Cost to Start a Soap Making Business
One of the major benefits of starting a soap making business is that it’s one of the most affordable types of businesses you can start. It’s possible to pursue soap making on a small scale on the side, gradually buying more equipment and supplies only as the business grows. Startup costs for a small operation can be as little as $1,000.
Some of the more expensive items to buy when starting a soap making business
- Soapmaking equipment
- Inventory of ingredients
- Camera for product photography
- Packaging
Steps to Starting a Soap making business
Step 1. Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related:
Step 2. Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation, and LLC. Each type of entity has its own pros and cons such as liability exposure, costs, and administrative requirements.
Related:
Step 3. Select your Location
It’s possible to start a soap-making business out of your home’s kitchen, saving on rental costs. As the business expands, you might choose to rent a storefront or workshop space. Rental costs will depend on the type of space, its size, its location, and available amenities.
If you are working out of your home and renting, be sure to check out your rental contract first before starting.
Related:
Step 4. Apply for Business Licenses and Permits
A soap making business owner will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.
Soap is a complicated product in the eyes of the FDA. Depending on its ingredients, it can be considered cosmetic, a drug, or both. The regulations surrounding each type of soap vary, and states and cities may also have additional regulations on soap making.
Some other common local, state and, federal registrations a soap making business may need include, a , , and Occupancy Permit among others.
Related:
Step 5. Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a soap making business is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Related:
Step 6. Get your Marketing Plan in Place
Marketing is particularly important for soap making businesses, especially because many of these businesses don’t maintain storefronts where customers can see the products. Instead, soap makers rely on marketing techniques like social media marketing, online advertising, and even print advertising. Some business owners may network with other local store owners, wholesaling their soaps. Marketing costs will vary depending on the type of the activity and the volume of marketing performed. Business owners can save money by learning to do some or all of their marketing themselves.
Related:
Step 7. Get Insurance
A soap making business needs several types of insurance for full coverage:
- General liability insurance helps to protect the businesses against expenses and lawsuits that could result if a customer is ever injured on the business’ property or by the business’ products.
- Commercial property insurance helps to protect the business if the shop and inventory are ever damaged or destroyed by an event like a fire.
- Worker’s comp insurance helps to cover expenses like medical bills and legal fees in case a business employee is ever hurt while working.
If you are working out of your home, be sure to check out your homeowner’s policy as many won’t cover accidents and damage from business activity.
Insurance costs will vary depending on the business’ size, location, and even the value of its inventory and equipment. Call multiple insurance providers and request quotes to get a sense of what insurance will cost. When evaluating the quotes, consider how the premiums, plan exclusions, coverage limitations, and deductibles compare.
Related:
Step 8. Hiring Employees
Many soap makers will run their businesses entirely by themselves, but as that business grows, they may choose to hire staff to help. ZipRecruiter reports that soap makers earn an average of $47,304 per year, though salaries can range from $17,000 to $110,500.
If a business owner decides to hire an employee, they’ll need to budget not only for salary costs, but also other related expenses like workman’s comp insurance, unemployment insurance, and paid time off.
Related:
How much can you potentially make owning a soap making business?
Soap making businesses can be profitable, but data on those specific profits is hard to come by. The One More Cup of Coffee blog estimates that Etsy store, the Little Flower Soap Co., likely makes about $80,000 per year, based on the store’s sales and average product prices. Remember that expenses need to be factored into that income, too, so exact profits are unknown.
Profits will vary significantly from business to business. Factors like whether the business is run part-time or full-time, how the business sells its soaps, its profit margins, and the number of years the business has been in operation will all affect its profits.
Things to consider before starting a soap making business
Modern Soap Making notes that it’s particularly important that soap makers not try to compete on price alone. The market is so saturated with soap makers that if you price your products simply so that they’re competitive with the lowest-priced soaps for sale, you won’t be able to make a profit. Instead, focus on delivering quality products and pricing your soaps appropriately.
Photography is also often a challenge for soap makers. When selling your soaps online, good photography matters. Photos need to be clear and well-lit. Soap makers will either need to hire a photographer or learn how to take quality photos themselves.
It’s also important to realize that when you have a soap making business, only a small portion of your time will be spent making soap. Modern Soap Making estimates that you should spend just 20% of your time making soap. The rest of your time will be devoted to other elements of your business, like product photography and marketing.
Resources:
Handcrafted Soap & Cosmetic Guild
