10 Things You Need to Know Before You Start a Soap Business
I've been asked a lot for advice about how to start a soap business. (Duh, that's why I'm here!) So I decided to round up the most common bits and pieces of advice I've given over the years into one gigantic resource. I've listed up ten things I think everyone should know before they start a soap company. Ready to rock?
Here's what you should know before you start a soap business of your very own:
1. You don't get to make soap all the time when you own a soap business.
Most soapmakers start a soap business because they have become soapmaking addicts, churning out batch after batch of lovely handmade soap. That's fine, you do need to make the product to sell it (unless you outsource manufacturing). However, when you run a soap business, you HAVE TO spend as little of your time as possible making your products. This is even more important if you are a one-woman (or man) show. Because if you don't have time to put into selling your products, you will end up with a very expensive
Once you start a soap business, less than 20% of your time as a sole business owner should be dedicated to soapmaking/production. (Yes, that includes time spent ordering supplies, dealing with GMP paperwork, and packaging product.)
This frees up the rest of your time to manage your business and sell the handmade soap you are making. This is why production efficiency is of the utmost importance! Time and time again, I work with soapmakers who are spending far too much time making products and creating new products. And then they wonder why their business isn't doing as well as they would like.
Takeaway: You have to spend more time selling soap than making it to be profitable.
I'm a huge productivity nut, so here are a couple of other posts on productivity:
- How to Improve Your Productivity The Old Fashioned Way
- The Top 5 Productivity Apps that I Can't Live Without
Side Note: If you are starting a soap business with a partner, it's super important to define roles ahead of time. Usually, one person steps into the role of Production Manager and the other picks up as the Operations Manager. That doesn't mean the Production Manager gets to turn a blind eye to the business aspects of running a company!
2. You don't get to make what you like when you start a soap business.
One of the most common mistakes soapmakers make when they start a soap business is creating a product line around the products they like the most. Newsflash: you aren't your target market. If your target market was exactly like you, they would make their own products and start soap business, too.
If your target market would die for a patchouli-scented soap, and you don't make it because you hate the smell (blasphemy!), guess where your customers are going to go? Yup, that's right - they're going to hand their cashola to a soap company that makes the products they want.
If you start a soap business making laundry soap, beard oil, glittery eyeshadow, and baby soap (because those are the products you like to make), then who the heck are you going to market to? Do you really know of any male infants who miraculously already have a beard the size of their body, do their own laundry, and wear make-up? Right. Start your soap business with a small product line (usually a maximum of 10 products). Have a consistent purpose and focus on a single market.
3. Branding is your soap business's backbone.
If you think branding is as simple as picking a few colors, a pretty graphic you like, and slapping it all together, I have news for you. Branding is so, so much more than that. And without strong branding, you will struggle when starting a soap company.
Your brand should guide every action and decision you make in business. Is it right for your business to develop this new product? Is it right for your business to do that craft show? Is it right for your business to be on that shiny new social media network? When you have a solid brand and target market, these questions become a cakewalk.
4. If you compete on price alone, you will never own a sustainable and profitable business.
The biggest mistake I see with soapmakers that I've worked with is either pricing their products in such a way that they feel is affordable or in line with an imaginary market. The problem with this is that many, many, MANY soap companies operating through their own websites, on Etsy/Artfire, or other venues, are creating their pricing on what someone else is doing. This means the "market price" continues to nose dive - to the point that no soap company who tries to compete on price will ever make a profit.
A few years ago, I set up my soap company at a local indie craft market and found that I was sitting in any maker's nightmare: they had assigned booths so that all similar products were next to each other. I was surrounded by four other soapmakers. Each soapmaker around me checked out each other's pricing and then set show specials to compete on price - except for me. I stuck to my guns on my pricing, selling my 3-ounce bars of soap for $7 and up. At the end of the day, every other soapmaker I spoke to reported barely breaking even on the show and walked away disappointed. Since I didn't lower my pricing (thereby avoiding diminishing the perceived value and quality of my products), I walked away with a healthy profit and a sunny disposition.
If you want to run a successful soap company, you absolutely must turn a healthy profit, or you will not be able to afford to stay in business. So why not plan for profit from the moment you start a soap business?
5. There is a market for everything.
The biggest argument I get in regards to charging decent prices that net a profit is that the market can't bear it. And that is a big ol' fat lie. The only time the market won't bear a price that is fair to you and your business is when you aren't going after the right market or a specific market at all.
If you are throwing your soap out in the wild, hoping and praying that some bloke will plunk down $10 for your soap, you are betting on a chance. You have to nail down a specific market that is right for your products. For most businesses a niche market is identified and a product is created to serve that niche. For most soapmakers, however, they start off by throwing caution to the wind and hoping someone somewhere will buy their products because they are AMAZEBALLS.
Companies who charge $12, $28, $120, or even $1400 for a bar of soap (yes, they exist) do not set up at a farmers market because that's what everyone else does. They find the consumers that are right for their products, and they start serving those fabulous people. It's the only way to grow a sustainable business that constantly snags a profit.
There is a market for anything and everything under the sun, you just have to find the right market and niche for your products. If you haven't started a product line yet, then find your market FIRST and then create your products for that niche.
6. There are more ducks to have in a row besides creating fab products.
Surprise, surprise, it's not as easy to set up a soap company as a lot of people think.
Before you sell a single bar of soap, you should know how stable the product will be over time. Ideally, you should know how your soap will handle being stored in the most ridiculous of places (like in someone's car in the middle of the summer in Arizona), how long the scent will last, and how long the product integrity will remain intact. Believe it or not, most soap does go bad over time and the last thing you want is to find out your soap goes bad quickly in the hands of customers AFTER you've taken their money.
Next up, you need to be in compliance with both local, state, and federal laws.
Within the United States, if you live in Florida or California, you would need to comply with a special set of cosmetics regulations. If you make cosmetic claims such as your soap is moisturizing, you will need to comply with FDA regulations. And even if you don't sell cosmetics, you still need to comply to other regulations governed by the Consumer Product Safety Commission and the Federal Trade Commission.
In Canada, you'll need to complete your Cosmetic Notification Forms. You'll also have to comply with the Canadian Food and Drug Act and other guidelines for cosmetics (including soap) on the Health Canada website.
And this is not a full list of applicable regulations, either! Don't forget any permits, inspections, or licenses you may need to obtain from your local or state government. Marie Gale is always a fabulous resource for finding applicable regulations (USA) you may need to comply with, but you also don't want to forget things like sales tax or DBA registrations, etc.
Don't forget insurance!
And finally, the one word soap companies dread hearing: insurance. Yes, you need business and product liability insurance before you sell your soapy creations. Fortunately, we've done a lot of the legwork for you and are happy to dish on what type of insurance policies you need and where to buy insurance for your soap business.
7. Photography is a huge pain point for most soapmakers who start a business.
Most soap companies want to sell their products online to reach the largest portion of their audience possible, which means your customers will rely on your ability to take stellar product photographs. And not everyone is a photography master.
If you're making any of these major product photography faux pas, you will be hard-pressed to gain an interested audience. It's important that your images accurately reflect your products and brand. That means product photos that are clear and well-lit. If you take a peek at Etsy or Artfire or other handmade product venues, you'll notice that the products getting featured on the front page or in collections is due to awesome product photography.
If you aren't fab with a camera, you will want to invest in professional product photography or learn how to DIY your own product photos. You'll also want to get familiar with the best sites for downloading stock photos.
8. Starting a soap business is an investment.
Your soap business will only be as strong as you are. You need to keep learning, growing, and stretching your limits to build a successful soap company.
Experienced soapmakers became experienced soapmakers because they knew they needed to keep learning. To this day, I still learn new things about soapmaking, even though I've spent over a decade making my own handmade soap. If you ever become stagnant in learning, you will become stagnant in growth, too. This doesn't just apply to soapmaking, but to business as well.
The old adage that you need to spend money to make money is just as true now as it has ever been. When you first start out, focus on your strengths. And put your money where it matters: invest in educating yourself to strengthen your weaknesses and outsource to tasks you are crap at or hate doing.
I always advise business owners to find accountability and support, whether that's through a business coach (and not just because I am one - I have one, too!) or through mastermind groups, trade organizations, or local support groups. Doing so will help you continue to invest in yourself and your business, whether it's mentally, physically, or financially.
Side note: Tread lightly when building your support system. Many students I've helped start a soap company have the issue of too many cooks in the kitchen, all drinking the same Kool-Aid. And that makes it difficult to focus on your business, plan for your own version of success, and stand out from the crowd. When starting a soap business, set a budget and set limits for paid *and* free resources. Don't take every course under the sun that seems like it will help you. And don't join every Facebook group you find.
9. You need to build your soap business for tomorrow.
If you are getting ready to start a soap company, it's always a top of the list priority to have an end game in mind. Do you want to grow your soap business into an empire? Do you want to stay in your kitchen forever? Do you want a retail store or a manufacturing space or employees to manage? Think about where you want your business to take you, and build your soap company to meet your needs.
If you want to sell to nationwide retailers, it's probably not smart to start a soap business with a product line that requires intensive labor (like time-consuming, intricately designed soaps or made-to-order products). So, you will want to start focusing on production efficiency and growth hacking as soon as possible. If you want to stay small forever, (there is nothing wrong with that if that's what you want), you'll have more leeway in how you design your products, how you price them, and even how you market them.
Don't forget, smart planning also means having an exit plan, from the start. If you plan to sell your business, pass it on to a family member, close up shop, or liquidate inventory and equipment, each of those routes to retirement requires preparations that need to be put in place early on. Building a business for your kids to take over looks very different from creating a company that you plan to offer for sale.
And even though you start with Plan A, you may end up with Plan D - planning is not set in stone. It will be important that you regularly fine-tune your plans for where you are and where you want to go. We're human, we change our minds, and that's okay.
10. Fear will be your biggest enemy when you start a soap business.
This really should be number one, I tell you.
I would venture to say that 99% of the soapmakers I work with allow fear of some kind to hold them back in business - whether that is a fear of cold calling, a fear of public speaking, a fear of failure, or any other multitude of fears.
Before you dive in headfirst starting your soap business, get crystal clear on your fears and start conquering each fear you have now. And as you continue to roll with your business, you will find new fears that crop up and it's important to keep taking steps to bust them out of your way.
When you decide to start a soap business, you are the only one who is responsible for your success. And you can't allow fear to dictate the path you take. Even if you consider yourself pretty fearless now, I promise you will find a fear down the road that holds you back. That's the life of an entrepreneur, and it's totally normal! Stay honest with yourself, and keep the ball rolling in the right direction.
Bonus advice from other soapmakers...
We checked in with other soap business owners from around the globe to find out what they wished they'd done differently when starting their soap businesses. Read their advice: If You Could Start Your Soap Business Over, What Would You Do Differently?
If you are already in business, what are some of the things you wish you had considered or known before you decided to start a soap company? Throw it down in the comments and let's help each other out.
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