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AccountTECH's July 2025 Gross Profit Margin Index

On August 27, 2025, AccountTECH released its Gross Profit Margin Index for July 2025, indicating a median of 18.25% for the industry. This measurement serves as a significant reference point for evaluating financial profitability and sets an upper limit on allowable expenses based on income.

Gross Profit Margin is crucial for businesses because it reflects the portion of revenue remaining after deducting commissions and franchise fees. Understanding this margin is essential, as it determines the available funds for operations, growth investments, and, ultimately, net profits. A higher margin grants businesses increased flexibility, stability, and resilience, while a lower margin can lead to heightened financial risks.

Yearly Observations

Each July, AccountTECH reports on gross profit margins, providing valuable insights into industry performance. The 2025 findings reveal stability in margins compared to 2024; however, examining the historical context uncovers a more alarming trend of profit margin decline.

Year-over-Year Analysis

• - Compared to July 2024: The index shows a 94% correlation, indicating relatively consistent margins year-on-year.
• - Compared to July 2022: There is a 95% correlation, suggesting a downward trend.
• - Compared to July 2020: Margins are significantly reduced, reflecting a 77% correlation.

These numbers underscore that while the recent short-term performance appears stable, a more extended timeline illustrates a troubling decline in profitability.

The Importance of the 2019 Benchmark

In 2019, the industry's gross profit margin was 23.84%. This represents a 5.59% decrease over the past six years, an issue that might seem small at first glance, but carries substantial implications for profitability.

Typically, EBITDA margins in this sector hover around 4%. Consequently, the fall in gross profit margin threatens to eliminate any residual net profit, placing many companies at risk of operating at a loss. The relationship between gross margins and profitability is undeniable, as without solid gross profit, long-term EBITDA becomes unsustainable.

Historical Declines in Perspective

Extending back over seven years, the July index trends reveal that margins once peaked but have noticeably declined towards the high teens due to increased competition, higher agent retention costs, and intensified price discounting. Although businesses are demonstrating resilience, the long-term outlook signals a critical need for enhanced efficiency and cost reduction methodologies.

The Distinction Between Profitable and Non-Profitable Firms

The July 2025 index delineates clear differences between profitable and unprofitable firms:

• - Profitable firms (with +6.16% EBITDA) held gross profit margins of 18.3%.
• - Unprofitable firms (with -5.19% EBITDA) recorded margins at 16.9%.

Even a seemingly minor gap in gross profit margins like 1.4% can lead to vastly different EBITDA figures. This emphasizes that while maintaining higher gross margins facilitates profitability, the essence of financial success lies in stringent expense control.

Conclusion: The Path Forward

The July 2025 Gross Profit Margin Index, showing 18.25%, serves both as a benchmark for ongoing analysis and a cautionary tale regarding the industry's declining profitability. A 5.59% drop since 2019 holds serious implications for numerous companies as it threatens their averages, pushing many towards potential unprofitability.

To mitigate these risks, businesses must focus on safeguarding gross profit through disciplined pricing strategies, optimizing agent mix, and efficiently controlling operational costs. The underlying message remains evident: gross profit is not just a metric, it forms the cornerstone of enduring financial viability.

About AccountTECH

AccountTECH has over three decades of expertise in real estate accounting services and offers the Real Estate Brokerage Financial Health Index Series, featuring monthly benchmarks across pivotal financial indicators, including EBITDA and gross profit margins.

For further inquiries, contact:

• - Mark Blagden (CEO): [email protected]
• - Sales Contact: Theresa Hurt (Sales): [email protected]
• - Media Inquiries: Rizza Batol (Media): [email protected]