February 17, 2023
Adam Hoeksema
The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 386,848 tax returns that were filed in the Manufacturing industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their manufacturing business.
We hope that this data will be helpful for you as a “reality check” for your financial projections and business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.
Here is what we will cover in this article:
Learn How to Use this Financial Data
If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data.
How Many Manufacturing Businesses in the US are Sole Proprietorships
There are approximately 385,000 manufacturing companies in the US organized as sole proprietorships. We specifically analyzed 386,484 companies based on the 2019 IRS tax return data.
Average Annual Revenue for Manufacturing Businesses
The average annual revenue for all sole proprietorship manufacturing companies in the U.S. was $84,749.
If that sounds low, keep in mind that this includes all manufacturing companies including manufacturing businesses that might operate on a part time basis.
Average Annual Expenses for a Manufacturing Business
The average annual expenses for all sole proprietorship manufacturing companies in the U.S. was $77,749.
The raw dollar amount is less important here, the important thing to note is that all expenses for a manufacturing company amounted to 92% of total revenue.
Average Net Profit Margin for a Manufacturing Business
The average net profit margin for a manufacturing company was 8%.
How Much Can I Make Owning a Manufacturing Business?
If you are wondering how much you might be able to make by owning your own manufacturing business, you can get a good idea by creating a revenue projection based on the number of miles you can drive per year and the average rate you can earn per mile. That will give you total revenue, then simply multiply that by 8% (the net profit margin) to come up with a forecasted profit as the owner of the business.
Top 10 Expenses for a Manufacturing Business
Based on the tax returns of 386,484 sole proprietors operating in the manufacturing industry, the following were the 10 largest business expenses as a percentage of revenue.
Average Material Costs for a Manufacturing Business
The average manufacturing company spent 42% of annual revenue on material costs.
These would be the cost of the raw materials to manufacture the end product.
Average Labor Costs for a Manufacturing Business
The average sole proprietor manufacturing business spent roughly 15% of annual revenue on labor costs. This 15% includes labor costs that were categorized as cost of goods sold or direct labor, salaried positions and contract labor.
Average Rent for a Manufacturing Business
The average manufacturing business spent roughly 4% of annual revenue on renting a manufacturing facility.
Average Utilities Cost for a Manufacturing Business
The average manufacturing business only spent 2% of total revenue on utilities.
Some manufacturing processes are more energy intensive than others, so this is an assumption you will want to take into consideration your specific process.
Important Details about the Data
I want to point out a few key items about the data:
- You can download this data for free from the IRS website.
- The data includes 386,484 manufacturing industry sole proprietorships in the U.S. in 2019. .
- This data will include businesses that operate full time, and businesses that only operate on a part time basis.
- Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.
- This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.
- We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry. COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data.
If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us!
