year. If it’s trending down, investigate immediately. Rising costs, pricing that hasn’t kept pace, a product mix shift toward lower-margin work, all of these show up in the margin line before they become a crisis.
The business owners I work with who grow fastest all have one thing in common: they know their margins cold. Not just revenue, the right numbers.
Revenue tells you how busy you are. Margin tells you how profitable you are.
Start there.
Want to understand what your margins are really telling you? Book a free 30-minute consultation and we’ll look at your numbers together, no obligation, just an honest conversation.
Book your free consultation at pa-partners.com.au
Chris Kent is the Founding Partner of Profit Acceleration Partners, a business coaching and advisory firm helping Australian SME owners find hidden profit and build businesses that work without them.