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Small Business Benchmarks
The Australian Taxation Office (ATO) publishes Small Business Benchmarks for a range of business categories, including musical instrument retail. The benchmarks are calculated from information reported in business tax returns and activity statements and provide financial ratios that businesses can use to compare their performance with others operating in the same industry.
The AMA monitors the ATO data for musical instrument retail and presents a summary and light analysis of the results over time. Selected consumer retail categories are also included to provide context for the financial characteristics of musical instrument retailers.
The AMA does not produce the underlying benchmark data. The source data are published by the Australian Taxation Office.
About the data
For musical instrument retail, the ATO provides benchmark ranges for businesses within three annual turnover bands. These turnover bands can change between benchmark years.
The AMA analysis focuses on two ATO measures:
- Cost of sales as a percentage of annual turnover
- Total expenses as a percentage of annual turnover
The ATO publishes a minimum and maximum benchmark range for each measure and turnover band.
AMA also derives measures of Gross Margin (GP%) and Net Profit from these data to make the benchmarks easier to interpret and to enable comparison over time and with selected retail categories.
What the analysis shows
There are two distinct parts to the analysis.
Turnover benchmarks show how the ATO benchmarks vary between musical instrument retailers in the lower, middle and higher turnover bands. Gross Margin (GP%) benchmark ranges are derived directly from the ATO Cost of Sales ranges, providing a measure that may be more familiar to retailers.
Retail comparisons examine indicative Gross Margin and Net Profit measures for musical instrument retail alongside selected consumer retail categories, including books, sporting goods and toys and games.
These answer different questions: the turnover benchmarks provide a practical reference point for an individual musical instrument retailer, while the comparative analysis is designed to examine trends over time and differences between retail categories.
Methodology
The ATO publishes its own methodology for the calculation of Small Business Benchmarks. AMA’s calculations are additional transformations of those published benchmarks for presentation and comparative analysis.
Measures and calculations
| Measure | Calculation | Notes |
|---|---|---|
| Cost of Sales % | ATO benchmark | Cost of sales as a percentage of annual turnover. The ATO provides a benchmark range for each turnover band. |
| Total Expenses % | ATO benchmark | Total expenses as a percentage of annual turnover. The ATO provides a benchmark range for each turnover band. |
| Gross Margin (GP%) – lower benchmark | 100% − maximum Cost of Sales % | The calculation is inverse: the highest cost of sales produces the lowest gross margin. |
| Gross Margin (GP%) – upper benchmark | 100% − minimum Cost of Sales % | The lowest cost of sales produces the highest gross margin. |
| Gross Margin (GP%) – turnover-band midpoint | 100% − Cost of Sales midpoint | Used in the comparative analysis. |
| Indicative Net Profit % – turnover-band midpoint | 100% − Total Expenses midpoint | Used in the comparative analysis. |
| Comparative Gross Margin (GP%) | Mean of the Gross Margin midpoints for the three turnover bands | Simple arithmetic mean; each turnover band has equal weight. |
| Comparative Net Profit % | Mean of the Net Profit midpoints for the three turnover bands | Simple arithmetic mean; each turnover band has equal weight. |
| Average across comparison industries | Mean of the composite results for the selected retail categories | Simple average of the industries shown; not representative of retail or the economy as a whole. |
The same method is applied to musical instrument retail and each of the selected comparison industries.
The resulting figures are standardised analytical measures, rather than estimates of the actual average financial performance of businesses within each industry. They are not weighted by the number of businesses, turnover, employment or any assumed distribution of businesses between the three turnover bands.
Limitations
The ATO Small Business Benchmarks are designed to provide information about small businesses. They should not be interpreted as measures of the financial performance or size of the Australian music products industry as a whole.
The ATO does not provide equivalent benchmark data for wholesalers and some other types of businesses operating in the music products industry.
Comparative industry results should also be interpreted with care. Business structures and the distribution of businesses across turnover bands differ between retail categories. AMA therefore uses equal weighting not to represent the actual structure of those industries, but to provide a consistent basis for comparison.
The average across the selected comparison industries is similarly a simple average of the categories shown. It does not represent retailing or the economy as a whole.
