Business Overview

The beauty and personal care industry generates more than $84 billion annually in the U.S alone. As consumers become increasingly aware of the benefits of natural products, beauty care manufacturers and retailers are now investing in the latest trend - beauty products infused with CBD, a non-psychoactive cannabinoid found in hemp and cannabis. Major retailers such as Sephora, Barneys, and Neiman Marcus are investing in CBD-infused face masks, hair products, cosmetics, and creams, offering a unique and profitable business opportunity for those looking to break out in the beauty industry.

Who is this business right for?

This industry is best suited for the business savvy entrepreneur who has a connection with cannabis and its benefits. They are passionate about educating the public of its benefits, recognizing it as a “super beauty ingredient.”

What happens during a typical day at a cannabis beauty products business?

Most investors partner with a private label manufacturer, who develops and produces their clients’ consumer goods. You will work closely with them to formulate and manufacture the CBD-infused products you conceive, determine packaging options, and ensure adherence with FDA rules and regulations. To remain relevant in the cannabis beauty product industry, business owners must remain abreast of current and emerging trends, continually striving to introduce new and innovative products. Additionally, networking and marketing will be an integral part of your day. When not working to expand your business, your team will focus on administrative duties, filling orders, and offering advice to customers regarding their personal needs. If a brick and mortar is part of your business plan, you and your staff will also need to maintain the facility and keep the shelves stocked, taking a more hands-on approach to customer service.

What is the target market?

Your target market includes consumers who are educated regarding the benefits of cannabis, particularly when it comes to skin care and beauty products. They are committed to natural living and possess the financial means to invest in their own wellness. Entrepreneurs are encouraged to conduct thorough research to identify which products have saturated the market and which ones are still needed.

How does a cannabis beauty products business make money?

A cannabis beauty product business generates revenue from each sale. These sales come from multiple sources, including online, 3rd-party retailers, and the business’ own beauty supply store.

What is the growth potential for a cannabis beauty products business?

CBD-infused beauty products are in such high demand that Wall Street analysts are beginning to treat it as its own, standalone category. Despite its popularity, this is still a fairly new industry, offering significant room for growth and profits for entrepreneurs looking to get in on the ground floor.

Getting Started

What are some skills and experiences that will help you build a successful cannabis beauty products business?

For long-term success in this industry, it is critical that the business owner possess strong interpersonal skills, able to make connections with customers, manufacturers, retailers, and industry colleagues. These relationships will help you understand the needs of your client base, ensuring everything from your logo, to product packaging and the products themselves, meets those dynamic needs.

Additionally, one must possess the qualities that make a great leader. You must be detail-oriented, with strong organizational and delegation skills. Flexibility, patience, and perseverance are critical. Most importantly, you must possess the passion to become involved in this ever-changing landscape. Dedication to continually educating yourself and others, and involvement in the ever-evolving legislation, will help ensure the industry continues to grow.

What are the costs involved in opening a cannabis beauty products business?

Starting a beauty product line from scratch requires a great deal of time and money. The planning stage, which includes product development, packaging, and identifying retailers, can take anywhere from nine to eighteen months and cost $75,000 to over $200,000. Start-up costs include insurance, payroll, trademark and logo design, and a website. If your business plan includes a storefront, you will also face the standard upfront costs, which include a location, display cases, business software, additional employees, and utilities.

To offset some of these expenses, entrepreneurs entering this industry are encouraged to seek out funding and grants. Sephora Accelerate is a program set up through Sephora that offers customers a unique unique opportunity to turn their vision into reality.

What are the steps to start a cannabis beauty products business?

Once you're ready to start your cannabis beauty products business, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:

STEP 1: Plan your Business

A clear plan is essential for success as an entrepreneur. A few important topics to consider are:

  • What are the initial costs?
  • Who is your target market?
  • How long it will take you to break even?
  • What will you name your business?

Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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STEP 2. Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your security guard company is sued. Consider using a registered agent service to help protect your privacy and stay compliant.

STEP 3. Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

STEP 4. Open a business bank account

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 5. Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 6. Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7. Get Business Insurance

Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.

STEP 8. Define your brand.

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

STEP 9. Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Where can I find a business mentor?

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

What are some insider tips for jump starting a cannabis beauty products business?

While this is still a fairly new industry, many have been working behind the scenes for years to educate consumers regarding the benefits of cannabis products. They offer the following advice:

  • Work with a product manufacturer that understands both the product and your target audience. They can assist you in identifying customer needs, brand development, and solving the payment processing dilemma many retailers are facing.
  • It is critical that you conduct thorough research ahead of time regarding payment processing, as there are strict rules and regulations that eliminate many standard processing platforms.

Growing Your Business

How to promote & market a cannabis beauty products business

While its acceptance is becoming broader, there is still much legislation work that needs to be done. Many online companies, including Google and Facebook, do not authorize paid promotion of cannabis products. Traditional methods such as paid radio and television advertisements are effective, but you will still need to tap into the digital media platform. Educate consumers through social media and contact social media influencers to devise a mutually beneficial partnership - they promote your product in exchange for free or discounted items. Additionally, this is where your networking skills come in. Approach beauty product retailers with your line of products, both on a local and national level, to ensure your line is carried in stores across the country.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

New investors are encouraged to start out with one or two products. Once you have perfected those, you can move on to the next item on your list. By doing so, you ensure a quality product and a brand consumers remember and are committed to.

How and when to build a team

During the beginning stages, you will have a partnership with the private manufacturer, who will help throughout the development stage. Should you decide to hire a staff to assist you personally, make sure each team member is well-versed in cannabis beauty products and the overall benefits of CBD.

Earning Potential

How much can you charge customers?

When setting your prices, consider all costs associated with making the product, as well as the product size. Prices range anywhere from $18 to over $2,000. This broad range is why it is critical that you identify your target market during the business plan development stage.

What are the ongoing expenses for a cannabis beauty products business?

The ongoing expenses business owners face managing a business of this magnitude include manufacturing, packaging, marketing and brand awareness campaigns, insurance, and payroll. If your business model includes a storefront, you will face additional overhead expenses that come with owning a brick and mortar shop. As mentioned, remaining on the forefront of emerging trends and active in legislation reform is also important. Therefore, those looking for long-term industry success should budget for market research, travel, and education.

How much profit can a cannabis beauty products business make?

With the announcement that several major retailers will start carrying CBD-infused beauty products, the profit potential in this industry is significant. This is a fairly new concept, however, so there is not currently enough information to provide reported profit earnings. Profit margins in the standard makeup industry typically average 40%, with some reaching as high as 80%. The average small beauty line reports an annual profit of $35,000 - $70,000, while the larger organizations report profits of well over a million dollars.

How can you make your business more profitable?

Once you have established yourself as a thought leader in the industry, consider branching out, building a collection of beauty products that includes makeup, skincare, creams, etc. Consider speaking at conferences and get as involved in the community as possible. This will help gain more visibility for your company and assist in identifying other areas that are still lacking quality products.

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Next Steps

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