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 step guide to starting your makeup business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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 long it will take you to break even?
- 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 makeup business?
If your business plan includes starting a makeup line from scratch, you will need to invest a great deal of time and money, before ever opening your doors to customers. Industry leaders suggest planning for nine to eighteen months, just to develop your makeup line.
In addition, you’ll need to budget for the following:
- Storefront and/or factory locations - malls, kiosks, and high-end plazas are an affordable option
- Lighting for your establishment
- Makeup accessories - mirrors, sponges, and brushes
- Display cases
- POS and business management system/software
- Logo and trademark design
- Advertising and marketing material
If you have a vision for a makeup product, Sephora offers entrepreneurs a unique opportunity to turn their vision into reality. Grants and funding through this program could help offset some of these initial costs.
Experienced makeup professionals report an initial budget of anywhere from $75,000 to $200,000, depending upon the specifics of your business plan.
What are the ongoing expenses for a makeup business?
The average makeup business’ largest operating expenses are payroll and costs associated with leased space.
Additional expenses include:
- Stocking inventory
- Manufacturing of inventory (if applicable)
- Marketing strategy and related advertising investments
- Education, travel, and market research
Annual expenses vary, depending upon location and size of product line.
Who is the target market?
Marketing efforts should target specific demographics. Learn who would benefit most from your products, their specific needs, and work to define what sets you apart from the competition.
A few demographics to consider:
- Actors and actresses
- Local broadcasters
- Cheerleaders and gymnasts
- Men and women of various ages - men represent a growing market that is largely untapped at the moment
- Makeup artists and consultants
How does a makeup business make money?
A makeup business generates revenue from either the individual sale or wholesale distribution of their products.
How much can you charge customers?
Beauty products are typically sold by the unit and vary in price. Low-end cosmetic lines have products starting at $5, while high-end items sell for upwards of $150.
How much profit can a makeup business make?
Profit margins for this industry average 40%, with some running as high as 80%. An average small beauty line can realize a profit of $35,000 to $70,000 annually, while larger companies are reporting profits in the multi-millions.
How can you make your business more profitable?
Makeup entrepreneurs have reported success implementing the following strategies:
- Host a makeup or skincare clinic, specifically geared towards your target audience(s).
- Offer makeup artist services.
- Get involved in photo shoots with local and national magazines.
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.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your makeup business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
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?.
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.
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.
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.
Federal Business Licensing Requirements
The U.S. Food & Drug Administration has set regulated standards for the production and sale of cosmetics. This FDA website outlines the federal cosmetics regulations. Review and understand these regulations to ensure that your makeup business is in line with all federal regulations.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a makeup business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
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.
How to promote & market a makeup business
Creating brand awareness takes time, creativity, and dedication. Carefully consider your logo and ensure it properly represents your product line. Many makeup lines have found success attending beauty-related events, such as industry organized seminars and expos. This is a wonderful way to network, conduct research, and educate consumers on your makeup line. Partner with local wedding planners, hair stylists, makeup artists, theatre groups, and photographers. They are often in the market for new products that meet their evolving demands.
Set aside a portion of your monthly budget to advertise in relevant magazines and websites. Additionally, online tools, such as business directories, social media platforms, and Google AdWords, will assist in identifying the needs of your target audience.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Recent studies indicate that the biggest reasons customers shop for a new makeup line is directly related to a drop in product quality and poor customer service. To ensure customer retention, follow up with clients and ask for their input. Provide special offers or free products on birthdays or significant life events. This affords you the opportunity to test out new products on customers and helps build a loyal customer base.
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.
Start A Makeup Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
The business savvy entrepreneur who is passionate about experimenting with cosmetics will find success in this industry. As the owner of a makeup business, your role is to help others turn their visions into a reality and feel more positive about their appearance.
What happens during a typical day at a makeup business?
This is largely dependent upon how you decide to structure your business. Whether you open a brick and mortar or ship products to others for distribution/sale, some day-to-day activities will remain the same:
- Test new products and collect feedback from current and prospective customers
- Fill makeup orders and ship to destination
- Advise customers on personal makeup and skincare needs, helping them achieve their desired look
- Network within community/industry and market your business
- Contact suppliers
- Conduct market research and keep up with the latest trends
- Regular sales team meetings to discuss current business trends and ongoing needs
- Administrative duties
If a makeup store is part of your vision, there are a few additional activities to consider:
- You and your staff will take a more hands-on approach with customers.
- Shelves must be fully stocked and reorders should be placed regularly.
- Facility must be maintained and kept clean.
What are some skills and experiences that will help you build a successful makeup business?
Real world experience is critical to the success of your business. Before establishing your company, consider working at a beauty store. Study each department, the customers' needs, the distribution chain, marketing, and staffing. There is a lot of work that goes into running a company like this. Learn from the successes and failures of your future competitors. Your education, however, shouldn’t stop there. Get to know the various products and lines on the market. Experiment with the merchandise and get creative.
To lead a makeup business to success, one should possess many of the qualities that make a great leader. Strong communication and organizational skills are critical. Attention to detail and the ability to delegate will also prove beneficial. The Professional Beauty Association offers membership resources to assist start-ups in realizing long-term success.
What is the growth potential for a makeup business?
Growing 6% in 2016, the beauty industry consistently realizes significant growth, year after year. The makeup class was the largest contributor, contributing 82% of the industry’s overall growth. While brick and mortar establishments offer the highest earning potential, online beauty sales have grown at a rate of 20% annually. This industry shows no signs of slowing down and offers ample opportunities for the dedicated and innovative entrepreneur.
TRUiC's YouTube Channel
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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 makeup business?
Industry leaders offer the following advice to those considering starting a makeup business:
- Success in this industry requires careful planning, hard work, and personal time. Do not expect to be an overnight success.
- Target your marketing efforts.
- Pay attention to the details.
- Research continuously to remain on top of the latest trends.
- Network, network, network.
How and when to build a team
Education and training are of the utmost importance in this field. With payroll representing one of your largest expenses, overstaffing stands to eat into your profit margins, slowing down the success of your company. When constructing your business plan, consider short and long-term goals. This will help you determine the size of your workforce and the timeline of when new members should be added to your team.