If you have a passion to create your own cosmetics line then you are in the right place. Do you know that every American wants to spend lots of money every year on cosmetics? Actually, most Americans spend around $244 to $313 every month on makeup and beauty products. To sum up, all these contributions make a huge $50 billion in sales each year.
By learning how to start a cosmetic business, you can tap into the immense consumer demand for beauty products. This presents an opportunity to turn your passion for beauty into a lucrative venture. Additionally, you can cater to groups that may have difficulty finding brands that meet their specific needs.
How To Start A Cosmetic Business: 9 Steps To Launch
It must be noted that the cosmetics industry is highly competitive because many brands are already doing business online and through stores. But don’t need to worry, every industry has some space for newbies. With the below instructions, you can start and run your own business in the correct way.
1. Choose A Cosmetic Product
The beauty industry includes many different things like products for taking care of your hair, your skin, and also things like makeup and perfume. First of all, you will have to select the product that you will sell through your cosmetic business. For example, if you are using it to sell makeup items then you can go for a set of eyeshadows. If your business is centered around haircare, you could start with a shampoo and conditioner set.
Many beauty brands begin with a small lineup of products, usually less than five items. Moreover, these kinds of products are variations of the same formula. Like the different shades of concealer of colors of eyeliner.
It is important to understand that making products can cost a lot of money, take a lot of time, and be very complicated. As a new business, it’s best to start by offering a small number of really good products that your intended customers will really like, instead of offering many average products that might hold back your success.
3. Local And Federal Regulations
It must be noted that custom-printed cosmetic boxes are highly controlled and monitored by FDA. For instance, the FDA imposes stringent limitations on the use of color additives in cosmetics, which vary based on the intended application on the body.
Cosmetics are products used for cleansing or beautifying, like bronzers and nail polishes. Drug classification comes with stricter requirements for registration, labeling, and other aspects. Launching an anti-dandruff shampoo brand can be more challenging than starting a makeup line that focuses solely on enhancing appearance.
4. Business Name
After finalizing the business idea, next, select a unique business name. In the same state, no two businesses in the same industry can have the same name, and this applies everywhere if it’s trademarked. You can use your state government’s business name search tool, like the Arizona Secretary of State entity search, and the U.S. trademark database to help you with this.
5. Business Plan
In order to achieve success, develop a road map. This road map is known as a business plan. It helps you prepare for the future, demonstrate your potential to lenders, and form partnerships with retailers.
Besides introducing you and your company, a business plan also helps you solidify your marketing and financial plans. It is also important to create a marketing plan along with the business plan. A marketing plan will describe how you can reach your targeted audience.
In addition, you must make a money plan for your small business. This plan should include a list of expected startup costs, such as product development and business registration fees, as well as monthly operational expenses like manufacturing, warehouse rental, shipping, and digital advertising.
Packaging is an important factor for any business. Without having attractive packaging you can’t run your cosmetics business properly. You can promote your brand through effective and colorful packaging. Moreover, if you prefer to buy cosmetics boxes wholesale then you can save money on packaging expenses.
7. License & Permits
To legally establish your company, the first step is to decide on its business structure. Will it be an LLC or an S corporation? This choice affects your personal liability and tax obligations. To complete your business registration, you can visit your state agency’s website or office.
Registering your business is a compulsory step but in addition to this, you will also have to obtain an employer identification number (EIN). This number is mandatory for corporations, partnerships, and businesses with employees. Even if you run a sole proprietorship, you may require an EIN to open a business bank account or apply for loans.
If your local government mandates permits or licenses for cosmetic businesses, it is important to begin the registration process for those as well.
8. Get funding for your business
When starting a cosmetic business, funding is essential. You can seek funds from banks or crowdfunding platforms. As you begin developing your products, you’ll have startup costs, so it’s important to secure funding early.
First, calculate your expected startup and operational expenses for the first six months. Moreover, find out that you can cover these costs. If not, consider options like crowdfunding, applying for business credit cards, getting bank loans, pitching to investors, or exploring other possibilities for funding your business.
9. Begin Product Development
Once you have your plans and funding ready, you can start creating your first cosmetic product. At this stage, you can also set your pricing strategy and product branding.
If you choose to make the product on your own, it’s important to study how to create cosmetic formulas that are safe and work well. You will need money for buying materials, containers, and packaging. This method is good for homemade products like soaps and organic makeup sold on sites like Etsy, but not for chemical-based items like sunscreens and toothpaste tubes.
Alternatively, you can hire a cosmetic scientist, which typically costs at least $1,000 per product. Once your product is ready, you can handle packaging and shipping yourself or find a manufacturer to help. The Society of Cosmetic Chemists can assist in finding a scientist to collaborate with.
You can also work with a private label manufacturer found on websites like Alibaba or Thomasnet. This allows you to skip expensive parts of the development phase. By selling pre-developed formulas with your own branding, you pay per unit at wholesale prices.