The Australian Taxation Office publishes a set of benchmarks for particular business categories, including musical instrument retail. The following tables show an indicative value for Gross Margin and Net Profit, over time, compared to comparable consumer products retail industries.
Musical Instrument Retail
The first two tables present the mid-point of the range provided by the ATO for small, medium and large businesses. The ranges for these categories are:
- Small: $65,000 – $285,000 turnover
- Medium: $285,000-765,000 turnover
- Large: more than $765,000 turnover
Indicative Average & Comparisons
Where do these figures come from?
The data provides a range (minimum and maximum) for Total Expenses and Cost of Sales, for Small, Medium and Large businesses. The purpose of the data is to provide information about small businesses and is obviously limited in the context of an industry with many small and some much larger businesses.
These tables use an aggregated figure for each year that first takes the midpoint of the Small, Medium and Large business results for each category of business, then weights them based on the estimated spread of Small, Medium and Large businesses in the music retail industry. The result is an indicative average ‘Gross Margin’ figure, and ‘Net Profit’ figure, for musical instrument retail. The same calculation is made for several other industries, for comparison.
The ATO does not provide data for wholesalers and other businesses in our industry, but does for other kinds of retailers.
Methodology
The ATO has published a full methodology for its calculation of Small Business Benchmarks, available here.
For these comparative tables, we have created a weighted average for simplicity of visualisation. This allows us to monitor the trend over time, and comparison to other industries using the same weighting and set of data.
1. Deriving the Business Size Split (30 / 40 / 30)
To estimate the financial performance of Australia’s music products retail industry, a business size weighting of 30% small, 40% medium, and 30% large was adopted. This breakdown was developed by integrating:
- ABS Definitions and FTE Bands: Employee ranges were interpreted using Australian Bureau of Statistics guidelines. Businesses with 1–4 FTE were mapped to the small turnover range, 5–10 FTE to medium, and 11+ FTE to large turnover, in line with common ABS business size definitions.
- AMA State of the Industry (SOTI) Report (2024): This report noted that approximately 83% of music retailers fall into the “small business” category (≤20 employees), with 17% classified as large. To refine this, the 83% figure was split into roughly equal halves, assigning 30% to small and 40% to medium. The remaining 30% (comprised of 17% large and an additional 13% from the upper end of medium-sized firms) was allocated to the large category.
This 30/40/30 split provides a pragmatic and scalable approximation that reflects the structure of the industry and allows application of ATO benchmark ranges by business turnover.
2. Calculating Weighted Gross Margin and Net Profit
ATO small business benchmark data for musical instrument retail provides cost of sales and total expenses as ranges by turnover band. Using the midpoint of each range for gross margin (100% − cost of sales) and net profit (100% − total expenses), a weighted average was created:
Weights of 30%, 40%, and 30% were applied respectively to these midpoints, reflecting the previously defined distribution of small, medium, and large businesses.
3. Application in Comparative Industry Analysis
The same 30 / 40 / 30 weighting was also applied when estimating comparable financial performance metrics for other discretionary consumer product retail sectors, such as books, sporting goods, jewellery, and toys and games. While these industries likely have a different business size distribution—possibly skewed more heavily towards larger businesses—this consistent weighting allows for a standardised comparison with the musical instrument retail sector.
Note of Caution: The 30 / 40 / 30 business size distribution used in these comparisons is based on the known structure of the music retail industry, and may not accurately reflect the structure of other sectors. Results for comparative industries should therefore be interpreted with care, as applying the same weighting may under- or overestimate the influence of small or large businesses in those sectors. This approach is used solely for consistency across the comparison.
4. Averages
The ‘average’ figure in the table is a simple average of these categories only. It does reflect the economy as a whole, any category of business that isn’t shown, and is not weighted. The calculation for musical instrument retail happens to be close to the average of these discretionary consumer product categories (sporting goods, books, toys & games, and musical instruments).
Sources
Small Business Benchmarks (information) | Small Business Benchmarks (data) | State of the Industry Report
