You will see hundreds of skin care videos as soon as you open TikTok or Instagram. Thanks to influencers and other advocates of skincare, this industry is blooming! And people looking for business ideas might wonder- Is Skin Care business profitable?
With a market size of more than $56 billion and a projected growth rate of 2.99%, this might actually be a good time to get into this business.
So if you are willing to find out the investment, profit margin, industry outlook, and other key details of starting a skincare business, then make sure to stick to this guide till the end.
Skin Care Industry Outlook
The skin care industry is booming thanks to influencers and social media trends that have played a huge part in creating the importance of skincare in people’s minds.
Be it chemical exfoliators or moisturizers with ingredients like Niacinamide, hyaluronic acid, etc., customers are willing to spend on products that give them the expected results. This opens room for entrepreneurs to earn lucrative income by starting their own skincare business.
In fact, according to Statistica, the skincare market in the United States is valued at $20 billion U.S. dollars and is expected to grow by 2.99% by 2028.
As such, this might be a great time to get into this business and make the most out of this opportunity.
Why Is The Skincare Industry Booming?
What Does It Take To Get Into The Skin Care Business?
Getting into the skincare business can be exhilarating, especially if that is something that you are personally passionate about.
However, for getting into something as sensitive as skincare, you not only need research but also knowledge of how things work.
Then there are, of course, huge costs associated with starting this business. Legal formalities in obtaining the necessary license as per your state requirement are some other key things that you will have to figure out.
Feeling overwhelmed by this? Don’t worry, and keep on reading as we simplify this brilliant business idea for you.
How Much Do You Need To Start a Skin Care Business?
First things first, starting a skincare business undoubtly requires money. Let us have a look at the breakdown of some expenses that you will have to bear at all cost:
But for you to earn this much money, you need to spend some to start your skincare business:
|Licenses and permits
|Marketing and advertising
The cost of starting a skincare business can vary depending on what cosmetics you are selling, inventory cost, location, etc. As you can see from the table above, you will need anywhere between $2,000 – $20,000 to start your skincare business.
Note: The table above shows an estimate, the actual cost might be more or less than this.
Most Demanded Skin Care Products
Since you are planning to start a skincare business, it might be good for you to find out what kind of skincare products people buy the most. Here’s a list:
- Hand cream: 141%
- Lip care: 98%
- Face tools: 83%
- Mist: 81%
- Moisturizer: 77%
Now that you know the most demanded items in the skincare industry. You can start by selling or focusing on one or more of these products initially. And diversify as you grow your business over time.
Pros and Cons of Starting a Skin Care Business
Pros of skincare business
- Can sell products online and scale your business
- Skincare ingredients are readily available
- Good profit margin
- High-in-demand business
- Can start small and diversify as your business grows
Cons of skincare business
- High start-up cost
- Building trust as a skincare brand takes time
What is the Profit Margin in Skin Care Business?
While the exact profit margin one can enjoy depends on factors such as industry benchmark, product range, pricing, business size, etc., generally, the Skincare business offers an opportunity to earn a healthy income.
How Much Can You Make From a Skin Care Business?
The revenue you generate from your skincare business will largely depend on your production and capacity to generate sales.
So, for example, the average per-unit price of producing facial products is $9. So, let’s say if you are able to sell 200 units in a week for the next one or two years, then you can generate $90,000 or more annually in revenue. And with a profit margin of 60%, you get to make a profit of $55,000 annually on this.
As your brand value increases, you might be able to sell, let’s say, 500 units a week. But with increased production costs, your profit margin might come down to 40%.
Even so, you would generate $230,000 in annual profits and take away a tidy profit of nearly $92,000. So, the money you make as a skincare business owner will largely vary and depend on a lot of things.
On average, however, most skincare owners make $50,000 – $200,000 in revenue annually during the first few years of business. With more time and brand value, your revenue and profit would considerably increase.
Is Skin Care Business Profitable In 2024?
Yes, the Skincare business is extremely profitable, with business owners enjoying profit margins of as much as 60% and earning $50,000 – $200,000 in annual revenue in just the first few years of business.
If you are able to create a strong brand image and have a solid marketing and business plan, then no one can stop you from succeeding in this business.
In the skincare business, everything comes down to building trust by offering products that actually work, and once you have won the hearts of consumers, they will bring repeated business to you.
How To Start A Skin Care Business? Step-By-Step Guide!
If you are serious about starting your skincare business, then here’s a step-by-step guide for you to get started:
Step 1: Identify if this business is right for you
The first and foremost thing to consider is to identify if this business is right for you. We have already shared the start-up cost, profits, and pros and cons of this business above; that should give you an idea. Let us look at some more key facts that will help you further:
Trends and challenges
Trends in the skincare industry include:
- There is a rise in awareness about grooming products, even for men.
- Rising demand for organic, sustainable, and herbal skincare products.
- There is a rising demand for full-fledged skincare products that can be incorporated into a routine.
Challenges in the skincare industry include:
- High level of competition.
- Problems with the supply chain.
- Associated health risks due to prolonged exposure.
Consumer spending Pattern
- Average consumer spending: In the U.S., consumers spend $323 a year on skincare products on average.
- Potential customers: Consumers aged 18 to 24 or Gen Z shoppers are the biggest shoppers of skincare products. However, with rising awareness, people of all age groups and genders are getting into skincare.
Step 2: Come up with a Plan
Once you have done the initial research and figured out if this business is for you, now comes identifying the why, what, and who of your business.
What type of products can you sell?
There is a wide range of skincare items available on the market today. Identify which ones you want to sell first. This could include:
- Face Oil
- Face Wash
- Eye Cream
- Face Mask
- Anti-Wrinkle Creams
Who? Identify your target market
As mentioned earlier, Gen Z is the most extensive customer base of skincare business owners. So you can choose to target them or women between the age of 18-60. Or you can also target just males since there is a rise in demand for male skincare products as well.
Where? Think about your business location
While starting out, you can sell skincare products online to save on additional expenses. But you will need a storefront as your business grows. When that happens, you will need to find a commercial space. For this, choose a location which is:
- Centrally located
- Has the influx of your target audience
- Has natural light with good ventilation
- Offers flexible lease options
- Can be renovated or repaired easily
Step 3: Think of a Skincare business name
The next step is to think about a business name for your skincare brand. Remember, a good brand name should represent your business and should be short and unique so that people can remember it easily.
Once you come up with a name, do not forget to get your brand name patent, or this might cause copyright issues in the future.
Step 4: Form a Skincare Business Plan
A business plan helps keep you focused and gives you a pathway to follow, which is why it is very important to prepare a business plan. Ideally, this should include:
- Executive Summary
- Business Overview
- Market Analysis
- Product and Services
- Competitive Analysis
- Management Team
- Sales and Marketing
- Operations Plan
- Financial Plan
Step 5: Business Registration
Business registration is a very crucial step. It’s the prerequisite to raising capital, paying taxes, opening a bank account, etc., and getting your business up and running.
Where should you register?
Your business registration location is important as it affects your legal requirements, taxes, and revenue. You might want to register your business in your state, but if you are planning to expand or move, then you can consider other options.
Which business structure should you choose?
While registering for your skincare business, you will be required to choose a business structure among the following:
The legal structure you choose among these will directly affect the way you work, your income, taxes, liabilities, etc., so make sure you understand all the options properly and choose the one that fits you the most.
Step 6: Register for Taxes
You will need an Employer Identification Number or EIN before paying your taxes. You can visit the IRS website to obtain an EIN number and learn more about the process.
Step 7: Obtain Skincare Business Licenses and Permits
You are required to obtain a number of licenses and permits to start a skincare business legally. Here’s the list:
- Esthetician license: If you offer skin care services.
- Cosmetology license: If you plan on applying makeup on your customers.
- Manufacturer license: If you plan on manufacturing your own skincare items.
For further details on the rules, regulations, and licenses required for the skincare business, you can read this FDA fact sheet.
What are some other legal requirements for starting a skincare business?
Federal regulations, permits, and licenses associated with starting your business include:
- Obtaining health licenses and permits from the Occupational Safety and Health Administration (OSHA)
- Taking care of trademarks, patents, copyrights, and other intellectual properties of your business.
- Doing business as (DBA).
- Complying with FDA and Food and Cosmetics Act.
- State-specific licenses and permissions.
Step 8: Getting Business Insurance
Assuming you and your business are immortal is one rooky mistake that business owners make.
You can do everything right, but ignoring business insurance could be deadly for your business. Business insurance saves you from unexpected accidents or costs that you may face during the course of your business.
Here are the types of insurance you must consider:
- General liability
- Business Property
- Worker’s compensation
- Equipment Breakdown Insurance
- Commercial auto
- Business owner’s policy (BOP)
- Professional liability
Once you have taken care of these key steps, its time to build a team if needed, develop a marketing plan, and launch your business.
What Are the Regional Variation in Income Earned By Skincare Business Owners?
When it comes to the income of skincare business owners, regional variation exists. Factors such as location, income variation, competition, consumer preferences, etc., all affect the profits one may make in this industry. For example:
- Affluent Areas: Those living and selling skincare in affluent areas or markets can price their products higher and make more money than those selling these products in less affluent areas.
- Rural Vs. Urban Areas: Again, skincare businesses running in dense urban areas might be able to make more and have a larger customer base than a business running in rural areas.
- Competition: Different areas may have different levels of competition. For example, someone running a skincare business in Korea might face extreme competition as compared to someone starting a business in the U.S.
Franchise Vs. Independent Skincare Business
Well, both franchise and independent business format have their own pros and cons. The best way to find out which route you should take is by comparing these pros and cons and identifying which business model you would like to work in.
In a franchise, you will largely benefit from the existing brand image and customer base, but you won’t take home all the profit. Royalty, investment, and other fees would take up some of the profits you made.
If you choose to start an independent skincare business, however, then you would get to set your own terms and work at your convenience. Not to mention, you would be able to take home all the profit that you have made.
However, to take your business to that level, you will need to work a lot on creating a brand image and marketing your business.
In conclusion, the earnings of a skincare business owner depends on multiple factors. And one thing that you will need the most in order to succeed is solid marketing and patience.
In the guide above, we have shared the start-up cost, profit margins, and legal requirements of starting a skincare business. Make sure you go through everything to get started with ease.
We hope you found your answer to Is Skin Care Business Profitable?- in this guide.
Is it difficult to start a skincare business?
Starting a skincare business can be difficult. However, with proper planning, patience, and hard work, you can become a successful skincare business owner.
How long before I launch my skincare line?
If you focus on a single product and make it a hero, then you might be able to start your skincare business early. However, if you plan on launching multiple products, then starting a skincare business could take 3-6 months.
What is the most profitable venture in the beauty industry?
Manufacturing and creating your own cosmetic line is the most lucrative venture in the beauty industry.
Is skincare market saturated?
The skincare market is currently saturated. So, in order to distinguish yourself, you have to come up with something unique or different. You can also try targeting men’s beauty as competition there is comparatively low.
What is the latest skincare trend in 2024?
Intensive body care and not just face care are the latest skincare trends in 2024.