Soap making may be an entertaining pastime, but when done right, it can be a profitable business venture, too. If you love making soap in your home, it’s possible to transform this hobby into a business. But starting a soap business involves much more than just making soap. From researching the industry to registering a business, and more, read on to find out what you’ll need to successfully start a soap business.
Soap making has been a popular hobby for years, but some talented creatives are working on their skills by making and selling soaps. Soap makers typically create unique handmade soaps that offer quality and features that commercial, large-scale soap products don’t. Soap makers may sell their soaps online through their own e-commerce websites or on sites like Etsy. They may also negotiate space in gift stores and smaller shops to reach a larger audience.
Many soap makers work out of their homes, which can save businesses money over renting space. Soap makers often handle their own marketing, packaging, and shipping, too, so talents and knowledge across multiple skill sets are important in this industry. Larger businesses may expand into more formal business spaces, but many businesses stay small but profitable.
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Overview of the Soap Industry
The soap manufacturing industry produces bar soaps, liquid soaps, detergents, and other cleaning and toiletry products. Major companies include Procter & Gamble, Colgate-Palmolive, and Dial Corporation. The industry has consolidated over time and is now dominated by large multinational corporations. However, small-scale artisanal soap makers can find success in niche markets.
Quality ingredients and unique soap recipes help small soap makers differentiate from big brands. Many artisanal soap makers use natural ingredients and essential oils to appeal to consumers seeking eco-friendly personal care products. Custom labeling and packaging also allow small businesses to stand out on retail shelves. Successful soap entrepreneurs often sell online or at local craft fairs and farmer’s markets before expanding to wholesale or retail distribution.
The soap industry is thriving, driven by consumers’ growing preference for artisanal, organic, and environmentally friendly products. Handmade soap, in particular, is gaining popularity due to its perceived higher quality and the personal touch it offers.
Several notable trends are impacting the soap and cosmetics industry today. First, consumers are increasingly interested in natural and organic skincare products. Brands that use plant-based ingredients, avoid harsh chemicals, and are environmentally sustainable resonate with today’s buyers. Secondly, customization is hot right now. Many buyers want to play an active role in designing a soap that caters to their skin care needs through choices of fragrances, oils, exfoliants, and more. Finally, consumers today expect transparency from brands. They want to know exactly what is in the products they are buying, which requires thoughtful ingredient choices and clear labeling by soap makers.
While everyone uses soap, soap making businesses tend to target more specific audiences. A soap maker might market to adults who value vegan, eco-friendly products. Another business might market to buyers who like to give beautiful soaps as gifts. The specific target market will largely depend on a business’s branding and the products that it creates.
Checklist To Start A Soap Business
Starting a successful soap business isn’t just about mixing oils and lye; it’s a full-fledged enterprise that requires a well-thought-out strategy. To help you get started right, take a look at this checklist.
Step 1: Research the Industry
Before diving head first into starting a new soap business, it’s important to first research the industry and understand the business of soap making.
First, educate yourself about the technical aspects of soap making. This includes understanding different methods (like cold process, hot process, melt & pour), safety protocols, and the properties of various ingredients. You can find many resources online, such as blogs and YouTube videos that offer detailed instructions and tips. Don’t just limit your research online; you can also attend trade shows, craft fairs, and industry-specific seminars where you can meet suppliers, retailers, and even potential customers. This gives you firsthand insights and can serve as an excellent networking opportunity.
However, for more in-depth knowledge, consider enrolling in soap making classes. There are a variety of classes on Udemy, and institutions like The Handcrafted Soap and Cosmetic Guild offer professional certification programs that cover advanced topics like formulation, design techniques, and business operations. These courses not only equip you with technical expertise but also help you avoid common mistakes that beginners make.
Another idea is to connect with established soap makers. Whether through social media or by reaching out for an informational interview, learning from those already in the trenches can offer you invaluable insights. Online forums and communities centered around soap making are excellent platforms for asking questions and sharing experiences.
Step 2: Write a Business Plan
While this isn’t a required step and many people dread the thought of crafting a business plan, it shouldn’t be thought of as a formality, but instead an operational blueprint. While creating soap can be a labor of love, turning it into a successful business involves logistics, marketing, sales, and financial planning.
Your business plan serves multiple purposes. It clarifies your vision, solidifies your strategies, and communicates your business goals. It also helps get those swirling ideas out of your head and onto paper, bringing your vision to life. If seeking funding, a business plan is almost always required so a lender can evaluate the project.
Related: How to write a business plan
Step 3: Source Funding
Ensuring adequate funding is an important step in starting a soap business. While the initial investment isn’t as high as many other industries, you still make sure you have access to the funds for covering costs such as materials, equipment, packaging, branding, and marketing.
To start, you should have created a list of everything needed, along with the costs in the business plan. If not, it’s important to know how much you need to have before going further as if you can’t access the funds, you will need to come up with another strategy.
If your personal funds aren’t enough to get started with, there are a few outside sources of funding to look at.
Friends and family: A potential source of funding is friends and family. They might be willing to invest in your business or lend you money. However, mixing business with personal relationships can be tricky, so it’s essential to put all agreements in writing and clearly communicate expectations to avoid misunderstandings later.
Lenders: Loans from a bank or credit union are another option. A personal loan is one option, while a business loan is another. For a business loan, banks typically require borrowers to invest at least 15% of their personal funds into the business, have a good credit score, and provide sufficient collateral. If a bank views your loan as too risky, they may use an SBA (Small Business Administration) loan guarantee which can help secure the loan by backing a portion of it.
Microloans: For smaller funding needs or if credit isn’t available through traditional lenders, microloans can be an excellent option. Organizations like Kiva, Accion, or local economic development groups offer microloans to small businesses. Some organizations also provide business training along with the loan, which can be very beneficial for new entrepreneurs.
Step 4: Register the Business
Starting a soap business, like any other business, requires you to complete certain legal formalities to ensure your business is properly registered and compliant with all relevant laws and regulations. Every state is different, but here’s a general overview of the steps you’ll need to take:
Choose a business structure: Your business structure affects your personal liability, tax obligations, and administrative requirements. The four main types of structures are sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).
- Sole proprietorship: This is the simplest form of business structure and is ideal for individuals running their business alone. It’s easy to set up and has lower costs. However, it does not provide any liability protection, meaning your personal assets could be at risk if your business incurs debts or legal issues.
- Partnership: This is an option for starting a business with one or more partners. It’s relatively easy to set up but does not provide liability protection like sole proprietorships.
- Corporation: This is a more complex structure that provides liability protection as it is a separate legal entity. However, it has higher setup costs and more administrative requirements.
- Limited Liability Company (LLC): This structure combines the liability protection of a corporation with the simplicity of a partnership or sole proprietorship.
Many soap businesses start as sole proprietors, mainly because of the cost and ease of startup. The LLC is often the next most popular due to the liability protection.
Related: Comparison of business structures
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!
ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!
Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!
Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Soap making requirements: Depending on the ingredients or claims of the soap, there may be federal requirements to follow. Soaps regulated by the FDA must meet three conditions:
- Composition: Mainly “alkali salts of fatty acids” – essentially, what you get when you mix oils or fats with an alkali like lye.
- Cleaning action: The cleaning action must come solely from those alkali salts of fatty acids; no synthetic detergents are allowed.
- Intended Use: The product must be labeled and marketed only as soap. If your soap is a cosmetic (like if it moisturizes) or a drug (like if it treats skin conditions), it’s under FDA jurisdiction. Cosmetics don’t need FDA approval, but you’re responsible for their safety. Drugs do need to comply with FDA monographs or new drug approval processes.
If your soap meets the FDA’s definition, it’s also regulated by the CPSC (Consumer Product Safety Commission).
The FDA doesn’t specifically define “natural” or “organic”. Whether your ingredients are plant-based or synthetic, the same safety requirements apply.
In addition to federal requirements, most states also regulate soaps. For the most part, they follow the FDA regulations, but some add additional requirements.
General business licensing: 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 and may include a business license, sales tax permit, Employer Identification Number, and Occupancy Permit, among others.
Related: What licenses do soap businesses need?
Step 5: Set Up Production
Alright, you’ve navigated the complex stages of funding and registration! This next step is where all the planning, research, and preparation materialize into tangible goods – the soaps that your customers will use and love. This stage involves setting up a workspace, acquiring the right tools and equipment, and starting soap-making.
Setting up a workspace: The first step in setting up soap production is to establish a suitable workspace. This could be a spare room at home, a rented studio, or a commercial space, depending on the size of your operation. Ensure the space is clean, well-ventilated, and has access to water. It’s also important to have sufficient storage for your raw materials and finished products.
Whether you’re considering a home-based operation or a separate commercial area, ensure the property is zoned. Some areas require registering home-based businesses and if you’re renting a space, be sure to clear it with your landlord. You don’t want to invest time and money setting up only to find out you’re violating a zoning ordinance or lease agreement.
Purchasing and setting up equipment: Once you’ve got a space, it’s time to fill it with the right tools. Here, your needs will vary depending on your production scale. At a minimum, you’ll need soap molds, a soap cutter, mixing bowls, and measuring tools. If you’re aiming for a larger-scale operation, look into industrial mixers and cutting machines.
Packaging design: While soap scents and ingredients matter, soap makers also need to create visually appealing products. This visual appearance matters now more than ever because of visual social media platforms like Facebook, Pinterest, and Instagram. These platforms can help sell products, but consumers may also buy products knowing that a product’s unique look will help them take a social media-worthy photo while using that product.
Step 6: Create Recipes & Find Suppliers
With the space set up, you’re ready to dive into recipe creation and supplier partnerships. Here are some tips from other soap makers to help you get set up.
Creating Soap Recipes
Creating your own signature soap recipes is one of the most creative and rewarding parts of starting a soap business. Take inspiration from books, online tutorials, and soap-making classes to learn recipe formulation.
- Start basic: In the beginning, less is more. Start with a basic recipe that involves a few oils, lye, and water. Master the basics first.
- Experiment: Once you’re comfortable, start adding colorants, fragrances, or other additives like herbs and clays.
- Safety first: Always use protective gear when handling chemicals like lye, and ensure your measurements are accurate.
- Testing: This step is non-negotiable. You need to test every batch of soap for pH levels and skin irritation.
- Scale carefully: Don’t just multiply your small-batch recipe. Each ingredient will scale differently. Run small tests before making larger batches.
- Document: Keep detailed notes on ingredients, measurements, and outcomes. You’ll thank yourself later when you’re replicating your successful formulas.
Once you’ve developed recipes, you’ll need to source ingredients from reputable suppliers. Search for companies providing oils, lye, micas, essential oils, packaging, and accessories tailored to soap makers. Most suppliers require your business to be registered before they will provide wholesale pricing.
- Raw material suppliers: These companies offer the essentials like oils, lye, and fragrances. Popular names include Bramble Berry, Bulk Apothecary, and Wholesale Supplies Plus.
- Packaging vendors: From shrink wrap to decorative boxes, you’ll need to package your product professionally. ULINE and ClearBags are good places to start.
- Local suppliers: Don’t underestimate the power of local. Some ingredients, like local honey or herbs, can add a unique twist to your products and serve as a unique selling point.
Request samples to test new ingredients. Building relationships with high-quality suppliers is key to creating consistent, high-quality soap. Join industry groups like the Handcrafted Soap & Cosmetic Guild to get supplier recommendations from other members. With tested recipes and reliable suppliers secured, you’ll be set to start producing inventory!
Step 7: Establish Distribution Channels
Alright, your soap recipes are top-notch, and you’ve nailed down your production process. Now, how do you actually get those heavenly bars into people’s hands? Distribution is the bridge between your soap and the end consumer. Let’s break down some of the most effective ways to move your product.
Setting up an online store: Your own website is a great way to have full control over your brand and how you present your products to the world. Platforms like Shopify, Wix, Weebly, and others offer templates, easy checkout options, and even some marketing tools. The setup cost varies but typically involves a monthly fee plus credit card transaction charges.
Online marketplaces: If you’re looking to tap into an existing customer base, platforms like Etsy and Amazon are chock-full of people looking to buy. Here’s what you need to know:
- Fees: Both platforms charge listing and transaction fees. Be sure you understand these upfront.
- Competition: You’ll be up against other soap makers. Differentiating your product is key.
- Control: Remember, these platforms control the customer experience more than your own website would. So, read their guidelines carefully.
Related: How to set up an Etsy shop
Local markets: Never underestimate the power of face-to-face interactions. Farmer’s markets, craft shows, local expos are great opportunities to get in front of people who actively seek quality, artisanal products. Make your stand attractive and inviting, offer samples if possible, and be ready to share your story and the benefits of your soaps. Check the requirements for setting up a stand, as you may need permits or insurance.
Whether it’s a custom-branded website, established online marketplace, or a bustling farmers market, each channel has its pros and cons. Some businesses even opt for a mix of all three. At the end of the day, you want to be where your customers are, offering them a soap experience they won’t forget.
Step 8: Create a Marketing Plan
Once your soap business is ready to roll, it’s time to tell the world, or at least your target market, about it. Marketing is particularly important for soap making businesses, especially because many of these businesses don’t maintain storefronts where customers can see the products.
Many soap entrepreneurs find success through social media platforms like Instagram, where the visual nature of the product shines. High-quality photos showcasing the uniqueness of your soaps can be a challenge for soap makers. Good photography matters when selling your soaps online, and 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. Email marketing is another effective way to keep your customers in the loop about new products, promotions, and company updates. Well-crafted emails can turn one-time buyers into repeat customers.
Local partnerships can also be a great way to sell products. Reach out to local boutiques or health food stores to see if they’d be interested in carrying your product. A common arrangement is consignment, where the retailer only pays you when the product sells.
Step 9: Prepare to Launch!
So, you’re almost there. Your soap business is nearly up and running, but before you cut that ribbon, there are some loose ends that probably need to be taken care of. Understand that not all these steps may be applicable to your situation, but they’re worth considering.
First, don’t underestimate the importance of business insurance. Insurance can protect against risks such as product liability claims or accidents. Different types of coverages you may need include general liability insurance, product liability insurance, and home-based business insurance if you’re operating from your home.
Next, let’s talk about bookkeeping. Accurate bookkeeping is vital for tracking income, expenses, and taxes. Consider using software like Wave Accounting (FREE) or Quickbooks, which are designed for small businesses.
And speaking of finances, you should consider a dedicated business bank account. This separates your personal funds from your business earnings, making it easier to manage cash flow and taxes.
Setting the right pricing can make or break your business. Consider factors like the cost of materials, labor, overhead, and the pricing of similar products in the market. Be sure to account for your time in making the soaps, as one day you may need to hire someone to help with production.
In terms of payments, accepting credit cards is almost a given. Offering credit card payments can make it easier for customers to purchase your products. You can do this through your e-commerce platform or a payment processor like Square or Stripe.
Common Questions When Starting A Soap Business
How much does it cost to start a soap business?
Starting a soap business can typically cost between $2,000 and $10,000, depending on various factors such as scale, quality of ingredients, and marketing.
Here’s a breakdown of the costs involved:
Materials: The cost of raw materials like oils, lye, and additives can vary widely based on the quality and type of ingredients you choose. Expect to spend around $100 to $500 for initial supplies.
Packaging & shipping supplies: Figure between $100 and $300 for bags, labels, boxes, packing material, and more.
Equipment: Basic soapmaking equipment such as scales, pots, utensils, and molds can be purchased for $500-$2,000.
Licenses and permits: Depending on the state and business structure, expect to spend between $0 and-$500.
Business insurance: For product liability insurance, you can expect to pay around $500.
Marketing: Initial marketing costs could include website setup, branding, photography, and promotional materials. An initial budget of around $1,000 could be a good starting point, but this can vary based on your marketing strategy.
While these costs provide a general idea, it’s important to note that they can vary significantly based on individual circumstances. For instance, if you’re starting from home or already have much of the equipment, your startup costs may be much lower.
How profitable is a soap business?
Profits will vary significantly from business to business. Factors like whether the business is run part-time or full-time, how it sells its soaps, production methods, recipes, and pricing will all affect its profits.
That said, we can come up with a rough estimate using some common industry metrics.
Let’s look at a small operation producing around 1,000 bars per month. With an average bar soap price of $6 and monthly production of 1,000 units, the estimated monthly revenue is $6,000.
Industry data suggest the Cost of Goods Sold is typically around 35% of revenue for bar soap. At 35%, our monthly COGS would be $2,100. After subtracting additional expenses like packaging, insurance, marketing, etc. estimated at $1,500 per month, we’re left with $2,400 in pre-tax profit.
This translates to an estimated annual pre-tax profit of $28,800 for our small operation producing 1,000 bars per month.
Many variables affect the actual profits, but this provides a general idea of the income potential. With hard work and smart management, soap businesses can generate solid returns with part-time work.
What skills are needed to run a soap business?
While starting a soap making business doesn’t require a business degree, certain skills and experiences can increase the chances of that business becoming a success.
Soap making experience: Making soap can be challenging, and getting consistent, quality results batch after batch is even more of a challenge. Previous experience or education in soap-making techniques will be helpful and can help to soften the learning curve when starting a soap business.
Understanding of aesthetics: Soaps need to be visually appealing, so an eye for aesthetics and overall design can help a soap maker to create products that look great on shelves and in photos.
Knowledge of fragrance and color blending: As soap makers get more advanced and creative in their products, knowledge of fragrance and color blending techniques can help them create truly unique soaps that will stand out from the competition.
Attention to detail: Details matter when making soaps, packaging them, and presenting them. An eye for detail is a valuable skill in this business.
Marketing skills: Many soap makers don’t have their own stores, and they often market their products themselves. Some experience with online marketing and in-person networking will be an advantage.
Customer service experience: A soap maker who has previous customer service experience will know how to provide a great customer experience to increase customers’ chances of returning.
Creativity: The soap making industry is highly saturated, so a business owner needs to be creative in designing unique products that will stand out from others.
What is the NAICS code for a soap business?
The NAICS code for a soap business is 325611.
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?