Are you passionate about skincare and dreaming of starting your own business in this thriving industry? Well, you’re in luck! The skincare market is booming, offering tremendous potential and profitability for entrepreneurs.
When you think about starting a skincare line, what comes to mind? Do you think it’s something only big businesses can do? That’s not the case at all! In fact, there are many small businesses that have started their own successful skincare lines. So, how do they do it? And more importantly, how can you do it too?
While you’ll need more than just a passion for skincare products, we’ll break down what you need to know in order to start your own skincare line. Are you ready to get started? Let’s go!
A skincare line business revolves around developing, producing, and selling a range of skincare products. These products can range from daily use items like cleansers and moisturizers to specialized solutions like anti-aging serums and acne treatments. The primary source of revenue comes from the sale of these products, either directly to consumers or through various distribution channels like beauty stores, online platforms, or spas and salons.
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The skincare industry in the United States is a booming sector. In 2022, the U.S. skincare market is projected to generate $23.6 billion in sales and is expected to grow by 2.99% annually through 2028.1
This growth is expected to be driven by increasing consumer interest in personal care and wellness, advancements in skincare technology, and the rise of e-commerce platforms that make it easier for consumers to discover and purchase skincare products. The trend of ‘clean beauty’ and natural, organic products also contributes to the industry’s growth, as more consumers seek out brands that align with their values of health and sustainability.
Steps To Start A Skincare Line
Step 1: Write a Business Plan
Starting a skincare business can be exciting, but it’s important to remember that success won’t happen overnight. There are a lot of moving parts to keep track of, and to keep everything in focus, writing a business plan is the first step.
Having a strong business plan can help you stay organized and on track with your goals as your business grows and evolves. Without a clear plan in place, it’s easy to get overwhelmed and lost in the day-to-day tasks of running a business. So, before diving into launching your skincare line, make sure to spend some time developing a solid business plan. It may seem like extra work upfront, but it will pay off in the long run.
Your business plan should also have financial projections that outline your anticipated expenses, revenue streams, and profitability. This allows you to calculate how much it will cost to start and assess the financial feasibility. Additionally, if outside funding is needed, the financial projections are especially to lenders and investors.
Related: How to write a business plan
Step 2: Register the Business
To properly register your skincare business and make it legal, there are specific steps to be aware of. These will vary depending on where the business and the specifics of the products being sold, but here is a general overview:
Determine your business structure: Choose the legal structure that best suits your skincare line. The four common types are sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Each structure has its own advantages and requirements.
- Sole proprietorship: This is the simplest structure to set up and has the lowest startup cost. However, it does not provide liability protection, meaning your personal assets could be at risk if your business encounters legal trouble.
- General partnership: This is similar to a sole proprietorship but involves two or more people. Like a sole proprietorship, it’s easy to set up but doesn’t offer liability protection.
- Corporation: This structure provides liability protection, meaning your personal assets are separate from your business. However, it’s more complex to set up and has higher costs.
- Limited Liability Company (LLC): An LLC combines the liability protection of a corporation with the simplicity and flexibility of a sole proprietorship and partnership.
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.
Obtain licenses and permits: Depending on your location and the type of products you’re selling, you might need a cosmetics manufacturing license, a local business license, a sales tax permit, and an Employer Identification Number (EIN). Be sure to research the requirements in your specific state.
Follow FDA regulations: The FDA regulates the ingredients of cosmetics under the Federal Food, Drug, and Cosmetic Act (FD&C Act).2 Your products must be safe for consumers, properly labeled, and not deceptive. There are also certain color additives and ingredients that are prohibited or restricted by FDA regulations. You can register your products under the Voluntary Cosmetic Registration Program (VCRP).3
Trademark your brand: Consider protecting your brand name, logo, and unique product names with trademarks. This prevents others from using your brand identity and provides legal recourse if they do
Step 3: Develop the Formula
After getting the business registered, it’s time to finalize the formulas for your products. The formulas are the backbone of your skincare line, and you need to approach this step with careful consideration and research. Here are a few considerations:
Identify your target market: Before you start experimenting with ingredients, it’s important to understand who you are creating your products for. Are they for people with sensitive skin, acne-prone teenagers, aging adults looking for anti-wrinkle solutions, or individuals interested in organic, all-natural products? Identifying your target market will help guide your formulation process.
Research ingredients: Once you know your target audience, research the ingredients that will benefit them most. For example, if you’re targeting people with dry skin, you might look into hydrating ingredients like hyaluronic acid or glycerin. If you’re focusing on natural products, you’ll need to research plant-based, organic ingredients. Always consider the safety, efficacy, and sourcing of each ingredient.
Hire a cosmetic chemist or begin researching private label manufacturers: Unless you have a background in cosmetic chemistry, you’ll likely need to hire an expert to help develop your formulas. A cosmetic chemist can create custom formulas based on your specifications. Alternatively, you could use a private label manufacturer. These companies offer pre-made formulas that you can brand as your own. While this route might be less unique, it’s often faster and more cost-effective.
Test your formulas: Once you have a formula, it’s essential to test it thoroughly. This means testing for stability (to ensure the product won’t separate or change over time), compatibility (to make sure it works with the packaging you’ve chosen), and safety (ensuring the product is safe for human use). You should also conduct consumer testing to gather feedback on the product’s performance.
Compliance with regulations: Make sure your formulas comply with FDA regulations and any other relevant standards for skincare products. This might involve testing for specific substances, labeling your products correctly, and ensuring manufacturing processes are up to standard.
Step 4: Set Up Production
Once you have developed your skincare formula, the next step is to set up production. Here are the tasks involved in starting a skincare line production:
Source ingredients and materials: Identify reliable suppliers for the ingredients and materials necessary to produce your skincare products. Ensure the quality of the ingredients aligns with your brand’s standards.
Establish a production facility: Depending on the scale of your operations, you may need to either set up your own production facility or work with a contract manufacturer. If you choose to have your own facility, ensure it meets the necessary regulatory requirements and has appropriate equipment and storage facilities.
Develop manufacturing processes: Create detailed procedures for each step of the manufacturing process, including measurements, temperature controls, and quality checks. It’s crucial to establish consistent and standardized processes to ensure product quality and consistency.
Obtain necessary certifications: Depending on your target market and regulatory requirements, you may need to obtain certifications such as Good Manufacturing Practices (GMP) or organic certification. Adhering to these standards adds credibility to your products and instills confidence in your customers.
Set up quality control measures: Implement quality control measures throughout the production process to ensure that each batch of your skincare products meets your predetermined quality standards. This includes conducting tests and inspections for ingredients, formulation consistency, and final product stability.
Create packaging and labeling: Design appealing and informative packaging that reflects your brand’s identity. Ensure your labels comply with regulatory requirements, including ingredient lists, warnings, and any additional claims specific to skincare products.
Determine storage and distribution: Establish appropriate storage conditions for your finished products to maintain their quality and shelf life. Develop a distribution plan that efficiently delivers your skincare products to retailers, e-commerce platforms, or directly to customers.
Step 5: Create a Marketing Strategy
With the launch of your skincare line close, this next phase is creating a marketing strategy so people know about your products. Having a good strategy is important as you are entering a very crowded space.
The first step is crafting a compelling brand story that encapsulates the essence of your products – whether it’s their natural ingredients, scientific innovation, or specific skin benefits. This narrative should be the backbone of all your marketing materials.
Before launching any campaigns, make sure to gather feedback and testimonials from satisfied test customers. These can be used in advertising materials or even incorporated into an influencer partnership or on social media platforms. It’s also helpful to offer sample sizes or discounted starter kits to give potential customers an opportunity to try out the products before committing to a full-size purchase.
In addition, focusing on a specific aspect or target audience (such as anti-aging or men’s skincare) can help consumers understand the unique benefits of your line and how it stands out amongst competitors.
Finally, don’t underestimate the power of word of mouth and customer referrals; consider implementing a referral program as part of your marketing strategy. Overall, careful consideration and promotion of your products’ results will ultimately drive sales for your skincare line.
Step 6: Prepare to Launch!
With the core steps out of the way, now it’s time for the final steps to wrap up everything and get your business up and running. The actual tasks you need will vary, but here are some common ones to consider:
Business insurance: Common types include product liability insurance, which covers damages your products might cause; general liability insurance, which protects against general business risks; and professional liability insurance, which covers claims of negligence or harm from your services or advice.
Setting up bookkeeping: This can involve hiring a bookkeeper or using accounting software like QuickBooks, FreshBooks, or Xero. These tools help track daily transactions, prepare for tax season, and create financial statements.
Opening a business bank account: Setting up a dedicated business bank account allows you to keep your personal and business finances separate, simplifying bookkeeping and ensuring accurate financial records.
Common Questions When Starting A Skincare Line
How much does it cost to start a skincare line?
A new skincare business can cost at least $5,000 to start and will likely exceed $10,000. But, of course, how much you do yourself at home and how much work you outsource to others modifies the overall cost.
Product formulation: This is often the most expensive part of starting a skincare line. Hiring a chemist and creating your formulations could cost anywhere from $500 to $25,000.
Inventory and packaging: The cost of ingredients, packaging materials, and initial inventory can range from $2,000 to $20,000. The exact cost will vary depending on the ingredients you use, the complexity of your packaging, and the number of products you plan to launch with.
Equipment: If you are making the products in-house, you will need to acquire the equipment to manufacture them. Estimated costs for equipment and supplies can range from $1,000 to $10,000 or more.
Business registration: Depending on your state, the cost to register your business can range from $50 to $1,000.
Insurance: The initial cost for insurance, such as product liability insurance, can range from $500 to $2,000.
Marketing: The cost to design a logo, launch a website, and initiate a marketing campaign can range from $1,000 to $5,000.
How profitable is a skincare line?
The profitability of a skincare line can vary significantly based on factors such as product pricing, sales volume, operating expenses, and market positioning. Let’s consider a hypothetical scenario to illustrate potential profitability:
For simplicity, let’s say your average product sells for $30, and your cost of goods sold (COGS), including ingredients, packaging, and manufacturing, is around $10 per unit. This gives you a gross profit of $20 per product.
Now, let’s assume you’re able to sell 1,000 units per month. This results in a monthly revenue of $30,000 (1,000 units x $30/unit). With COGS at $10,000 (1,000 units x $10/unit), your gross profit would be $20,000 monthly.
However, you also have operating expenses to consider, which include marketing, insurance, salaries, and administrative costs. Let’s say these expenses total $12,000 per month. Subtracting this from your gross profit leaves you with a net profit of $8,000 per month ($20,000 – $12,000).
Annually, this translates to a revenue of $360,000 (12 months x $30,000/month), a gross profit of $240,000 (12 months x $20,000/month), and a net profit of $96,000 (12 months x $8,000/month) before taxes.
It’s important to note that these figures are hypothetical and can vary greatly.
What is the NAICS code for a skincare line?
The NAICS code for a skincare line is 325620.
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.
Related: What is a NAICS code?