Last Updated on August 16, 2020

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 making business involves much more than just making soap. From marketing skills to creativity, read on to find out what you’ll need to successfully start a business of your own.

Business Overview

Soap making has been a popular hobby for years, but some talented creatives are putting their skills to work by making and selling soaps. Soap makers typically create handmade, unique soaps that offer quality and features that commercial, large-scale soap products don’t offer. Soap makers may sell their soaps online through their own websites or through sites like Etsy, and they may negotiate space in gift stores and smaller shops to reach a larger audience. 

Many soap makers work out of their homes, which can save the 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. 

Industry Summary

According to IBIS World, the soap and cleaning compound manufacturing industry has dealt with competition from foreign manufacturers. These manufacturers have lower wages and operating expenses, and as a result, they’re able to produce competitively-priced products, driving down market prices. United States industry revenue decreased from 2015 through 2019, and in 2019, the industry was a $41.6 billion industry. IBIS World predicts that the industry’s revenue will increase moving forward, though. 

As of 2019, the soap manufacturing industry consisted of 4,817 businesses. Those businesses employed a total of 49,634 staff.

Keep in mind that these statistics reflect commercially manufactured soaps. Statistics on the handmade soap industry are limited but handmade and specialty products have a unique set of benefits that can help them to compete against these commercial products. From using all-natural products to delivering quality and features that larger operations don’t offer, smaller soap making businesses can carve out their own markets.

Industry Trends

Many trends are affecting the soap making industry. According to Twin Craft, consumers increasingly want to buy soaps from companies that are ethically and environmentally responsible. Cruelty-free and vegan soaps are highly valued, and customers want to know where and how the products used in soaps were sourced. 

The self-care trend has shaped the wellness market recently, and self-care should continue to be popular in 2020. Because bathing is seen as a wellness ritual, the emphasis on self-care means that consumers are seeking bath products that promote relaxation and healing. Soaps that promote a spa-like experience are in-demand, and lavender soaps or soaps with natural fragrances can help to promote relaxation. 

While soap scents and ingredients matter, soap makers also need to create products that are visually appealing, too. This visual appearance matters now more than ever because of visual social media platforms like Pinterest and Instagram. These platforms can help to sell products, but consumers may also buy products knowing that a product’s unique look will help them to take a social media-worthy photo while using that product, too. 

Soap trends are also influenced by trends in other industries, like pop culture and cooking. The Soap Queen blog references soap makers who have been inspired to design soaps to reflect unicorn, Minions, and cake decorating trends.

Target Market

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. 

Skills, experience, and education useful in running a soap making 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 making 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 to 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 the chances of customers returning.

Creativity. The soap making industry is highly saturated, so a business owner needs to be creative in designing products that are unique and that will stand out from others.

 

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:
How to write a business plan
Free sample business plans

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: Comparison of Business Entities

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: Choosing a business location

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 sales tax permit, Employer Identification Number, and Occupancy Permit among others. 

Related: Common business licenses, permits, and registrations by state

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: Finding the money to start a business  

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: Low-cost ideas to market a new business

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: Common types of insurance a business may need

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: Hiring your first employee

 

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