Do you want to start a cosmetics line? If YES, here is a 20-step guide to starting a cosmetics line business with NO money and no experience.
The cosmetics industry generates billions of dollars in sales every year as several companies – from multi-national corporations to independent cosmetic companies – have their various shares in an industry that has a wide consumer base.
Also, the fact that the industry is always offering new and advanced formulas has made it a hot industry for those looking to start a new business. However, as lucrative as this industry might be, it would be best if you conduct your own research and engage in thorough planning before starting out.
First you have to understand how the industry works and the trends that exist therein, you cannot go into a business that you have no understanding of the basics. You might need to gain formal knowledge or spend time learning about the chemistry behind cosmetics.
You might even start experimenting with available make-ups on yourself, family members or friends in order to determine what you feel might be lacking in these products in order to remedy them when you launch your own products.
It is important that you know the area of the cosmetics that you intend to concentrate on, this will enable you to have as fewer hitches as possible from the beginning. Ensure that whatever you choose are along your line of interest and then after the business has kicked off and has gained solid footing, you might then expand on your cosmetics line by adding new products or varieties of the same product.
The cosmetics industry is stiff with competition as different brands try to stand out from the rest. However, what sets a brand apart from others is in the intense marketing that it engages in as each brand tries to find a bait that will attract customers.
In order to find out the right bait for your business, it is imperative that you ask yourself what makes your products different from the rest, why should a customer leave the brand they trust for yours, what is the special ingredient in your cosmetics that could be used as leverage and also how you intend to package your product for it to become an attractive and recognizable brand.
It is also imperative that you put together a business plan. writing a business plan can however be overwhelming and it is left for the entrepreneur to decide if he wants to hire a business plan writer or if he intends to get free samples online.
20 Steps to Starting a Cosmetics Line With No Money
Table of Content
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed with ideas & Strategies
- 17. Develop Iron-clad Competitive Strategies to Help You Win
- 18. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
The cosmetics market is majorly driven by a rise in demand for cosmetics that are made with natural ingredients especially among consumers that are health conscious. It is expected that the growth in the cosmetics market will be driven by continuous innovation as well as development of more anti-aging products that also offer sun protection.
One factor that is affecting the cosmetics market is the fact that individuals are improving on their lifestyles and are becoming more conscious of their usage of cosmetics to achieve a certain style or overall personality. The demand for cosmetics is also spreading as men now use various types of deodorants and fragrances in their daily routine.
The cosmetic industry is divided into three segments; product, application, as well as geography and the industry is resistant to downturns in the economy as it fared better than other industries during the depression in 2008. During the recession, even though consumers were more conscious of how much they were spending, it didn’t stop them from spending on cosmetics because it has become a necessity for most people. As the economy has continued to become more stable with rising per capita income, the cosmetics industry has continued to boom.
The industry as at 2015 generated more than billion in the united states alone and even though hair care and skin care were the largest two segments, cosmetics is the third largest segment in the industry with more than 14 percent share in the whole industry. The industry growth is due to the fact that more people are becoming increasingly aware of the use of cosmetics, even the male folks.
On a global level, the industry generates $314 billion and has had an annual 2.1 percent growth from the years 2012 to 2017. There are more than 29,000 cosmetics businesses in the United States employing about 698,000 people. The industry is considered to be a mature one globally especially in developed markets. However, the market is also considered to be dynamic even within product lines that are deemed as luxury.
The industry also has steady revenue from sectors where the products are not so discretionary. Globally, the economy has continued to be better over a five year period (2012 to 2017), which has allowed the market for high end cosmetics to grow as well especially in emerging markets.
The barrier to entry into this industry is not only moderate but requires that the entrepreneur has substantial capital, skilled labor as well as access to distribution networks.
While it might be easy to enter the industry if all the factors are right, establishing a brand name is however difficult especially for new entrants as many continue to enter the industry, thereby making it difficult to achieve national brand recognition much less an international one.
Entrepreneurs looking to go into the industry must be able to bring in products that will offer competitive pricing to consumers and this might be difficult if starting on a small scale especially as large scale cosmetics companies have bigger production facilities that will enable them to achieve economies of scale, a feat that requires substantial capital investment.
Another factor that intending entrepreneurs must consider is the fact that existing operators already have distribution and network relationships established.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who use make-up can be said to be all encompassing except on account of religion and personal reasons as people use cosmetics for a whole lot of reasons.
Also, those who use cosmetics are within the ages of 14 to 65 years and are majorly females. Therefore, when you are deciding on the demographics for your cosmetics business ensure that you have singled out the demography that will help achieve your goal and objectives.
3. Decide Which Niche to Concentrate On
The cosmetics line of business is where products are prepared, blended, compounded and then packaged for the target market. There are different kinds of cosmetics in the market and users have a reason for preference of the products they use.
There are different niches for entrepreneurs in the industry and those who choose certain niches are either aiming to stand out or explore a different need in the market. It is important however to be sure of whatever niche you intend to go into so that you do not end up wasting your time and money on a niche that won’t be profitable.
Below are some of the niche ideas within this particular business that one can specialize on;
- Anti-aging cosmetic products
- Organic cosmetic products
- Skin whitening cosmetic products
- Sensitive skin care products
- Mole removal products
- Anti-acne products
- Warts removal products
- Dry skin care products
- Anti-scars solution products
- Infant skin care products
- Multi utility products
The Level of Competition in the Industry
The cosmetics industry is filled with intense competition regardless of the niches that customers have to choose from. This is because many big brands are able to go into as many niches as possible, while little brands have to choose a profitable niche in which to compete in.
What customers want from any cosmetics that they use is that it meets their expectations. Most customers who are looking to achieve something with cosmetics do not mind the brand as long as it meets their expectations. Customers are however getting more conscious as to what they use as more people are becoming environmentally conscious, which has made the competition in this niche to be tough as well.
There are several cosmetic companies scattered all over the United States and even globally and so if you are looking to start your own line of cosmetics, you should expect stiff competition not only within the country but also all over the globe.
4. Know Your Major Competitors in the Industry
In every industry, there are brands that stand out due to the quality of their products, how long they have been in the industry, their customer care relationship and their marketing and publicity strategies. The cosmetics industry though extremely competitive is one that has brands that have stood out from the others.
Below are some of the well-known brands both in the United States and all around the globe;
- L’Oreal S.A.
- Unilever PLC
- Avon Products Inc.
- The Estee Lauder Companies Inc.
- The Body Shop International PLC
- Procter & Gamble
- Johnson & Johnson
According to Forbes, the cosmetics industry generates $445 billion every year and it is one of the places where entrepreneurs can attain success within a short period of time. According to analytics in the year 2016, about 62 cosmetics companies were acquired, which was 38 percent more than those that were acquired the previous year and according to experts, those that will be acquired in 2017 will be higher than the number acquired in 2016.
The entry barrier to starting a business in the cosmetics industry is quite low as there are several labs in the United States, where entrepreneurs instead of developing their products themselves can pay to work with chemists on a contractual basis in order to be able to develop their own formulas.
However easy it might be to get into the cosmetics industry as an entrepreneur, it is difficult to run the business and compete with others on a global scale especially if you are a small company.
This is because you get to contend with specific regulations guiding each country and you will also need to look for ingredients and distributors that are specific to the countries, which is why bigger brands tend to have more of an advantage.
5. Decide Whether to Buy a Franchise or Start from Scratch
One decision that you will need to face as an entrepreneur is whether to start your business from scratch or to buy a franchise. While either option doesn’t guarantee the success of your business as there are other factors that need to be taken into consideration, you should ensure that whatever option you pick is one that aligns with your core goals and objectives. If you are looking at buying a franchise, ensure that you have conducted a thorough market survey of franchise opportunities available so that you can settle on buying a franchise whose objectives align with that of your company.
Starting from the scratch is not a bad idea as you can dictate the pace at which you want your company to grow. Unlike a franchise where certain parts of the business – such as marketing, product rates – are handled for you; starting a business from scratch means that you would take care of all these aspects of the business which might overwhelm certain people. This is why having a business plan is necessary because when starting from the scratch you will need a guide to help you achieve your intended goals and objectives.
6. Know the Possible Threats and Challenges You Will Face
When looking to start any business as an entrepreneur, you should be prepared for possible threats and challenges and have strategies in place to combat them. It should however be noted that not all threats and challenges can be handled because they are deemed uncontrollable and when this occurs, the best the entrepreneur can do is not feel overwhelmed and just remain focused on why the business was established.
Some of the threats and challenges that you might likely face when looking to start your cosmetics line business include; arrival of major competitors in the industry, change in industry and trends, adverse government policies and change in consumer preferences.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
When looking to start a business, deciding on the best business structure is very important in determining how far your business would go. If you intend to run a business that will be recognized internationally, then starting as a sole proprietorship will not allow you achieve this aim.
This doesn’t mean that you can’t however start as a sole proprietor and then change the legal entity along the way as your business expands, but since cosmetics is a sensitive business, a small lawsuit or disaster to your business could shut the doors of your business.
By and large, there are five major legal entities that are available to entrepreneurs looking to start their business in the United States and they are sole proprietorship, partnership, S Corporation, C Corporation and Limited Liability Company (LLC). There are several attributes that you can use to determine which legal entity you should consider and they are; flexibility, ownership and control, taxation structure and liability issues.
If you are starting off on a small scale, then you might need to consider starting as a sole proprietor because it gives you the chance to start off on small scale and if any mistakes are made, corrections can be done. The only bad thing about the sole proprietorship legal entity is that you are liable for the debts and losses that your business will incur.
Most entrepreneurs looking to start their cosmetics business usually start off either as a corporation or an LLC and this is because these entities are separate entities from the owners. However an LLC is often considered as more flexible than a corporation and so most entrepreneurs often opt for it.
8. Choose a Catchy Business Name
When looking to start your cosmetics line business, it is important that you have an idea of what you are going to call your business. You can choose your own name or a completely fictitious name for the business as long as the name isn’t in use by any business and the name can be easily remembered and is unique enough.
Below are some of the catchy business name ideas suitable for a cosmetics line business;
- Macka Beauty Co.
- Lenty Beauty Inc.
- Promier Beauty Corporation
- Flush M.A.
- Lily-Beth Products Inc.
9. Discuss with an Agent to Know the Best Insurance Policies for You
When starting any kind of business, you should be aware that disaster or calamity could strike at any point and you should therefore be totally prepared to rebuild after it has occurred. A lot of businesses never recover after a disaster because the entrepreneurs running that business were not prepared for disaster and so could not rebuild after they had been struck.
The fact that you have started an endeavor means that you would encounter risks especially if you are one that has used up all their savings or mortgaged their home in order to start the business. While getting coverage for your business is necessary, it is important that you pick the right coverage by engaging an insurance agent or broker to help you out.
Below are some of the insurance policies that you will purchase when looking to start your cosmetics line business in the United States;
- Property Insurance
- Casualty Insurance
- Workers’ Compensation Insurance
- General Liability Insurance
- Commercial Property Insurance
- Product liability insurance
- Errors and Omissions Insurance
- Umbrella Policies
- Contents Coverage
- Mechanical Breakdown
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
It is important that you get your patent and copyright handled so that you do not have to contend with others stealing your recipes. In looking to protect your property which might also include your brand name, you could engage the services of an attorney who has knowledge in your kind of industry to help with applying for intellectual property protection.
If you are starting your business on a budget constrain however, you might not need to bother with applying for an intellectual property protection.
11. Get the Necessary Professional Certification
The cosmetics business isn’t one that you will require any sort of professional certification before you can start the business, especially if you have started the business on a small scale and your products are known for its quality. However, as you expand your business, you might need to hire professionals who will give your business the reputation it needs.
Successful brands usually partner with production companies that already have specialists to help manufacture the products they need; therefore providing a win-win situation for the cosmetics company.
12. Get the Necessary Legal Documents You Need to Operate
When looking to start any business, it is important that you know what documents will be needed for you to start your business and run it without any hitches whatsoever. The cosmetics line of business is an extremely sensitive one and not having the right documentation could put you into trouble with the law where you can be banned from either running the business in that city or the whole country or fined.
Ensure that you seek the services of an attorney when it comes to the legal documents that you will need to start or run your business. The list of legal documents that you will need to run your cosmetics line includes;
- Insurance Policy
- Patents and Trademarks
- Employment contracts
- Business Plan
- Business Permit and License
- Certificate of Incorporation
- Sales Tax Permit
- Operating Agreement for LLCs
- Employer Identification Number (EIN)
- Tax Identification Number (TIN)
13. Raise the Needed Startup Capital
One thing that entrepreneurs usually have to contend with is start-up capital and this is the reason why a lot of businesses do not become reality. Looking for startup capital is not always an easy task for any entrepreneur except those that can raise the money from their personal savings or whose business does not require much capital.
If you have to raise start-up capital from other sources, then it is essential that you have a business plan that will convince external investors on the need to invest in your business as this will show them how serious you are about the business.
Below are some of the options that you can explore when looking for startup capital for your cosmetics line business;
- Generate part of your startup capital from personal savings and sale of stock or properties
- Source for soft loans from your family members and friends
- Apply for loan from bank
- Get a business partner or investor to invest in the business
14. Choose a Suitable Location for your Business
Location has a serious impact on the success of a business and so where you choose to locate your company is very important for the attainability of your goals and objectives. This is why choosing a location for your business is something that you have to take your time with.
You can totally start your cosmetics line business from your home especially if you are starting off on a small scale; just ensure that your environment is safe enough and that there is a clear space for work documents.
Why most people don’t bother about leasing a facility for their business when just starting out is that once the cosmetics are ready for the market, deals have to be made with stores and distributors to push the cosmetics on shelves.
However, the truth is if you are going to compete against serious competition, then you might need to lease a facility where your major clients can easily access when they want to. Ensure that your facility is in a place that is accessible. If you have no idea of where to lease for your business, engage the services of a real estate agent and let them know how much you’d be willing to spend to lease a facility.
15. Hire Employees for your Technical and Manpower Needs
Once you have decided on starting your business and where you intend to operate the business from, then you must become familiar with FDA regulations, get the necessary permits as well as capital that is essential for you to start the business.
You must ensure that you either know about the ingredients you intend to use or you work with a lab that will help you develop what you want. If you are going to be producing the ingredients yourself, ensure that you have reliable suppliers for the ingredients and that you are getting it for the best rates possible.
Having the right materials with which to work with is very necessary if you intend to produce your own cosmetics. You will also need packaging and design labels, computers, phones and filing cabinets to carry out administrative work and store important documents in.
When looking to build a business structure for your business, it is essential that you get it right by employing only the right hands to work with you in achieving your goals. The number of people that you will however employ will depend on the scale of the business you intend to run. You will need a Chief Executive Officer (owner), administrative and resource manager, marketing and sales executives, accountant, receptionist, cleaner and driver.
Over and above, you will require at least 8 key people in order to successfully run your cosmetics line.
The Service Delivery Process of the Business
There are several processes involved in producing cosmetics. As an entrepreneur you first have to develop your business plan before beginning an in-depth research regarding the kind of cosmetics you want to start producing.
Once you have knowledge of the niche you intend going into, then you can start creating exclusive formulas based on your niche idea. At this stage, you can develop sample cosmetics and have it sent for evaluation along with your ingredient list and approval form. Once the product has been approved, then production can begin.
Selecting the right package and design for the packaging of your cosmetics is necessary as this is what the customers are going to first see. Once this has been taken care of, then your products can go on the shelves.
16. Write a Marketing Plan Packed with ideas & Strategies
One of the most important activities that you will engage in as an entrepreneur for the benefit of your business is marketing as this will enable you sell whatever products or services you have. The good thing about marketing is that it is a double edged sword where you get to not only generate revenue for your business but also awareness as well. With marketing also, you not only get to penetrate your intended target market but you also get a fair share of the market and also compete favorably against those already in the market place.
Your marketing strategies have to be in line with the overall marketing plan that would be based on your market survey. This therefore means that the first step to creating the right marketing strategies is to ensure that a thorough market survey has been conducted, where the target market for the business has been identified and their characteristics known; also the business’ competitors have to be identified as well and their strengths and weaknesses known in order for the marketing strategies to be very effective.
Location is very vital in marketing, as the right location will mean that you spend less than your competitors in creating awareness for your products. With products like cosmetics, it is important that your products are located in places that your target market is likely to visit because the more your products can be found in popular places, the more you should be able to get the awareness you need and generate revenue for your business.
While getting a marketing consultant that understands the industry thoroughly is very important when looking to create effective marketing ideas and strategies, it is also important that you hire a marketing team that will deploy these marketing strategies.
The marketing team should not only be empowered to physically market your products but they also should ensure that the marketing strategies align with your core marketing plan. Below are some of the marketing strategies that you can use for your cosmetics business;
- Ensure that you get in touch with stakeholders in the industry when introducing your products, its features, and the prices.
- Install different billboards and flexi banners in strategic locations around the areas where you are looking to attract your customers.
- Ensure that you create a quality website you can use in promoting your cosmetics.
- Make use of social media platforms such as Facebook, Instagram and Twitter to market your products.
- Ensure that you place adverts in newspapers and beauty magazines as well as on radio and television stations in order to increase awareness for your products.
- Empower your marketing and sales team to physically engage in marketing activities that will increase awareness for your business.
17. Develop Iron-clad Competitive Strategies to Help You Win
There are enough cosmetics on the shelves of beauty stores in the United States and the market is very competitive as it would take a whole lot to get your cosmetics on the shelf and even noticed by your target market. The number of competitors that you will face means that you will need to have competitive strategies in place that will enable you to win customers.
Some of the competitive strategies that you would need to have in place include; ensuring that your products are of high quality, engaging in publicity campaigns in order to create more awareness for your products, ensuring that you have good relationship with your clients and that you have built a solid business structure for your business.
18. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
There are different kinds of cosmetics in use and so to get your cosmetics line noticed, it is imperative that that you engage in publicity campaigns. Asides from the fact that boosting awareness for your brand will get your business noticed by your intended target market, competitors and the general public, it is through publicity that you can generate and meet your revenue target because the more people get to be aware of your cosmetics, the more they will buy it.
The huge benefits that boosting one’s awareness brings is why many successful and already established businesses do not mind setting aside a certain amount of money every year to ensure that awareness for their brand is boosted and that their corporate identity is not only created but seen as positive. Even though there are certain businesses to which any kind of publicity is good, the cosmetics line kind of business industry has to be careful about the kind of publicity it generates.
It is imperative that before any kind of strategies are crafted, that a thorough understanding of who the target market is and what they expect has been researched on by the company. If for instance, your cosmetics line target women between 18 – 35 years, then your publicity strategies must be tailored to suit this demography; which means you must know where they likely visit in order that your publicity activities might be seen.
Due to the fact that the cosmetics industry is intensely competitive, as one that is just starting out, it is imperative that you engage the services of a brand consultant who knows the industry thoroughly to help you craft the right strategies for your business.
Below are some of the strategies that can be used to boost awareness for your brand and also create a corporate identity for your company;
- Make use of social media platforms such as Facebook, Twitter, Snapchat, Instagram and Pinterest to create awareness for your cosmetics line
- Ensure that you install billboards and flexi banners in strategic locations in order create awareness for your business
- Distribute handbills, fliers and paste notices in areas where your target market are likely to assemble
- Ensure that you use your website to vigorously promote your brand of cosmetics
- Place adverts about your cosmetics in print media such as newspapers and beauty magazines as well as radio and television stations
- Create a distinct logo and ensure that your official cars and tee shirts used by your staff are branded