Profitability for Indian SMEs.
Know exactly where you stand.

EBITDA margin benchmarks by sector: IT services 20–35%, professional services 25–40%, manufacturing 12–20%, trading/distribution 5–12%, retail 8–15%, food & beverage 15–25%. If your margin is 5+ percentage points below the sector benchmark, a profitability diagnostic is warranted.

Customer profitability = Revenue from customer − Direct COGS − Customer-specific servicing costs (dedicated support, custom delivery, returns, credit costs). Many Indian SMEs find that 20% of customers generate 80% of profit — and that some "large" customers are actually margin-negative when all servicing costs are included.

Common causes: (1) Revenue growth driven by price discounting rather than volume; (2) Overhead costs growing faster than revenue (over-hiring in anticipation of growth); (3) Customer mix shift toward large buyers who demand lower prices; (4) Raw material cost inflation not passed through to customers; (5) Increasing rejection/rework rates as production scales without quality systems.

Operating leverage measures how much profit grows when revenue grows. High operating leverage means a 10% revenue increase translates to a 25%+ profit increase (because fixed costs are covered and additional revenue mostly falls to the bottom line). Low or negative operating leverage means revenue growth does not improve profit. Indian SMEs with thin margins often have low operating leverage because variable costs scale proportionally with revenue.