How to Start a Soap Business: Clean Money Checklist
Making artisan soaps is a popular hobby that can turn into a lucrative business in surprisingly few steps. Soap and cosmetics make up 35% of holiday presents gifted every year [1], indicating a big demand on the market for homemade, handcrafted soaps.
We walk through everything you need to know about how to start a soap business. Starting with writing your business plan, making your company legal, costs, pricing plan, equipment checklist, and marketing.
Write a business plan
You might think that a business plan is unnecessary if you are already an experienced soap maker or if you’re planning to sell online only from an ecommerce website. However, writing a plan will help you solidify your goals and take a closer look at your finances and the steps required to turn your soapmaking pastime into a full-time job.
A strong business plan will include some of the following:
- Market analysis - is there a demand for your business?
- Branding
- Marketing strategy
- Location - including various web platforms if you plan to be an online retailer
- Target market
- Products overview
- Costs
- Pricing plan
- Logistics
Make your business legal
Depending on where you live, you’ll have to register your business with the relevant government body. This is for tax purposes mainly, but also because your business name might have to follow specific rules and regulations or be subject to copyright laws.
Insurance
Insurance is crucial when working with cosmetics. If a customer takes an allergic reaction to your products and you’re unprotected, it could be terminal for your business.
For this reason, you should seek out fully comprehensive Arts and Crafts insurance. This covers:
- Personal liability - should you be injured while manufacturing your soap.
- Product liability - if you or your products accidentally hurt a customer.
- Contents and stock cover - this often includes equipment and tools, too.
- Stallholder cover - most markets and craft fairs will not let you sell your products if you aren’t covered by this policy [2].
- Business interruption cover - if your working premises becomes unusable due to an insured event like a flood or fire. This cover helps with costs of working in a temporary location and turnover loss due to interruption. The cover also includes if events and fairs are canceled due to venue damage [3].
Ingredient legislations
There are many regulations around the ingredients you can use in your soap that vary greatly across the globe. If you plan to ship your products internationally, make sure to choose products that are approved in all destinations. Here’s where you can find the guidelines for your location:
Europe and the UK: The European Commission [4]
USA: The Food and Drugs Administration (FDA) [5].
Canada: Health Canada [6].
Australia: Department of Health - National Industrial Chemicals Notification and Assessment Scheme (NICNAS) [7].
New Zealand: Environmental Protection Authority [8].
Equipment, ingredients, and packaging costs
As a whole, the handmade soap industry is projected to be worth $24 billion by the end of 2022 [9], but how profitable is it for individual retailers? First, let’s break down the costs associated with making soap.
Fixed costs - equipment
Equipment is one of the fixed costs when making soap. If your equipment is protected by insurance it’s usually something that you’ll buy once until it’s no longer fit for purpose. Some of the equipment you’ll need includes:
- Scale for oils, liquids and lye ($5-$25 depending on size)
- Thermometer ($5-$10)
- Hand blender (costs vary dramatically - can be bought for as little as $30 for a non-professional blender)
- Heavy-duty containers for pouring lye (prices vary depending on size)
- Soap batter containers in various sizes for different batch sizes (roughly $10-$30)
- Plastic and silicone spoons and spatulas for stirring ($2-$10)
- PPE - oven mitt, apron, reusable gloves, and safety goggles (>$25)
- Soap molds and stamps- you’ll have lots of these in different sizes! Silicone molds are often very affordable and the best choice for all soap makers [10].
- Knives or soap cutters ($20-$150)
When heated, lye can reach over 200°F (93°C). Avoid a glass container for mixing the lye and water together, even if it’s heavy-duty, and opt for steel or heavy-duty plastic containers instead [11]. Please note that these prices are based on averages, and could vary by location, availability and whether you choose to invest in industrial or locally-bought equipment.
Ongoing costs - ingredients and packaging
Your list of ingredients will depend on the soap you produce. You might want to make plain soap, exfoliating soap, decorative soap. It depends on your niche and the solution you’re trying to provide to customers.
For roughly $18, you can make a 1kg (35oz) batch [12], which makes about 7-8 average-sized bars of soap. This includes the following ingredients:
- Olive or vegetable oil
- Cocoa butter
- Lye (sodium hydroxide)
- Water (free)
- Essential or fragrance oils
- Decorative elements like dried flowers or fruit
If you’re interested in making gentler fragrance-free soap, you could sub fragrance oils for porridge oats in your soap butter. This is more sustainable environmentally and financially, and is reported to make soap creamier! This brings your total down to $10-11 for the same sized batch [13].
Packaging prices vary depending on your branding and how you plan to distribute your soap. You might wrap your soap in beeswax, parchment paper, pillow boxes, yarn, twine… the possibilities are endless. Don’t forget to budget for warning labels, product display labels, and shipping.
Pricing plan
61% of consumers are willing to spend more on artisan products like handmade soaps. Quality ingredients and luxury benefits, such as aromatherapy, are the top priorities for this market [14].
Your pricing will be influenced by your branding (which we’ll come to shortly), and the ideal profit margin you’d like to see. Pricing matters a lot, and it’s difficult to dramatically change your pricing once your products are live.
- If you create luxury artisan soap, you could consider a prestige pricing strategy. Here, your products are priced higher to signify that they’re top quality and use the best ingredients.
- You might create everyday soap for the everyday person, and opt for a more affordable pricing point. Cost focus pricing might work best for you.
- Or, if you create a particular niche type of soap, that offers similar benefits to those already on the market, you might want to use a market pricing strategy.
Branding and marketing
Once you’ve worked out the costs and navigated through the legal red table, it’s time to promote your product. Your branding should be designed in a way that speaks to the ideal customer you’d like to attract. It also breathes life into your business and should mirror your brand’s personality and ethics.
Choose visual branding that relates to your products. Your colour scheme, font, slogan, and website should be instantly recognizable and distinct to your brand. Your visual branding will also inform your marketing and business competition strategies.
Where to advertise and sell your products
The handmade soap industry is on a steep incline [15]. Because of this, retailers are spoilt for choice for where to sell and advertise their products. Social media is a great place to start: platforms like Facebook, Instagram, and Pinterest are particularly popular.
However, they have their limitations. If you’re planning to run a business, you’ll want to invest in an ecommerce website. Online marketplaces like Etsy and eBay are great, but there may be a lot of competition, and you will be subject to sellers’ fees with every sale.
Using your own ecommerce platform will give you a lot more editorial freedom since you can give more information about your product and convey your branding with a lot more ease.
Scrub up for success
When building a business, you’ll need strong foundations to support your growth. Point of sale (POS) systems work as the backbone of retail businesses for a number of reasons. Designed to work as a complete business management system, you can control all vital aspects of your company from one cloud-based system.
Receive detailed analysis on the areas that matter to your business:
- Filter sales reports by individual product, profit margin, trending items, or employee
- Multi-award-winning inventory management that syncs online sales and in-person sales for the most up-to-date stock levels
- Create your own website or integrate with a fully loaded e-commerce platform
- Automatic order purchasing once stock falls below a certain level
- Customer management systems that save customer contact details and shopping preferences for more targeted marketing
- Integrations with over 100 apps including marketing, accounting, bookkeeping, and loyalty program apps
- Employee management for more efficient scheduling and payroll
If you’d like to learn more about our industry-leading software, request a free callback with one of our experts.