How to Start a Cosmetics Manufacturing Business

Do you have an idea for a cosmetic product or line? Maybe you are entrepreneurial-minded and want to start your own business. In that case, you are probably wondering how to start your own cosmetics manufacturing business.

Starting a cosmetics manufacturing company isn’t different from any other product-based business. Here are the steps to start selling your own cosmetics line:

1. Build Your Brand
2. Find a Wholesaler
3. Choose Your Sales Platform
4. Make a Profit

Cosmetics are one of the most popular and enduring products. Cosmetics help us feel clean and look good, which makes us more successful socially.

Cosmetics go way beyond make-up. According to Statista, make-up only constitutes about 16% of the worldwide cosmetics market. Here are some examples of other types of cosmetics:

• Skincare products
• Haircare products
• Perfumes/cologne
• Toiletries
• Deodorants
• Oral hygiene products, including toothpaste

In other words, cosmetics are one category of consumer goods that everyone in the world uses. That’s what makes it such a great business. Let’s look closer at what you need to do to get your cosmetics manufacturing company off the ground. This article assumes you have already planned and designed your prospective product. 

Build Your Brand

Once you have determined your product formulation(s), you need to start working on building your brand. Building your brand is crucial for both product and service-based businesses. And you should continue to build and reinforce your brand throughout the life of your company.

Know Your Customers

The first step in building a brand is to know who your customers are and what moves them. If you have designed an organic skin lotion, for instance, your audience is going to care very much about natural products. They may also be interested in other environmentally friendly practices, such as keeping a low carbon footprint and sustainability.

You can then use this information to build the core tenants of your brand. 

Value Proposition

Next, determine your value proposition. This is also closely related to your customers. In other words, how do you create value for the people buying your products?

Unsure how to create a value proposition? Here are some of the most famous value propositions to get you started:

• Slack: “Be more productive at work with less effort.”
• iPhone: “The experience IS the product.”
• Uber: “The smartest way to get around.”

Some people confuse value propositions with mission statements. Mission statements are broader, describing a company’s overall plan for doing business. Value propositions describe why customers will buy your product. 

Use Social Media

When starting your own cosmetics company, you probably don’t have a lot of money available in the initial stages to mount a massive marketing campaign. You can use social media to promote your brands without spending any money.

Start the buzz about your products with friends and family. You can then find social media influencers who might be willing to post about your products in exchange for free samples. 

Find a Wholesaler

Next, you need to secure a reliable supply chain to source your products. You may be in the fortunate position of outsourcing production from the beginning, but more likely, you will be making your own products, at least to start. To keep your cost of sales low, find someone who can buy wholesale ingredients from.

Here’s what to look for in a wholesaler.

High-Quality Raw Ingredients

When it comes to cosmetics, people who buy from small companies are typically looking for a one-of-a-kind special product—and they don’t mind paying a premium for it. 

The first rule of selling premium products is using premium ingredients. That’s why your inputs need to be non-toxic and reliably sourced.

DSM is a wholesale supplier used by cosmetics producers all over the world. More than 45% of its products are organic, making it an excellent and stable supplier of the raw materials of your products. 

What Do You Need to Qualify for Wholesale Purchasing?

While lots of companies advertise themselves as wholesalers, the best wholesale suppliers only sell to other businesses. So what do you need to do to qualify to purchase from these wholesalers?

It’s known by different things in different states, but you need to get a reseller’s permit in order to buy wholesale products. This usually comes in the form of a state tax ID number.

Your individual state’s website will have instructions on how you can apply for a state tax ID number, also known as a reseller’s permit. You can also get this license from a third-party vendor, such as MyUSACorporation.com.

Choose Your Sales Platform

Next, you need to figure out the channels you will use to sell your products. For smaller, home-based businesses, Shopify and Etsy might be great alternatives to sell your products. You can also build your own website or use a more comprehensive online marketplace like Amazon.

Keep Your Customers in Mind

Remember how you got to know your customers as you were building your brand? These are the people you need to be keeping in mind when choosing your sales platform. 

If you are branding yourself as a small, home-based business, for example, Etsy and Shopify would be sales platforms that are compatible with this business. If you want to promote your items alongside major names in the cosmetics industry, you should choose a more comprehensive marketplace like Amazon. 

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Build a Website

Even if you decide to outsource your sales platform, you should build your own website (or have one built for you.) Having a website with a clever domain name goes a long way in terms of professionalizing both your image and products.

You can sell products through your website with a simple plugin like WooCommerce, or you can use your website as a landing page to point your customers to Amazon or another online marketplace page. 

Higher Representatives and Distributors

The most traditional route is to hire representatives and/or independent distributors to sell your product. You can even do some of the in-person selling yourself by visiting local independent boutiques and gift shops. 

When working with a retailer to place your product, the most common arrangement is for them to sell your products on consignment. The retailer receives a fee, usually a percentage of the selling price, to place and promote your products.

Make a Profit

The final step in starting your own cosmetics manufacturing company—and any other company—is to have a plan for profitability.

Have a Financial Cushion

Even the most brilliant of new enterprises are rarely profitable right away. In fact, most businesses don’t achieve profitability until after operating for two or three years. And real success doesn’t often present itself until the company has been running for seven to ten years. 

Maybe it’s because they tend to be optimistic by nature, but entrepreneurs underestimate how long it will take their business to be profitable. 

Loans and Series A funding are always a possibility but never a guarantee. Before starting your cosmetics manufacturing business, have a financial cushion to get both you and your product through the difficult times ahead.

Keep Expenses Low

Everyone knows that building sales is a necessary component in attaining profitability, but few people think of controlling costs as a means of achieving the same end. 

Keep your costs by any means that does not sacrifice your product. If you don’t need to rent office space, don’t. Many businesses are started from homes and even garages and basements. Amazon and Microsoft are just two examples of this.

As a bonus, if you base your business from home, at least to start, you can benefit from some very lucrative home business tax deductions that will help you hold on to more of your money so you can invest it into your new business. 

Managing Cash Flow

Managing cash flow effectively can also help you make a profit from your cosmetics company. If you run out of money, you will have a hard time paying your wholesale suppliers. No supplies means no products. No products means no business. 

You can adequately manage cash flow as a small business by promptly invoicing your clients. This can be difficult when dealing with larger customers, who may want up to 90 days to pay invoices to manage their own cash flow better. A way to combat this is by diversifying your client base so all your proverbial eggs are not in one basket.

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Frequently Asked Questions

1. Isn’t there too much competition? Can I make it as a small cosmetics business?

If you have a good product, build your brand, and create value for customers, you have an excellent chance of success. Remember that virtually every big business started as a small business. 

2. How do I price shipping costs into my products?

Cosmetics are usually small, but they can be expensive to ship if they are liquid. However, with free shipping from giants like Amazon, customers aren’t keen on paying for shipping. Consider setting a price limit for free shipping, often around $50.

To learn more on how to plan your own cosmetic manufacturing business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.