How to Start an Essential Oils Business

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Quick Reference

Essential oils are becoming more and more popular, particularly in aromatherapy and skin applications.  If you have ever tried to make your own oils, why not turn it into a business?  You could make a living, be your own boss, and be creative.

Business Overview

An essential oils business makes and sells essential oils in a shop, to retailers, or online.  Some essential oils shops also offer aromatherapy services.

Industry Summary

According to Grandview Research, the essential oils market demand was 247.08 kilotons in 2020, and its popularity is expected to grow 7.5% per year through 2027.  According to Statista, the global market size was $17 billion in 2017 and is projected to grow to $27 billion by 2022.

Industry Trends

The trend to use essential oils for aromatherapy, skincare, and alternative healing is expected to continue.  Some research has shown that they have medical benefits, so increasing positive study results will increase demand.  The lack of side effects is another factor that will increase demand.

Target Market

Your target market will be people seeking the health and skincare benefits of essential oils.

Skills, Experience, and Education Useful in Running an Essential Oils Business

There are several specific skills that you will need to open an essential oils business.

  • Experience.  Experience making your own oils would be extremely valuable.
  • Education.  You will need to educate yourself on various types of oils and how to make them.
  • Business knowledge and experience.  You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
  • People skills. You’ll need to be able to build rapport with your customers so that you retain them as customers and keep them coming back.

Costs to Start an Essential Oils Business

Here are the typical costs you will face when you open an essential oils business.

  • Starter kit – which includes 12 oils, a diffuser, and other items – $200
  • Initial marketing such as Facebook ads or search engine optimization for your website $500 -$1,000

Steps to Starting an Essential Oils business

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your essential oils business should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and your ongoing expenses.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.

Related:
How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect essential oils business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

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 a 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.

RelatedComparison of Business Entities

Step 4: Select your Location

Most essential oil businesses are sold via MLM (multi-level marketing or also referred to as network marketing), where the owner sells directly to friends, family, and word of mouth.  Additionally, a high-traffic location could be used for visibility, such as a kiosk in a mall.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

You may 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. Check with your state for specific license and permit requirements for your essential oils business.  Some other common local, state, and federal registrations an essential oils business may need include a sales tax permit and an Employer Identification Number.  

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

Step 6: Find a Supplier / Manufacturer

Finding a quality supplier that uses quality ingredients is important in order to keep customers reordering from you. Several suppliers will drop ship your orders, which keeps the need to invest in inventory lower than having to always have stock on hand.

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 8: Get your Marketing Plan in Place

An essential oils business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for an essential oils business include social media marketing and online advertising. Developing a website can be a significant expense, but it can also give your essential oils business greater visibility online.

Related: Low-cost ideas to market a new business

Step 9: Get Insurance

An essential oils business needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hiring Employees

You may need employees to help you run your essential oils business.  Make sure that you select people with appropriate experience and training.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your essential oils business 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.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning an Essential Oils Business?

The price for a small bottle of essential oils is between $10 – $30, but they are often sold in sets.  If you sell sets of 6 at $120 and sell 10 sets per day, you will make $438,000 in annual revenue.

Things to Consider Before Starting an Essential Oils business

Starting your own essential oils business or any business will have its challenges.  You need to be prepared and make sure that you know what you’re getting into.

Marketing and acquiring customers will be your biggest challenge and an ongoing expense.  You need to have a high visibility location to attract customers.  The best locations are going to be more expensive.

You will face competition, so you need to offer high-quality products at competitive prices to be successful.

Talk to other business owners for tips on starting a business and do your homework to determine costs.  Researching other local essential oils businesses can provide insight into what they offer and what prices they charge.

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