How to Start a Makeup Line
Finding that perfect makeup takes time, but what if that product that’s ideal for you doesn’t exist yet? If you’re creative, have a great idea for quality makeup products, and also have an entrepreneurial spirit, then starting a makeup line of your own could be an exciting and rewarding career move. It won’t be easy – this industry is competitive – but new and unique ideas that meet an existing need in the industry could be well-received. If you’re considering starting your own makeup line, read on to find out more about what’s involved in this journey.
Makeup lines deliver specialized products to consumers. A makeup line might focus on one element of the cosmetics industry, like skin care, while other lines might encompass a wide array of makeup options, including eye makeup, lipstick, concealer, and more. Most makeup lines are sold in a variety of stores, including pharmacies and big-box retailers, but online sales do make up a portion of the industry, too.
The makeup industry is highly competitive, with many larger brands dominating the market. Thanks to evolving trends, though, there is space for independent, smaller makeup lines – but great branding and marketing are essential in spreading the word about these new brands. Many consumers become loyal to a particular cosmetic line, meaning a business needs to deliver a quality product and then follow up with a great user experience and additional products to win over customer loyalty.
According to IBIS World, the United States cosmetic and beauty product manufacturing industry experienced a 3.6% decline in profits from 2015 to 2020. That decline was partially due to an increase in competition, but the COVID-19 pandemic also led to a 7.4% decline in just 2020. As of 2020, the industry reached a market size of $43.1 million. A total of 3,878 businesses employed 51,291 staff.
The makeup segment of the beauty industry takes in 20% of total sales and includes products like lipstick, nail polish, blush, foundation, eyeshadow, and other products.
The good news is that the cosmetic industry is expected to grow from 2020 to 2025. Improving consumer confidence and an increase in disposable income and consumer spending should drive that growth. Some industry components, like skin moisturizers and deodorants, are considered to be essential items, so their sales should be unaffected by the pandemic.
The cosmetics industry is rapidly changing, thanks to many evolving trends. Common Thread Collective notes that online cosmetics purchases are becoming more common, but in the United States, 81% of market purchases still occur in stores. Drug stores and pharmacies continue to be the most popular shopping destination for buying cosmetics in America. Mass merchandisers and online purchases are the second and third most popular options, respectively.
While online sales may not have taken off yet, Common Thread Collective predicts that online sales could account for 48% of all cosmetics sales by 2023. This is encouraging for smaller makeup manufacturers, particularly because L’Oreal, Unilever, Procter & Gamble, and Estee Lauder Companies accounted for 81.7% of worldwide cosmetics sales in 2019.
Quality could be key to gaining online sales. Sixty-four percent of buyers who valued quality over price were more likely to buy online. Retailers who offer exclusivity and a unique product to shoppers could encourage these online sales.
Like most other industries, the cosmetics industry has also adapted to the increased demand for natural, organic, and clean products. Clean beauty and organic makeup are in high demand right now, and the natural cosmetics market should roughly double from 2018 to 2027. Fragrance-free products made with natural ingredients and essential oils should see robust sales.
Most makeup lines will market toward adult women, but depending on the specifics of your line, your target market or niche may slightly differ. A specialty line might market to teens, senior women, women in their 40s, eco-conscious women, and more.
Checklist for Starting a Makeup Line
Starting a makeup 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
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: How to write a business plan
Step 2: Name the Business
Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 3: 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 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 makeup line, 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 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 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: Select your Location
It may be possible to store inventory in a spare room in your home initially, but as a makeup line grows, it will be time to rent commercial space. A climate-controlled space is a must for most makeup products. Rent costs will vary depending on the size, location, and amenities.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Specifically, for a makeup line, Food & Drug Administration (FDA) understanding regulations may be required. Be sure to check out check out the FDA’s 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, among others.
Step 6: 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; otherwise, there is nothing really unique about what you are selling.
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 7: 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 makeup line is another. Unless you have considerable experience in the industry and the high startup cost, it won’t be easy to get sufficient bank funding. In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 25% towards the total start-up costs.
Step 8: 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 9: Get your Marketing Plan in Place
Marketing is an essential element of developing and releasing a makeup business. Creating your makeup brand is important and would include the logo, colors, and feeling behind your products. Then developing a strategy to let potential customers know about your business may include marketing techniques such as promoting on social media platforms (Facebook, Instagram, Pinterest), online advertising (Etsy, Amazon), print advertising, direct mail, and more.
The makeup industry is highly competitive, and a new line will be going up against well-established major beauty brands. When planning out your line, look for something you can do differently to stand out from the competition. This might be organically sourced ingredients, makeup designed to work with specific health conditions, or a unique approach to makeup that hasn’t been explored yet.
Step 10: Get Business Insurance
There are several types of insurance to consider when starting a makeup line. 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 11: Hire Employees
Depending on a makeup line’s business model, it may be necessary to hire some employees. According to Zippia, a cosmetic chemist makes an average of $62,202 per year, though salaries can range from $46,000 to $83,000. Zippia reports that business assistants, who could help with everything from securing accounts to shipping products, earn an average of $42,000 per year. A business may also need to hire branding consultants and website developers, though this is often done on a freelance or consultant basis.
In addition to staff salaries, a business will need to budget for other costs that come with hiring employees. These expenses may include workman’s comp insurance, unemployment insurance, and paid time off.
Related: Hiring your first employee
Step 12: Set up an Accounting System
Setting up an accounting system for your makeup line is critical to the long-term success of your business.
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 makeup line?
The cost of starting a makeup line can be significant, especially if the business owner cannot perform the chemistry development themselves. A small makeup line of ten products can cost $60,000 or more, while a larger makeup line can cost upwards of $150,000.
Common startup costs for a makeup line include:
– Product development and manufacturing
– Formula development
– Inventory of product ingredients
– Packaging design and production
– Website development
– Product photography
How much does a makeup line owner make?
Makeup line profits can vary significantly depending on the line’s specialty, business model, and profit margins. To increase your line’s chances of success, focus on coming up with a unique and desirable product and working to deliver that product in multiple ways, such as selling it both in stores and online.
Are there grants to start a makeup line?
It’s extremely rare to find a grant to start a makeup line. 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 skills are needed to run a makeup business?
Starting a makeup line doesn’t require a business degree, but certain experiences and skills can help.
Cosmetology degree. An education in cosmetology serves as a great background when starting a makeup line. This education provides a business owner with detailed information on how makeup is used, the qualities that make the best products, and important safety and handling best practices.
Cosmetic chemistry knowledge. While not required, a background in cosmetic chemistry will allow a business owner to formulate and develop their own products. Business owners who don’t have a cosmetic chemistry background should plan to work with a cosmetic manufacturer to help with product development or hire a cosmetic chemist as a consultant or employee.
Knowledge of industry trends. An awareness of the products that are most in demand, the qualities that consumers seek out in products, and the colors that are most popular at the time will help a business owner to create a line that’s relevant and popular.
Branding and marketing knowledge. Branding is a huge part of a makeup product’s success. A business owner who has branding and marketing knowledge can handle part or all of this process themselves.
Attention to detail. Whether developing products or working on branding, attention to detail matters in every aspect of this business.
Customer service skills. Strong customer service skills will help a makeup business stand out. Positive buyer experiences can increase the chances of customers buying from the line again.
What is the NAICS code for a makeup line?
The NAICS code for a makeup line is 284405.
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.