Finding that perfect makeup takes time, but what if that product that’s ideal for you doesn’t exist yet? If you’re creative, have a great idea for quality makeup products, and have an entrepreneurial spirit, then starting a makeup line of your own could be an exciting and rewarding opportunity.
Starting a makeup line requires more than just a passion for makeup. It won’t be easy, but our guide is here to help you by providing an overview of the makeup industry, an outline of the key steps, and answers to common questions.
Business Overview
When starting a makeup line, you are essentially launching a consumer packaged goods company within the cosmetics industry. This involves developing makeup products, branding your line, contracting manufacturers, obtaining distribution, and marketing your products to retailers and consumers. It requires an understanding of product development, manufacturing, packaging, branding, marketing, and selling on both a business-to-business and direct-to-consumer level.
A makeup line might focus on one element of the cosmetics industry, like skin care, while other lines might encompass a wide array of makeup options, including eye makeup, lipstick, concealer, and more. Most makeup lines are sold in a variety of stores, including pharmacies and big-box retailers, but online sales do make up a portion of the industry, too.
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Industry Summary
The makeup industry is highly competitive, with many larger brands dominating the market. Thanks to evolving trends, though, there is space for independent, smaller makeup lines. Many consumers become loyal to a particular cosmetic line, meaning a business needs to deliver a quality product and then follow up with a great user experience and additional products to win over customer loyalty.
The cosmetic and beauty product manufacturing industry market is estimated to be worth over $42 billion. Within this, color cosmetics like makeup accounts for around 35% of the market. Makeup sales are driven heavily by influencer marketing and social media platforms like Instagram and YouTube. As an entrepreneur, it’s important to leverage these marketing channels and partner with influencers to promote your products.
Industry trends show that consumers are becoming more conscious of the ingredients in their makeup and are seeking out natural and organic options. There’s also a growing demand for cruelty-free and vegan products. These trends are something to keep in mind when developing your product range.
Steps To Starting A Makeup Line
Step 1: Market Research
When considering starting a new makeup line, it’s important to do your homework first. That means conducting thorough market research to understand the industry, your target audience, and your competitors. This will help you determine if starting a makeup line is a good idea and what unique value you can bring to the market.
One of the first steps is to understand the regulations that apply to the cosmetics industry. This includes requirements for ingredients, testing, labeling, and more. You want to make sure your business complies with all of these requirements before launching your line. The Food & Drug Administration (FDA) has a helpful guide for startups and home-based cosmetic businesses.
Next, you’ll want to identify your target audience and understand their needs, values, and demographics. Your target audience is the cornerstone of your makeup line. By understanding their needs, values, and demographics, you can tailor your products to meet their demands. Creating buyer personas, which are fictional representations of your ideal customers, can help you visualize your audience and develop products that resonate with them.
Conducting a competitive analysis is also important. This involves researching established and trending makeup brands that are selling similar products to what you plan to offer. You’ll want to study their branding, pricing, product range, and marketing strategies to see what’s working and what isn’t. This can help you identify gaps or opportunities in the market that your brand could fill. In addition to studying the big players in the industry, you’ll also want to look at what small and indie brands are doing. These brands often have unique offerings and a different approach to marketing that can provide valuable insights.
Last, it’s important to assess social media beauty trends. Look at popular hashtags, products featured in tutorials or reviews, and influencer partnerships to see what’s resonating with consumers. This can help you identify trends and opportunities that you can leverage for your brand.
Once you’ve conducted your market research, it’s time to choose your product niche and business model. This could involve manufacturing your own products, opting for a private label approach, or reselling products from other brands. Your choice will depend on your market research findings, resources, and business goals.
Step 2: Write a Business Plan
Setting off on the journey to start a makeup line involves many steps, and perhaps one of the most important is crafting a well-thought-out business plan. This document serves as a blueprint for your business, outlining your goals, strategies, and financial projections.
One important reason to create a business plan is that it serves as a reality check. It forces you to take a hard look at your business idea and evaluate its potential. When you put pen to paper and start mapping out your plan, you might realize that some aspects of your business idea need to be tweaked or that there are potential challenges you hadn’t considered. This reality check is invaluable because it helps you address potential issues before they become real problems.
A business plan also allows you to project your income and expenses, which can help you estimate whether your business is feasible. By taking a close look at your projected costs and potential revenue, you can determine if your business has the potential to be profitable. This is an important step because it’s better to know in the planning stage whether your business idea is feasible rather than finding out after you’ve already started.
Related: How to write a business plan
Step 3: Source Funding
Starting a makeup line can be expensive, and one of the biggest challenges for many entrepreneurs is finding the necessary funding. Fortunately, there are several options available for those looking to start a makeup line.
The first source of funding to assess is self-funding. This involves using your own savings or assets to bootstrap the business. Many entrepreneurs start this way as it can be the most straightforward option. However, if personal savings are not enough to cover the startup costs, outside funding sources will be needed.
Lenders are a common source of outside funding for new businesses. They typically require the borrower to invest at least 15% of their personal funds towards the total cost of the project, have a good credit score, and have sufficient collateral. If the bank feels that the loan is too risky, they may require an SBA (Small Business Administration) loan guarantee.
Another option is to seek funding from friends and family. This can be a great way to raise money, but it is important to put any agreements in writing to avoid misunderstandings or conflicts down the line.
For those with lower funding needs or who may not be able to access credit through a lender, a microloan could be a good option. Some organizations offer microloans in addition to business training, providing both funding and valuable support for new entrepreneurs.
Finally, crowdfunding is another option for raising funds. Platforms like Kickstarter and Indiegogo allow entrepreneurs to launch a campaign and raise donations from the public. This can also be a great way to gauge interest in your product and build a customer base before launch.
Related: Finding the money to start a business
Step 4: Register the Business
Starting a makeup line is exciting, but it’s necessary to make sure you properly register your business and comply with all relevant laws and regulations. Every state is different, but here is a general overview to help you get started:
Choose a business structure: The first task is to choose a business structure. There are four main types to choose from: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Each has its own advantages and disadvantages.
- Sole proprietorship: Easiest to set up and has lower startup costs, but offers no liability protection.
- General partnership: Similar to a sole proprietorship but involves two or more people.
- Corporation: Provides liability protection but is more expensive and complex to set up and run.
- Limited Liability Company (LLC): Provides liability protection while still being relatively simple to set up.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Related: Finding a domain name for your business
Understand cosmetics regulations: Cosmetics businesses must comply with FDA regulations related to labeling, safety, and manufacturing. This includes ensuring your products are properly labeled, not adulterated or misbranded, and safe for use as intended. In addition to federal regulations, there may be state-specific licensing or permits required for manufacturing or selling cosmetics in your state. Be sure to check the requirements in your area and comply with any applicable laws.
Obtain business licenses and permits: Depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).
Related: State guides for general business licensing
Step 6: Set Up Operations
The next aspect to cover is setting up operations, which involves everything from product formulation to warehousing.
The first step in setting up your makeup line operations is product formulation. You can either develop products from scratch, leveraging your creativity and knowledge of the market, or partner with a lab for custom formulations. This makes sure your products comply with safety regulations and are safe for consumer use.
Working with a lab can be beneficial, particularly if you lack experience in cosmetic chemistry. Labs can help create samples and refine formulas until you achieve the desired results. Alternatively, you can purchase pre-made bases and pigments and customize your own blends. This approach offers greater control over the manufacturing process and can be more cost-effective, especially when starting.
Next comes sourcing suppliers for your ingredients, packaging, and applicators. Choosing the right suppliers is critical as they directly impact the quality of your final product. It’s important to vet suppliers carefully, considering factors such as their reputation, quality of materials, pricing, and reliability.
Then comes the decision of whether to manufacture in-house or use a contract manufacturer. In-house manufacturing allows for greater oversight and control, but it can also be more resource-intensive. On the other hand, contract manufacturers have the expertise and equipment to produce large quantities efficiently, but you might have less control over the process.
Finally, consider where you will store your raw materials and finished products. An organized warehouse ensures smooth operations, from inventory management to order fulfillment. Whether you choose a dedicated warehouse space or use a portion of your home when starting, make sure it’s clean, organized, and suitable for storing cosmetics.
Step 6: Create a Marketing Strategy
Now, it’s time to start letting the world know about your unique offerings. This involves several strategic tasks, from finalizing branding to exploring various marketing channels.
At its core, your brand is the personality of your business. It’s what sets you apart from competitors and attracts customers to your products. This includes choosing a name, logo, color scheme, and packaging that reflects your brand’s identity and appeal to your target audience. Consider trademarking your business name and logo to protect your brand identity from infringement.
With your brand established, the next move is to build a website. Your online store will serve as the primary platform for customers to learn about and purchase your products. Make sure it’s user-friendly, attractive, and secure, encouraging customers to shop with confidence.
Once your branding and website are ready, it’s time to market your brand. Social media is a powerful tool for this, allowing you to reach a wide audience and engage with customers directly. You could also collaborate with influencers whose followers align with your target demographic. Paid advertising, whether online or offline, can also be effective. Online ads can be targeted to specific demographics, while traditional media ads can help you reach a broader audience. Remember to align your marketing message across all channels for consistency.
Last, although starting with online sales is common, having your products in physical stores can significantly boost your brand visibility and credibility. As your brand grows, retail partnerships can be a key step in expanding your customer base and establishing your presence in the beauty industry.
Step 7: Prepare to Launch!
We’ve gone over several core steps to start a makeup line, but we aren’t done yet. There are several other steps to consider, and while everyone’s needs will vary, here are some common loose ends you might need to tie up before starting.
Business insurance: Protecting your business from unforeseen events is an important consideration. Liability insurance, product liability, and business property insurance are some types you might look at.
Setting up bookkeeping: Establish a system for managing finances. Accounting software Wave Accounting (FREE) or Quickbooks will help in keeping track of sales, expenses, taxes, and profits.
Opening a business bank account: Separating personal and business finances is not only professional but also simplifies accounting and tax reporting.
Common Questions When Starting A Makeup Line
How much does it cost to start a makeup line?
Starting a makeup line can be an expensive venture, with costs ranging from a few thousand to over $150,000. This range depends on the scale of your business and the specific decisions you make along the way.
Business registration: Registering your business is an essential first step. While fees vary by state and country, expect to spend a few hundred dollars for this process.
Product development: Creating your product line is one of the most significant expenses. Developing a formula for your products and making prototypes can cost around $2,000 per formula.
Inventory: Initial inventory purchase will likely be your largest expense. It can range from $1,000 for a very small operation buying pre-made formulations to $50,000 or more for custom-developed products.
Insurance: Initial insurance costs, including general liability and product liability, can be around $500-$3,000 for the first year, depending on coverage levels.
Packaging and branding: Designing and producing your packaging and branding materials can cost between $1,000 and $5,000, depending on the complexity and quantities.
Marketing: Marketing your makeup line can involve many different activities, from hiring influencers to running ads. Initial marketing costs can range from a few thousand to tens of thousands of dollars, depending on your strategy.
Legal costs: On average, legal costs for trademark registration, contract drafting, and tax compliance can range from $1,500 to $6,500
How profitable is a makeup line?
Makeup line profits can vary significantly depending on the line’s specialty, business model, and profit margins. Industry data shows that the typical gross profit margin for a makeup product is around 60-80%. This means if a product retails for around $25-$40, it may cost $10 to manufacture.
Let’s look at an example of a new makeup line:
– Average retail price per unit: $30
– Cost of goods sold per unit: $10 (includes ingredients, packaging, manufacturing)
– Gross profit per unit: $20
If the makeup line sells 5,000 units in the first year, that’s:
– Revenue: 5,000 * $30 = $150,000
– Cost of goods sold: 5,000 * $10 = $50,000
– Gross profit: $150,000 – $50,000 = $100,000
After accounting for operating expenses like marketing, insurance, and other overhead, the net profit margin may be 60% of revenue. For this example, if operating expenses are $60,000 for the year, the net profit would be:
Gross profit: $100,000
Operating expenses: $60,000
Net profit: $100,000 – $60,000 = $40,000
What skills are needed to run a makeup business?
Starting a makeup line doesn’t require a business degree, but certain experiences and skills can help.
Cosmetology background: An education in cosmetology serves as a great background when starting a makeup line. This education provides a business owner with detailed information on how makeup is used, the qualities that make the best products, and important safety and handling best practices.
Cosmetic chemistry knowledge: While not required, a background in cosmetic chemistry will allow a business owner to formulate and develop their own products. Business owners who don’t have a cosmetic chemistry background should plan to work with a cosmetic manufacturer to help with product development or hire a cosmetic chemist as a consultant or employee.
Knowledge of industry trends: An awareness of the products that are most in demand, the qualities that consumers seek out in products, and the colors that are most popular at the time will help a business owner create a line that’s relevant and popular.
Branding and marketing knowledge: Branding is a huge part of a makeup product’s success. A business owner who has branding and marketing knowledge can handle part or all of this process themselves.
Attention to detail: Whether developing products or working on branding, attention to detail matters in every aspect of this business.
Customer service skills: Strong customer service skills will help a makeup business stand out. Positive buyer experiences can increase the chances of customers buying from the line again.
What is the NAICS code for a makeup line?
The NAICS code for a makeup line is 284405.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
