Start a cannabis beauty products business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your cannabis beauty products business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
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 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.
Who 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.
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.
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.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Cannabis Beauty Products Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your cannabis beauty products business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
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
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
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.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
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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.
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.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Cannabis Beauty Products Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
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.”
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
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 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 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.
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Take the Next Step
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.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
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.
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.