Are you thinking about starting a soap business and wondering how to get started? Soap making is an exciting hobby and the sky is virtually the limit with all the endless possibilities you can create.
Maybe you’ve been a soaper for a while and wondering how to make an income rather than just a few dollars here and there. Or, maybe you have been wanting to get into the world of soap making but not sure if you should consider a business. Either way, you can start a soap making business from home and generate a profit, but there’s a lot more to learn than just how to make beautiful soap.
There are many things to consider and implement when starting a soap business, besides production. Making soap is actually the easy part and should be the least time-consuming. The more difficult part is getting your soap out there, marketing, research and branding!
So how do you get started? Let’s dig in!
1. Know Your Target Market
This is probably one of the most overlooked aspects of starting any business. A target market is a group of people that fit a certain age, demographic, characteristic and even income. Before you jump into the world of soap making you should define your target market as this will be your customer profile.
One common mistake people often make when they are starting out is to create a mountain of soap without any clear idea of who is actually going to buy it. They think that if they have beautifully crafted soap then it will sell itself. Wrong! You need to make your product for your target market.
To define your target market, ask yourself the following questions:
- Who is likely to buy my soap? Age, gender, demographic?
- Where are my customers located? Where do they usually shop?
- What is important to them? Values?
- What is their average income? Can they afford premium prices?
2. Find a Niche
After you have determined your customer profile you need to narrow down and tap into a particular niche. This step really goes hand in hand with step 1. Determining your market audience will influence your niche.
Why is it important to zone in on a particular niche? You want your soap to stand out amongst the competition.
For Example:
If your target market audience is comprised of women ages 30-40 who value organic and all-natural and environmentally friendly products then your niche would tap even further into this category. Perhaps your business would offer these women products that meet all of the above requirements but would cater to sensitive skin. Your niche would therefore be all-natural organic soap that caters to people with sensitive skin and packaged to be environmentally friendly.
Tapping into a niche will set you apart from other soap businesses out there. Don’t be afraid to narrow in on a particular audience.
3. Build Your Brand
Now that you have narrowed down your market audience and niche you will need to start building your soap business’ brand. This means giving your business a personality that is going to flow from your name, slogan, packaging, colors, scents, logo, etc.
Your brand is going to tell people exactly what you are all about and most importantly it should appeal to your target audience. Your brand is what makes you stand out amongst the competition and is what people will remember.
Creating your brand doesn’t happen overnight. Everything you do within your business is going to help build your brand over time.
Here are some great things to consider when building your brand:
- Who is your target audience? Age, demographic, personality?
- How will you relay your brand through packaging, colors, fonts, scents?
- Does your brand stand out amongst the competition? Is it unique or too generic?
Your brand is your business identity. It should tell people exactly what you are about and should catch the attention of your target market.
Remember, EVERYONE is not a market. Selling your soap products that will appeal to everyone will kill your business before it even starts. Focus on one particular market audience and create your brand that will catch that particular demographic’s attention.
4. Determine Costs
One mistake that many newbie soapers make is pricing their product to match that of their competition. Here’s a tip, DON’T!
It doesn’t matter what your competition sells their soaps for. After all, your price needs to reflect YOUR product, not someone else’s.
Creating a successful and profitable soap business means you need to price your soap carefully. If you try to price your soap to match your competition then you will be doing your business a huge disservice. There are many things you need to consider before you settle on a price.
Cost of Materials
How much does it cost to produce one bar of soap? To determine this, you need to calculate the cost of materials, shipping and any additional costs associated with producing that ONE bar of soap. You can determine the cost of materials of one bar of soap by dividing the total cost of materials including shipping) by the total amount of product.
For example, if you are spending $250 on ingredients and packaging for a batch of soap that yields 100 bars of soap then your price of materials is roughly $2.50 per bar of soap. This is just the beginning. There are several more things you need to factor in before you set your price.
Time
You need to factor your time into your price just as important as your materials. You would never work for someone else for free so don’t make that mistake here. After all, this is a business, not a hobby.
Determining what your time is worth depends on how much you would expect (realistically) to be paid. Would you work for minimum wage? Probably not. If you expect to make a profit selling soap (which you should be expecting!) then you need to factor in this cost.
Secondly, you need to factor in wages. Do you have someone working for you? If the answer is yes, you definitely need to factor their wages into your price point. You should really factor this into your cost anyways encase you plan to hire someone in the future. You want to be prepared to grow your business which likely means hiring help. If you don’t factor this into the price then you don’t have much padding to expand in the future.
So how do we factor in the cost of labor? Let’s say that it takes 2 hours to make a batch of 100 bars of soap. What do you think your time is worth for those two hours? Let’s say you are paying yourself $25/hour and your worker $20/hour. You are then factoring in $90 in wages to produce one batch of soap. Divide this by 100 bars of soap and you have an additional $0.90 to add to each bar of soap.
Overhead Costs
Your overhead costs are the costs associated with rent, electricity, advertising, website costs, and anything that costs money to run your soap business.
Now you are probably thinking that it doesn’t cost any money to make a batch of soap in your kitchen, but not so fast. Remember, you are a business now, not a hobby. If you want to make a profit (which should be the goal) then you need to factor in this cost, even if you are running this business out of your home.
So how do you determine your overhead costs? The best way to do this is to determine your total overhead cost for the month (this is your electricity, rent, website, travel, etc.) and divide by your total sales for that month.
If you spent $1200 in overhead costs and sold $2500 worth of product then your overhead rate would be approximately 48%. You now should be adding approximately 48% of your product cost to your price. If your product cost is $3.50 then you would add around $1.68 to each bar of soap.
Now that we have gone over the things you need to consider before you decide on a price, let’s talk about how we can reduce many of the costs associated with producing soap.
5. Purchase Materials in Bulk
This is probably the most crucial tip for scaling your business and increasing your profit. If you are constantly buying just enough materials to produce one batch of soap then you will be eating away at your profit margin.
There is, however, a balance here. If you are buying so much stock that you can’t use it in time then you will be no further ahead. Make sure that the volume of materials you purchase can be utilized in a reasonable amount of time. You don’t want to be using expired ingredients.
Shop around and find the best deals without sacrificing quality.
6. Start Small
Many people that go into soap making think they need to produce a mountain of soap in every variety under the sun in order to appeal to a lot of people. This is time consuming and will only increase your labor costs.
You need to know before you start your business exactly what you will be selling. You should not be experimenting anymore at this point. You should have a clear idea of what types of soap you will provide and exactly how to produce those items. Recipes should be perfected and tested prior to launch.
Making soap should not be taking up all your time. The bulk of your time should be spent selling and marketing your products, not experimenting.
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7. Get Organized
Yes, organization matters, even when running a soap business out of your own kitchen. If you aren’t organized then you will spend a lot of time and money needlessly. The amount of time you spend trying to find ingredients or standard procedures costs money.
Keep an inventory record of supplies you have on hand as well as what you need to order. You should also have all your soap making procedures available so that you know exactly how to produce your soap without error. Your business needs to operate as smoothly as possible in order to run efficiently.
8. Stop the Huge Giveaway
If you think that giving away your product will get you further ahead then you are making a huge mistake. When you are just starting up you need to keep things tight. Giving away samples in the hopes that people will be more likely to purchase your products really just hurts your business. Large businesses have more money in their budget to account for free samples and giveaways but a small start-up business does not.
This applies to friends and family to. Would you give away a new laptop or car? No of course not, so don’t do it with your soap products. Giving away products is fine as a hobby but as a business, you will only be hurting your profit margin. Run your business like a business, not a hobby.
The Takeaway
The most important aspect of turning your hobby into a business is to get your mind into business mode. Determine your business strategy, implement a plan and start treating your business like a business.
You don’t want to spend all your time creating. You want tried and true protocols when you are starting up. There will be room for experimentation and adding to your product line but this comes when you have already established your business and are bringing in enough revenue to cover those expenses. Start small and start smart.
Do you have your own soap business? Leave a comment and let me know what you would do differently if you were starting from scratch, I’d love to hear!
For more information and ideas on starting your soap business, check out this great book
