Do you want to start a soap making business with nearly nothing? If YES, here is a complete guide to starting a soap making business from home with NO money and no experience.
Okay, so we have provided you an in-depth sample soap making business plan template. We also took it further by analyzing and drafting a sample soap marketing plan backed up by actionable guerrilla marketing ideas for soap making businesses.
Making soap is a fun hobby that can turn into a full-time business or at least a way to make a little extra money. Homemade soaps, especially those that use organic ingredients or beautiful designs, are a hit with many customers since they are an inexpensive luxury and a popular gift-giving idea.
Starting a Soap Making Business with Nearly Nothing – A Complete Guide
- Industry Overview
Have you noticed that there is a lot of handmade soap in the U.S. market? Just go to Etsy’s website and search for handmade soap. At last check, there were 311 pages with 21 listings per page. That’s 6531 bars of soap for sale. Add that to the popular brands who carry out production on a large scale.
If you appreciate the value of soap in our daily lives and how much money people spend on soap every day, you would realize there’s a huge potential in the soap business. With your new knowledge and skill, you could focus on producing ordinary and cheap bar soaps for laundry, washing and cleaning. On the other hand, you could explore different colors, scents and herbs to produce exotic and special soaps for discerning customers.
It’s also important to consider the tastes, preferences and demand of your local market. Some people (especially the poor) are mainly concerned about price and will be interested in a soap that is cheap, yet effective. For other discerning consumers, the shape, packaging, fragrance, color and size will usually determine what soaps they buy. With your creativity, you could appeal to and win a sufficiently large base of loyal customers who may like your soap for its uniqueness.
Table of Content
- Starting a Soap Making Business – Market Research and Feasibility Studies
- Possible Threats and Challenges of Starting a Soap Making Business
- Starting a Soap Making Business at Home – Legal Matters
- Is Professional Certification Needed to Start a Soap Making Business?
- Writing a Business Plan for your Soap Making Company
- How Much Does It Cost to Start a Soap Making Business
- Starting a Soap Making Business – Technical and Manpower Details
- Starting a Soap Making Business – The Marketing Plan
- Tips for Running a Soap Making Company Successfully
Starting a Soap Making Business – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic components of those who need soaps include;
- Carpet Cleaners
- Public Offices
There are several areas of the soap making business you can look into. Here are some of them;
- Wedding favors
- Monogrammed or personalized soaps
- Organic soaps
- Baby soaps
- Tweens Soaps
- Male Soaps
- Novelty soaps.
- Household soaps and detergents
- Commercial soaps and detergents
- Polishes and other sanitation goods
- Surface active agents
The Level of Competition in the Soap Making Industry
Every business is riddled with competition, the way you respond to it as a business is what matters. Just because your fellow soap maker sells a bar of soap to someone at a Farmer’s Market doesn’t mean that you can’t also sell a bar of soap to that same person.
The market is big. You have to believe that you can all co-exist in a friendly, easy going, manner. Because you CAN! The world is a big place. Everyone uses soap. There is a market for your product and it’s HUGE. Even if you have to share it with others, it’s big enough for you all.
Be so focused on your own business and taking baby steps to your bigger goal that you continue to offer different products and drive a bigger wedge between you and your fellow soap maker with branding, lines of products and sales strategy. Figure out your X factor and pursue it with dogged, single minded focus. Let your fellow soap makers inspire you to do better and excel on your own individual path, every single day.
List of Well Known Brands in the Soap Making Industry
There are several well-known soap brands in the United States of America. Here they are:
- Irish Spring
- Burt’s Bees
- Bath and Body Works
- Body Shop
The Soap and Cleaning Compound Manufacturing industry is in the mature stage of its economic life cycle. Revenue growth is slowing, product innovation is moderate and the number of industry establishments is declining. During the 10 years to 2021, industry value added (IVA), which measures the industry’s contribution to the economy, is expected to increase at an annualized rate of 0.2%.
GDP is anticipated to increase at an annualized rate of 2.3%. Although IVA growth is expected to be significantly slower than that of the overall economy, most of this decline is due to dropping industry wages. The industry itself exhibits many characteristics of a mature industry.
Is a Soap Making Business Worth Starting from Scratch Or is Buying a Franchise Better?
Franchises are a booming business but soap making franchises are rare or totally non-existent. As such, they’re appealing to entrepreneurs who want to operate a storefront without investing too much in the traditional costs of starting a business.
These traditional costs may include research, development and advertising, just to name a few. But even with saving on traditional costs, starting a franchise is still a big investment. Before investing in a franchise of own, carefully consider the pros and cons of franchise ownership. As a soap maker, it is advisable you start from scratch if you want to have control over certain aspect of your business and also control your profit wholly.
Possible Threats and Challenges of Starting a Soap Making Business
There are some challenges that newbies face. Here are some of them;
- At first you’ll likely be working on your business and at your day job
- You have to plan and organize everything yourself
- Profits may be little to nonexistent at first
- You may end up working odd hours
- It’s not all just making soap!
Starting a Soap Making Business at Home – Legal Matters
- Best Legal Entity to Use for a Soap Making Factory
Home-based business owners typically operate as a sole proprietor or limited liability company (LLC). An LLC, which protects your personal assets, may be preferable to sole proprietorship. Check with an experienced tax professional or an attorney to determine which entity is best for you.
As a sole proprietor in Texas, you must file a Doing Business As permit and pay the fee of about $15, depending on your county. As an LLC, you must register with the secretary of state, which will cost you about $300. You’ll also need to apply for federal tax identification and a sales tax permit, both of which are free.
The Best Insurance Policy Needed for a Soap Making Business
Insurance is an important part of any business. It protects your personal and professional assets. If you sell a product or service, you must have business insurance to protect your business assets in case you cause damage or injury to your clients.
It also protects your supplies and equipment from theft or damage. As a business with a relatively low-risk product and low-cost supplies and equipment, you should be able to secure a basic insurance policy for about $600 to $1,000 per year.
Intellectual Property Protection for your Soap Making Business
If you are considering starting your own soap making business, then you should consider filing for intellectual property protection. Filing for intellectual property protection for your firm is not only limited to your company’s logo and other documents, and but also protecting of course the name of your company.
If you want to file for intellectual property protection and also register your trademark in the United States, then you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.
Is Professional Certification Needed to Start a Soap Making Business?
Today, every business has one form of certification or the other. Even though, it is not a priority to be certified as a soap maker, having it is an added advantage and an addition to your pool of knowledge about the business. Certification Badges are a great way to add credibility to your business cards, web site, LinkedIn profile and Facebook page. It gives a professional touch to all your marketing efforts.
Certification shows that you take your work seriously, that you are dedicated to the profession and that you care about the quality and safety of the products you create. Certification raises you above the crowd at craft shows and fairs. People are more willing to buy from a certified soap maker than one who isn’t.
List of Legal Documents Needed to Run a Soap Making Business
Register your business with the government. Laws vary by state. Talk to your local Department of Commerce and Department of Licensing to receive the forms that you need to establish your business and to learn if you need a license to do bookkeeping.
You can notify the federal government of your business by applying for an Employer Identification Number (EIN). You can also create a business name for yourself and file a “Doing Business As” or “DBA” notice. These are some of the basic legal document that you are expected to have in place if you want to start a cleaning business in the United States of America;
- Certificate of Incorporation
- Business License
- Business Plan
- Non – disclosure Agreement
- Memorandum of Understanding (MoU)
- Employment Agreement (offer letters)
- Operating Agreement
- Company By laws
- Operating Agreement for LLCs
- Insurance Policy
Writing a Business Plan for your Soap Making Company
Put Your Ideas on paper. It is not expected to be totally perfect, just get it out of your head. Detailed strategic planning is essential to a successful business. This is often challenging for creative entrepreneurs. You can also find a mentor to help you get started. This can be through the Small Business Association, or a successful business owner who is willing to take you under their wings to meet on a monthly basis for feedback and guidance.
It may help you to take a business plan writing class. Most classes give you deadlines in various stages throughout the planning and writing process. This enables you to get your business plan finished in segments. You’ll want to pay close attention to your business market analysis, competitive analysis and strategy in particular.
Once you’ve completed your plan, review it every three months and see if your business needs to be redirected in any way.
How Much Does It Cost to Start a Soap Making Business
So how much does it actually cost to start a soap making business and do things right? What do you really need to start the business the right way and start getting real, paying clients through the door right away? Read through this post for that;
- The Total Fee for incorporating the Business in United States of America – $725.
- The budget for Insurance, permits and license – $600.
- The Amount needed to rent a suitable office/production facility with enough space in the United States of America – $5,000.
- The cost of buying the soap making equipment and supplies – $1,500
- The Cost of Launching an official Website – $700
- Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $1000
- Other miscellaneous – $1,000
Based on this, to start the business on different scales;
- Small Scale: To start up this business on the small scale, which means starting from your room without renting or leasing an office space, you will need around $5,600
- Medium Scale: On a middle level start-up, which will incorporate office rent, you will need around $11,000
- Large Scale: On a large scale, if you intend competing with the big dogs in the industry, be ready to spend around $50,000.
Financing your Soap Making Business
The more capital you raise, the faster you can grow. The more you can demonstrate demand, the easier it is to attract capital. So hit the pavement and make sales. I’ve never seen anybody get enough money from a grant to launch a viable business. Just enough to go broke. The likely sources of financing for this venture:
- Your own savings
- 2nd Mortgage on your house
- Family, even though it’s very risky even asking them
- A bank loan with a personal guarantee
- A private backer who strongly believes in her skills and concept
Choosing a Suitable Location for your Soap Making Business
One of the hottest business trends today is to be home based, and soap making business is excellent candidates for this type of setup. After all, your customers will likely never come to your production facility since all your work is done on there. But that’s not the only issue influencing your decision to operate from a home based office or a commercial location.
Starting a Soap Making Business – Technical and Manpower Details
Your manpower needs as a soap making business depends on the scale at which you operate, if you operate on a small scale, you will only be the one running the business but if you choose to expand and go medium then you will need at least 4 more workers, anything above 4 employees means you are operating on a large scale.
Whichever scale you wish to operate will determine your manpower need and it is important for you to know that the industry is not labor intensive which only need people to man the equipment.
Equipment Needed to Start a Soap Making Business
Soap making requires a few dedicated tools, and a space to work in (whether just your kitchen, or a full shop). As your soap making operation grows, you might purchase additional equipment, but to start out you will at least need:
- A blender
- A microwave
- A mixing kettle
The Production Process Involved in a Soap Making Business
The fastest and shortest way to make soap is the melt-and-pour method. You can buy a soap base from a hobby store and you melt that down in the microwave (in the amount you want) and then set it in a mold. This will take more than a minute but it’s fairly fast; the expectation of making soap in a minute is not realistic.
Before you can succeed at selling soap, you must become an expert at making it, and refine the technique and formulae you want to use. Basic soap making only requires a few ingredients, but a wide variety of types of soap can be made by tweaking the formula.
If you want to create a product that stands out, experiment with ingredients like scents, colors, and moisturizers until you create a soap that you think is unique and high-quality. There are two main methods for making soap, the hot process and the cold process;
- The cold process of making soap is the most common method. It involves mixing an alkali (usually lye) with fats or oils. Once mixed and formed into shape, it can take weeks for the soap to cure.
- The hot process of making soap requires you to cook the soap. This method requires no cure time, and can make it easier to add scents and colors. However, it is more difficult to work with and mold hot process soap.
Starting a Soap Making Business – The Marketing Plan
- Marketing ideas and Strategies
Your marketing and sales initiatives rank just as high as your soap making efforts. They work hand-in-hand. Successful marketing and sales results allow you to make more soap and around and around it goes.
If your website launch is a few months or years away, at least grab an account on Twitter under your business name as well as a Facebook fan page and a blog. Go to your local library and find a book on internet marketing or hire someone to do it for you if it fits in your budget.
Attend local business networking events. You never know who you are going to meet. Networking is about being friendly and promoting your business simultaneously and genuinely. It’s no fun meeting someone who is “all business.”
Another way to network is with other soap makers. You can make lots of friends amidst this industry association. In addition to the friendships, you will receive a lot of referral business from colleagues who pass along a customer who is looking for a product that you carry.
Possible Competitive for Winning your Competitors in the Soap Production Industry
To be successful at selling soap, you need to understand your market, and how to reach it. Spread the word about your soaps whenever and however you can, but target your primary market in particular. Common advertising possibilities include:
- Social media
- Advertisements online and in traditional media
- Business cards
- Sales displays
Possible Ways to Increase Customer Retention for your Soap Making Company
a. Word of Mouth
This is definitely the oldest form of marketing and advertising used by businesses since the world began. While it may bring slower results than radio or television, it still works very well. Because people are becoming increasingly suspicious of paid advertising.
I still think word-of-mouth remains one of the most trusted methods in the world today. When a customer is happy and satisfied with a product or service, there’s a natural human tendency that they are likely to share this experience with people in their circle of trust and influence – family, friends, colleagues, neighbors and sometimes, strangers.
b. Give out Freebies
Everybody loves free stuff. Giving away some of your products and services for free does three very positive and interesting things for your small business: First, it lets people out there know that you exist. Second, it gives you a chance to prove the value of your product or service and show that it really works.
Third, it provides your future customers with a risk-free way to try out your products or service without spending any money. And if customers find value in your products or services, they will be willing to pay money for it.
c. Offer discount and Deals
Just like free stuff, discounts and deals work well too. They are another creative and low cost way to attract more customers to your business. People often see discounts and deals as a huge opportunity to save money and enjoy a product or service for a whole lot less.
In fact, discounts and deals usually influence customers to buy more products or services than they initially planned. They love to ‘take the opportunity’ because the same products may not be so cheap tomorrow. Offering deals and discounts are also a powerful way to publicize your brand.
You can even sell your handmade soap to hotels at a discount to get them hooked, since hotels are usually repeat buyers.
Strategies to Boost Brand Awareness and Create a Corporate identity for your Soap Making Business
If you think branding is as simple as picking a few colors, a pretty graphic you like, and slapping it altogether, for your information. Branding is so, so much more than that. And without strong branding, you will struggle in business.
Your brand should guide every action and decision you make in business. Is it right for your business to develop this new product? Is it right for your business to do that craft show? Is it right for your business to be on that shiny new social media network?
When you have a solid brand and target market, these questions become a cake walk. You’ll want to set yourself apart from the competition, and create a product that consumers really want. Think about who you want to buy your soaps, and what kind of niche your products will fill.
For example, you might create soaps that are entirely free of any animal by-products for those consumers who care about animal rights, or soaps that are made using only all-natural ingredients for consumers who care about “green” and healthy living. Think about:
- Creating a unique and memorable company name
- Using specially designed shapes
- Embossing the soap with letters or other forms
- Wrapping the soap in special papers or ribbons
- Creating a logo for your company
Creating a Suppliers / Distribution Network for your Soap Making Business
There are several sales channels for selling your soaps. If you are just beginning, start with your family and friends. As a newbie, be ready to give away a lot of soaps. These freebies will help you test your products, especially if you want a clear and honest feedback on your recipes. Were the soaps moisturizing? Were they long-lasting? Did they like the fragrances? What didn’t they like and what would they recommend?
- Retail Sales
Potential retail channels include art and craft shows, farmer’s markets, home parties, and the internet just to name a few. Corporate and hospital venues can be great exposure for your products. At least here in New England there is very little competition selling in this channel.
Most businesses and hospitals ask for 20 percent of your daily sales or charge a flat daily fee. Sincerely, this is an effective way to build your brand by educating customers, making sales, networking and referring business over time to web sales.
You must have attractive displays, set prices, business cards or fliers to spread your information, be ready to educate your customers. Do not assume they know the benefits of using handmade soap. One of the best tips for successful retail sales where you have the pleasure of meeting your customers one-on-one is to stand and sell with passion.
Take sincere interest in your customers and keep your focus on them and their skincare needs. Tell and show them how your products will benefit them. Offer quantity pricing such as $6 each or four soaps for $20 to increase your sales. Remember to cross-sale with lip balms, scrubs and lotions. Suggestive selling works! Remember to collect sales and use tax for your respective state.
When it comes to wholesaling, there is so much to say, but much of what you will learn will come from experience. There are a few key points to guide you into successful wholesaling. You must do your homework and be prepared. As a previous store owner, it can be painful to see a new artist enter your store and try to sell you wholesale for the first time without having done their research.
Visit your potential wholesale account first and see if you can envision your soap on their shelves. Call ahead and arrange a time to meet with the store buyer. Be gracious and understand that oftentimes these store owners work long, hard hours and deal with many people on a daily basis trying to sell them something. Don’t drop in on a store owner unannounced and expect them to meet with you.
Understand wholesale pricing and terms. Then design and print out copies to hand out to potentially interested parties. Information on wholesaling should include minimum opening order (the minimum amount a retailer must spend to write an order with you).
You can set it at $300. For me, this immediately weeds out serious buyers from the unserious ones. Also, consider that you’ll want retailers to carry a good selection of your products otherwise they will become “lost” in the store. For me, a $300 minimum assures the store owner that the product line will have a strong and visible presence and will have a better chance of being sold.
If you sell a store a few bars they will linger in the store and then the owner may turn around and tell you that they never sold. And perhaps they didn’t sell, but it was due to low visibility. Good retailers understand this concept. Set your wholesale opening order for at least $300.
Your wholesale sell sheet should include some quality pictures of your products, with wholesale pricing next to each one. Remember, wholesale is half of the retail price. If you are selling your retail soaps at $6, then you will be wholesaling them for $3.
Each of your products should also have a minimum. Most companies sell in dozens. This is a good idea for several reasons. What you don’t want is stores ordering two lemongrass soaps, three lavender, and so on. This is a time killer and you’ll be spinning your wheels for the desperate act of selling a few bars. Raise your minimums and you’ll raise your bottom line!
In regards to consignment, placing your soaps in a store under contract and being paid as they sell is not recommended. There is low incentive for store owners to sell consignment products they haven’t paid for them upfront as they do in wholesale and based on experience it often results in low sales, as well as over-handled and damaged products.
Tips for Running a Soap Making Company Successfully
There are several things to consider when running a business successfully. They are;
- Always use high quality ingredients and to keep costs down buy them in bulk as the more you buy, the lower the price gets
- Try and develop your own brand which should state something about you. This is your chance to be creative and unique and develop a brand that people will recognize as being crafted by you
- Packaging and labeling is all important – an attractive and eye catching packaging will sell far easier than a soap simply wrapped in cellophane. If your soap is totally natural you can try packaging it simply in plain paper tied with raffia and decorated with a cinnamon stick or slices of dried peel. The label should state all of the ingredients, starting with your dominant ingredient and it is a good idea to include a contact phone number of web address so that customers can re-order.
- Pricing is the all important factor that can make or break. It is vital to include every single cost involved down to the last cent, and work out the cost of a single unit. This way you can see immediately what your bottom line figure needs to be.
- Always have samples on your stall for people to touch and smell as this is by far the best way to attract interest. Another good idea is to have flyers on your table and hand them out to passers-by together with a free sample. It really does not cost much to make up a batch of soap and then cut it into small sample sizes to give away and the rewards far outweigh the costs.