How To Start A Lip Gloss Business
Max Factor was definitely onto something when he developed the first lip gloss back in 1930. Factor, who had been creating makeup for the movie industry, wanted to make a product that gave lips a neutral-colored, glossy shine.
Since then, lip gloss has been a trusty companion for many women, added to cosmetic pouches and clutches worldwide.
If you know a thing or two about cosmetics, love makeup, and the perfect pout, then starting your own lip gloss business may be a fantastic and realistic option to follow a passion and earn an income at the same time.
IBISWorld defines operators in this industry as “companies that develop, produce and package lip products such as lipstick, lip balm, lip stain, lip gloss, and lip liner”.
There is, however, more than one way to start your own lip gloss business. For example, you may decide that you want to create your own lip gloss brand and set up a private-label lip gloss company. Or you may choose to work as an affiliate or start your own e-commerce business and sell existing, popular brands.
Each option has merits but also a slightly different focus and structure. We recommend that you examine your skills and expertise before setting up your own lip gloss business – know where your strengths and passions lie.
According to IBISWorld’s 2021 report, lip gloss holds a 22% share of the US’s $4 bn lipstick manufacturing market, right behind lipstick and lip balm. The two largest companies are Estee Lauder Companies Inc., based in New York, and The Clorox Company, based in Oakland, California. Private Label companies are also on the rise, with New York-based Kolmar Laboratries holding the most significant market share, with over $188 million in annual sales.
In the US, an annual growth of 2.1% is forecast for this industry up to 2025.
At this point, it is worthwhile to examine the trends and strategies of the wider beauty industry. Companies increasingly connect with their customers through social media, influencers, and targeted brand storytelling.
Consumers want to connect with brands and know they get natural, nutrient-rich ingredients and environmentally friendly, local production. This trend has created opportunities for niche products in this industry.
Whether you decide to be a distributor of lip gloss or a manufacturer, your target market remains broadly similar. Segments may include
- White-collar workers and professionals that are looking for subtle lip gloss tones with minimal pigmentation
- Teenagers and tweens that are into more popping gloss colors; perhaps with added flavors
- People who prefer a completely natural and environmentally friendly product or one that is not tested on animals.
- People that suffer from sensitive skin or allergies
- Makeup professionals
Checklist for Starting a Lip Gloss Business
Starting a lip gloss business can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off on the right foot.
Step 1: Write a Business Plan
Creating a business plan is an important first step in starting your own business. This document will outline your business goals, strategies, and how you plan to achieve them. If funding is needed, a bank will require you to have one.
Multiple studies have also shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Name the Business
Your business name is important for marketing and branding purposes. It should be something catchy and unique that will help you stand out from the crowd.
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a lip gloss business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Apply for Business Licenses and Permits
Every business needs to be licensed and registered with the government. This will ensure that you’re operating legally and can help you avoid any legal issues down the road.
Specifically, for a lip gloss line, you will want to review the Food & Drug Administration (FDA) information for startups and home-based cosmetic businesses.
The Beauty Business Journal states that a line will need to ensure that its products adhere to national and local labeling guidelines. A business owner will need to work with the county, national, and local regulatory bodies to identify any applicable cosmetics licenses. These licenses will vary depending on location, as well as if the business follows a direct-to-consumer model.
Last, there are general local, state, and federal business registrations, such as a local business license, sales tax permit and Employer Identification Number (EIN), among others to obtain as well.
Step 5: Come up With a Formula
While there are many formulas that you can source online or through a private label manufacturer, it is worth coming up with a unique formula of your own, so you can stand out versus competitors.
If you don’t have the background, working with an experienced chemist is key, plus they can help with sourcing reputable and reliable suppliers for ingredients and manufacturing.
Step 6: 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 lip gloss business is another. Fortunately, the cost to start a new ice vending business is relatively low; however, funding to start a business can be difficult. If funding is needed, banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
There are many ways to market your lip gloss business.
For starters, you will need someplace for people to buy from. Selling to friends and family can be a great low-cost way to test the waters, along with setting up a booth at a local farmer’s market. Having an online shop such as your own website and/or an Etsy store can be a great way to let people purchase your lip gloss from outside of your local area.
To get people to your product, you can start by creating a social media presence and promoting your products on popular social media platforms like Instagram, Facebook, Twitter, Pinterest, and YouTube, and also working with beauty-related blogs. You can also distribute samples to local beauty stores and spas, or participate in trade shows and other events.
With a little creativity and hard work, you can get your lip gloss business off the ground and start generating some buzz.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a lip gloss business. A few of these include:
– General liability insurance protects the business against medical bills and other fees that could result if a customer is ever injured by the makeup.
– Commercial property insurance can help protect the business if its inventory, equipment, or building are ever damaged in an event like a fire.
– Worker’s compensation insurance covers expenses like medical bills that the business might face if an employee were ever injured while working.
The cost to insure a makeup line will vary based on factors like the value of a business’ equipment and inventory will also affect cost. To get the most accurate idea of potential insurance costs, request quotes from multiple providers. When comparing those quotes, consider not only how the premiums differ but also how the deductibles, policy exclusions, and coverage limits compare.
Step 10: Set up an Accounting System
Setting up an accounting system for your ice vending business is critical to your business’s long-term success.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a lip gloss business?
There are a few variables to consider when looking at the costs to start a lip gloss business. For example, you can decide to:
– Develop your own lip gloss from scratch. You will need to invest in research, materials, and packaging and potentially in some production machinery and storage space, or
– Team up with a private label company and still sell lip gloss under your brand. This option is less of an investment to start with as the setup for research and the production of cosmetics already exists.
– Sell existing, popular lip gloss brands. In this instance, you will be running your own distribution business.
– Keep all your business online. Your primary expense will be an investment in a website, or e-commerce platform, excellent visuals, online storytelling, and marketing.
Invest in a brick-and-mortar business. This will likely be the most expensive option. Consider the costs of renting or leasing a space in a high-traffic area with an appealing shop front, the stock needed, insurance, and potentially staffing costs.
Overall, this industry is deemed a medium barrier to entry with a stable outlook and a medium regulation level. It also lends itself to starting small to test the market and gradually build on what works well.
What skills are needed to run a lip gloss business?
Creativity and Curiosity. If you are a creative person with an entrepreneurial streak and an interest in cosmetics, developing your own lip gloss business sounds like a great fit.
Before you do that, we recommend you do your research. What is your target market? Who is your competition? For example, lip gloss falls under FDA regulation. Do you know what ingredients you need to make lip gloss, where to get them, and how to scale your production?
A great way to get a taste of lip gloss production is to get yourself a lip gloss starter pack.
Marketing and Communication Knowledge. Lip gloss and cosmetics, in general, are very visual industries. It’s ultimately all about enhancing a look. So your marketing material, your company’s logo, website, social media posts, and everything should have strong visuals, consistent branding, and a message that connects with your target audience.
Business management skills. Whether you will run a business manufacturing or distributing lip gloss, business management skills are always valuable. Accounting and pricing skills will be especially useful, as is competency in using e-commerce platforms.
You will need to be able to price your products, work out profit margins and ensure your accounting is in line with tax regulations.
How much money can you make with a lip gloss business?
It is somewhat tricky to determine wage expectations for owners of a lip gloss business in the US. In the US Bureau of Labor Statistics, the lip gloss business falls under cosmetics, which is quite a varied industry with considerable differences in price points. But the overall outlook for the sector is positive. According to IBISWorld, wages as a revenue share are up by 6.4%. Another positive is that because lip gloss is generally at a lower price point than lipstick, its market is less affected by volatility in income and consumer behavior.
Are there grants to start a lipgloss business?
It’s extremely rare to find a grant to start a lipgloss business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a lipgloss business?
The NAICS code for a lipgloss business is 446120.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
How can you create value for your customers and make this a successful business?
First, find the gaps in the market – especially organic, local products are in increasing demand. Then, do research, understand your target market, and work out price points and production levels. Then, weigh up what you need and write an honest business plan.
If you are into cosmetics and have an entrepreneurial spirit, the lip gloss industry offers fantastic opportunities to be your boss.