Definition of a Small Business
A small business is a privately owned business with low sales and employee levels. The qualifying criteria for obtaining a Small Business Administration loan state that a small business is one with fewer than 500 employees and less than $7 million in annual sales. The reality is that the average small business in the United States has fewer than 20 employees and less than $2 million in sales annually. Various metrics for determining the size of a small business affect profit margins because larger companies generally deploy new technology whereas smaller companies rely on labor and less efficient equipment.
Average Business Profit Margins
The average net profits of a small manufacturing wood products business, with $2 million in revenue annually, according to the website "Biz Stats," is 14.56 percent per year. Medical equipment and suppliers, with $2 million in revenue, have a net profit margin of 26.95 percent annually. By contrast, computer and electronics products return a net profit of 53.94 percent, and the food processing sector, according to "Biz Stats," has a net profit margin of 10.28 percent.