Starting a cosmetic business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful cosmetic business.
Importantly, a critical step in starting a cosmetic business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
15 Steps To Start a Cosmetic Business:
- Choose the Name for Your Cosmetic Business
- Determine the Type of Cosmetic Business You Will Launch
- Develop Your Cosmetic Business Plan
- Choose the Legal Structure for Your Cosmetic Business
- Secure Startup Funding for Your Cosmetic Business (If Needed)
- Secure a Location for Your Business
- Register Your Cosmetic Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Cosmetic Business
- Buy or Lease the Right Cosmetic Business Equipment
- Develop Your Cosmetic Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Cosmetic Business
- Open for Business
1. Choose the Name for Your Cosmetic Business
The first step to starting a cosmetic business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your cosmetic business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your cosmetic business.
2. Determine the Type of Cosmetic Business You Will Launch
The next step is to determine the type of cosmetic business you will launch. The three main types of cosmetic businesses are:
- Retail Cosmetics Business: This is a business that sells cosmetics directly to consumers through retail stores.
- Wholesale Cosmetics Business: This type of cosmetic business supplies other retailers with cosmetic products.
- Manufacturing Cosmetics Business: This type of business manufactures cosmetic products and then sells their products wholesale or retails.
3. Develop Your Cosmetic Business Plan
One of the most important steps in starting a cosmetic business is to develop your cosmetic business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your cosmetic business.
- Company Overview – this section tells the reader about the history of your cosmetic business and what type of cosmetic business you operate. For example, are you a manufacturer, retailer or wholesaler?
- Industry Analysis – here you will document key information about the cosmetic industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your cosmetic business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your cosmetic business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Cosmetic Business
Next you need to choose a legal structure for your cosmetic business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the cosmetic business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
2) Partnerships
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a cosmetic business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a cosmetic business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a cosmetic business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your cosmetic business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Cosmetic Business (If Needed)
In developing your cosmetic business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a cosmetic business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a cosmetic business that they believe has high potential for growth.
6. Secure a Location for Your Business
Having the right space can be important for your cosmetic business, particularly if you’d like to meet clients there.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Cosmetic Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your cosmetic business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
9. Get a Business Credit Card
You should get a business credit card for your cosmetic business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
There are a few licenses and permits you’ll need to operate a cosmetic business. The most common ones are:
Business License – A business license is generally required in order to start a business. The requirements for obtaining a business license vary by state, so be sure to check with your local government office for more information.
Tax ID Number – Also known as an Employer Identification Number (EIN), a tax ID number is needed to pay federal and state taxes on behalf of your business.
Sales Tax Permit – If you’ll be selling products or services in your state, you’ll need to apply for a sales tax permit from your state’s department of revenue.
Health Department Permit – If you’ll be manufacturing or selling any type of cosmetic product, you’ll likely need to obtain a health department permit from your state’s health department.
Nearly all states, counties and/or cities have license requirements including:
- Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of cosmetic business you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Cosmetic Business
When starting a cosmetic business, it’s important to protect your business with the right insurance. Here are some of the most common types of insurance businesses should consider:
General Liability Insurance – This type of insurance protects your business from any legal claims made against it. For example, if someone trips and falls in your store, general liability insurance would help cover the costs of any legal proceedings.
Product Liability Insurance – This type of insurance protects your business from any legal claims made against it for products that cause injury or property damage. For example, if a customer is injured by one of your products, product liability insurance would help cover the costs of any legal proceedings.
Commercial Property Insurance – This type of insurance protects your business from any damage or loss to your property. For example, if a fire destroys your office building, commercial property insurance would help cover the costs of repairing or rebuilding the building.
Business Income Insurance – This type of insurance protects your business from any loss of income due to a disaster or accident. For example, if your business is unable to operate for a period of time after a fire, business income insurance would help cover the lost income.
Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Cosmetic Business Equipment
Before you can start your cosmetic business, you need to buy or lease the right equipment. Here are some of the most common pieces of equipment you will need:
- Countertops and Display Cases – You will need a countertop to display your products and a case to store them in.
- Storage Cabinets and Shelving – You will need cabinets and shelving to store your products and supplies.
- Labels and Printers – You will need labels to identify your products and a printer to print those labels.
- Scale – You will need a scale to weigh your products.
- Cash Register – You will need a cash register to process payments.
- Computers – You will need computers to manage your business operations.
There are many other pieces of equipment that you may need depending on the type of cosmetic business you launch. For example, if you plan to manufacture cosmetics, you will need additional equipment such as mixers, blenders, and ovens. Talk to other cosmetic business owners in your area or consult with an equipment supplier to get a complete list of the equipment you need for your specific business.
13. Develop Your Cosmetic Business Marketing Materials
Marketing materials will be required to attract and retain customers to your cosmetic business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your cosmetic business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional cosmetic business website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your cosmetic business.
14. Purchase and Setup the Software Needed to Run Your Cosmetic Business
When starting a cosmetic business, there are a few key pieces of software that you will need. The first is accounting software. This will help you manage your finances, including tracking expenses and income. The second is a customer relationship management (CRM) system. This will help you keep track of customer information, such as contact details, purchase history and preferences. Finally, you will also need a web hosting service to host your website.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your cosmetic business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Cosmetic Business FAQs
Is it hard to start a cosmetic business?
There is no one-size-fits-all answer to this question, as the ease or difficulty of starting a cosmetic business will vary depending on your skills, experience, and resources.
However, if you follow the steps above, you should be able to start your cosmetic business without too much difficulty.
How can I start a cosmetic business with no experience?
If you don't have any experience in the cosmetic industry, it might be a good idea to consult with an experienced business professional. There are many resources available to help you get started, such as online tutorials, books, and even business courses.
Another option is to start a smaller cosmetic business. This will allow you to gain experience and learn the ropes before expanding into a larger business.
Finally, remember that starting a cosmetic business takes time and hard work. Don't give up if things don't go as planned in the beginning - just keep working hard and you'll be successful in no time!
What type of cosmetic business is most profitable?
The profitability of a cosmetic business will vary depending on the products and services offered.
However, some of the most profitable cosmetic businesses are those that offer high-end products and services. This is because customers are willing to pay more for premium products and services.
Another factor that affects profitability is location. A cosmetic business that is located in a high-traffic area, such as a city center or shopping district, will likely be more profitable than one that is located in a rural area.
Finally, the type of cosmetic business you start will also affect profitability. For example, a hair salon is likely to be more profitable than a nail salon.
How much does it cost to start a cosmetic business?
Like most businesses, the cost to start a cosmetic business can vary depending on the size and scope of the operation. The average startup range is between $10,000 and $30,000.
This cost can include everything from equipment and supplies to marketing and advertising costs.
One of the biggest expenses is likely to be the cost of setting up a storefront or office. This could include things like rent, utilities, and marketing materials.
Another major expense is likely to be inventory. You'll need to purchase products to sell, and this can be costly, especially if you are offering a wide range of products.
Finally, you'll need to factor in costs like accounting and legal services, as well as employee salaries.
What are the ongoing expenses for a cosmetic business?
The ongoing expenses for a cosmetic business can vary depending on the size and scope of the operation. The average ongoing expenses range between $1,500 and $5,000 per month. This could include things like rent, utilities, inventory costs, advertising costs, and employee salaries.
However, some of the most common expenses include:
- Rent or mortgage payments
- Utilities, such as electricity and water
- Employee salaries
- Marketing and advertising costs
- Product inventory
- Accounting and legal fees
How does a cosmetic business make money?
A cosmetic business can make money in a number of ways, including through product sales, services, and advertising.
One of the most common ways to make money from a cosmetic business is through product sales. This could include selling products to consumers directly, or through retailers.
Another way to make money from a cosmetic business is by providing services. This could include things like beauty treatments, such as facials or massages, or hair and makeup services.
Finally, businesses can make money through advertising. This could involve placing ads in local newspapers or magazines, or on websites or television channels.
Is owning a cosmetic business profitable?
Owning a cosmetic business can be profitable. The average annual income for a cosmetic business owner is around $60,000, but this number can vary depending on the type of services offered and the location of the business.
Some of the biggest benefits of owning a cosmetic business include:
- Flexible hours
- Low overhead costs
- Ability to work from home
Some of the key things you can do to make your cosmetic business more profitable include:
- Offering a variety of services: This will help you appeal to a larger audience, and it can also help you attract new clients.
- Pricing your services competitively: You don't want to charge too much or too little, but rather find a price that is reasonable and fair.
- Investing in marketing and advertising: This is essential for any business, but it is especially important for a cosmetic business, as you need to generate awareness about your services.
- Creating a strong brand identity: A strong brand identity can help your business stand out from the competition.
- Offering customer incentives: This could include things like discounts, loyalty programs, or free products/services.
Why do cosmetic businesses fail?
A cosmetic business can fail for a number of reasons, such as a lack of marketing, an ineffective sales strategy, no competitive edge, and poor customer service.
Many businesses also fail because they don't research their target market sufficiently and instead try to appeal to everyone, which can be a costly mistake. It's important to understand what your target market wants and how you can best serve their needs.
Another common reason for business failure is a lack of investment in training and education, which can keep businesses from adapting to industry changes and keep them from being able to offer the latest services and products.
Finally, many businesses fail because they're not run efficiently and end up wasting valuable resources. This can be avoided by using cloud-based software, outsourcing tasks, and investing in good organizational systems.
Who are key players in the cosmetic market?
The cosmetic market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
Some of the key players in the market include:
- L'Oreal
- Estee Lauder
- Procter & Gamble
- Avon
- Revlon
- Unilever
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.
How much should I charge for my cosmetic services?
Cosmetic fees can vary depending on the type of cosmetic services being offered, as well as the size and scope of the project.
However, some common cosmetic fees include:
- Makeup application - $50-$100
- Eyebrow shaping - $20 to $50
- Lip injections- $350 to $1,000
- Chemical peels - $75 to $200
- Botox - $150 to $400
- Microblading - $450 to $1,000
The best way to determine the right fee for your cosmetic services is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.
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