How To Start a Lipstick Business

by Temiloluwa Alagbe
181 views 7 minutes read
A lipstick line.

The beauty industry is very prosperous and lipsticks are its backbone. Starting a lipstick business is the perfect place to start if you are business-savvy with a passion for make-up. With the various shades and lipstick colours in existence, the lipstick industry provides an avenue to express your creativity while earning you a profit. This comprehensive guide to starting a lipstick business is the first step in the right direction on your journey to business success. Keep reading!

What We Covered In This Article

Overview of The Lipstick Industry

The lipstick industry is vibrant and prosperous with an estimated market value of $9.57 billion as of 2021 and a compound annual growth rate of 5.5%. The major factors responsible for the industry’s rapid growth are the rise in disposable income and the growing influence of social media. Some industry trends include:

  • Vegan-ingredient lipsticks with eco-friendly packaging.
  • Inclusive and innovative lipstick formulas.
  • Direct sales from producer to consumer.

By 2030, the lipstick industry is projected to be worth $14.68 billion.

Is it Profitable to Start a Lipstick Business?

The lipstick business is generally profitable to start. On average, you can expect to have a 20% – 40% profit margin and the average annual income ranges from $100,000 – $150,000. However, there’s really no limit to how much your business can make as there are various factors that determine the profitability of your business.

How Much Does it Cost to Start a Lipstick Line?

The average cost of starting a lipstick line ranges from $100,000 – $200,000. However, you should note that various factors can influence your start-up costs, so there’s no one-size-fits-all answer.

Pros and Cons of The Lipstick Business

Pros:

  • High profit margins.
  • Relatively low start-up costs.
  • Direct relations with the consumers.
  • Large and growing industry.

Cons:

  • Highly competitive.
  • Strict regulatory laws.
  • Trend-driven.

How to Make Lipstick to Sell

There are two major ways of obtaining your products for your lipstick business and they include:

  • Custom formulation.
  • Private label.

1. Private Label

Private labelling involves putting your logo and stamp of ownership on lipstick products manufactured by a different company. It typically involves getting into a partnership with a manufacturer where they permit you to package and brand their products as yours. Sometimes, they even allow a slight change in the product’s formulation. Many manufacturers often set a minimum order quantity so you need to be prepared for that.

Selecting the right manufacturer is essential to your business’ success as their quality standards are yours. Choosing a low-quality product supplier can have adverse effects on your business. For this reason, you must select the right manufacturer to supply you with lipsticks for your business. Here are a few manufacturer suggestions that you might find helpful:

i) Albea Cosmetics

Albea Cosmetics is a leading private label manufacturer offering various private label services. With branches in different parts of the world, Albea cosmetics sells various cosmetic products and creative packaging.

ii) Lady Burd

Lady Burd is a private label manufacturer with their headquarters in New York and a branch in Florida. They specialize in selling cosmetics products of any kind to other businesses for branding.

iii) Audrey Morris Cosmetics

Audrey Morris Cosmetics sells high-quality cosmetics products while also offering private label services. The minimum order requirement for this private label manufacturer is $200 worth of products and they also offer packaging services.

iv) KBL Cosmetics

KBL Cosmetics sells various cosmetic products and packaging. Their headquarters is located in California and their opening hours are from 8:00AM – 5:00PM so you can either walk into their office or place your order online.

v) Mineral Mine Cosmetics

Mineral Mine Cosmetics is a private label manufacturer with a reputation for maintaining their product quality. They also sell a variety of cosmetics products and packaging to other cosmetics businesses.

2. Custom formulation

Custom formulation involves manufacturing your lipstick products yourself. It includes researching ingredients and testing recipes and products. In this method, you are responsible for the manufacturing and packaging of your lipstick products. In the next section of this article, we discuss how you can manufacture lipstick products in the comfort of your home.

How to Make Lipstick at Home

Yes, it is very possible to produce lipsticks for sale in your home and here’s how. We’ll start with listing the required ingredients.

  • Beeswax.
  • Shea butter.
  • Coconut oil.
  • Jojoba oil.
  • Cocoa powder or red food colouring (depending on your desired shade)

Now, here’s the recipe:

  1. Put the beeswax, shea butter and coconut oil in a microwave-safe boil and melt in a microwave while occasionally stirring the mixture.
  2. Allow to cool for a few minutes (should not exceed 3 minutes as you only need it to cool slightly).
  3. Stir in the jojoba oil and cocoa powder or food colouring.
  4. Using a syringe or pipette, package your fresh batch of lipstick into lipstick tubes.
  5. Leave to cool. You can use a refrigerator to speed up the process.

You can adjust the shades by adjusting the quantity of cocoa powder or food colouring you use in the preparation process. You can also add glitter for a bit of pizzazz. In any case, you can get creative with the recipe!

Create Your Own Matte Lipstick Line

Because matte lipstick is one of the most demanded lipstick products, it may be an essential addition to your lipstick line. You can either get matte lipstick products for your business from a private label manufacturer or produce them yourself. Here’s a DIY matte lipstick recipe to make things easier for you.

Ingredients:

  • Beeswax.
  • Shea butter.
  • Coconut oil.
  • Kaolin clay.
  • Eyeshadow (eyeshadow colour should be in your desired shade).

The Recipe:

  1. Put the beeswax, shea butter, and coconut oil in a microwave-safe bowl and melt slowly while occasionally stirring.
  2. Slowly add kaolin clay and stir thoroughly. This produces the mattifying effect.
  3. Add pigmentation (eye shadow) at intervals and stir until the desired shade is achieved.
  4. Using a syringe, package your freshly made lipstick into lipstick tubes.
  5. Leave to solidify at room temperature or use a refrigerator to speed up the process.

To make liquid matte lipstick, only a few changes need to be made and these changes include:

  • Substituting eyeshadow for liquid pigmentation (like food colouring).
  • Increasing oil content to keep the lipstick liquid at room temperature.

Whether you are manufacturing your lipsticks at home or in a factory, you must ensure that your manufacturing process obeys all the safety rules in your locality and tallies with the city’s GMP laws.

Cost of Making Lipstick

Here’s a breakdown of how much it would cost to produce a single tube of lipstick.

Regulatory costs$0.20 – $0.50
Ingredients$0.50 – $1.00
Labour costs$0.25 – $1.00
Packaging$0.50 – $1.00
Total$1.45 – $3.50
Cost estimate for the production of one lipstick tube

From this table, we can deduce that producing 20 units of lipstick will cost at least $29 and $70 at most. For 50 units, production costs will be at least $72.50 and $175.00 at most and for 1,000 units you should expect to spend between $1,450 – $3,500.

Cost of Starting a Lipstick Business

Provided below is a breakdown of the cost of starting a lipstick business.

1. Legal costs

If you want to start a lipstick business, you must go through a series of registrations and get the necessary licenses and permits. Some of the licenses you would need include:

i) Business license

The most important license you need is a business license as without one, you cannot legally own a business. The cost and application process for a business license varies, depending on your location, but it typically involves filling out a form and paying applicable fees that can range from $50 – $500.

ii) Trade license

A trade license is important for your business as it proves your business’ credibility and signifies professionalism. You may also require a trade license to gain access to certain marketplaces and trade shows. Generally, getting a trade license involves obtaining a tax identification number for your business, submitting an application, and paying applicable fees. The cost estimate for getting a trade license ranges from $100 – $300.

iii) Cosmetic product registration

If you plan to manufacture your lipstick products, you will need to register your business with the concerned regulatory body in your country. The process and cost of registering your cosmetic business are highly dependent on your location.

iv) Good Manufacturing Practices (GMP) certification

You will also need a GMP certificate to manufacture your lipstick. This is important because the certificate is a testament that your products are up to standard. To get a GMP certificate, you need to first research GMP rules, principles, and guidelines and ensure that your business is not in contradiction with any of them. After that, you can apply and schedule an inspection after paying the necessary fees. The cost of getting GMP certification depends on where your business is based.

In essence, you should expect to spend between $1,000 – $10,000 on fulfilling all your legal obligations as a business owner.

2. Workspace costs

This is an estimate of how much you should expect to spend on setting up a workspace. Your workspace could be a home office or a factory. Either way, you need a space where you receive supplies, produce lipstick, and fulfill orders. The cost of getting a workspace for your business is dependent on various factors but you should expect to spend between $100,000 – $300,000 on building expenses.

3. Raw material and equipment costs

As long as you intend to be the producer of the lipstick products you sell, you must factor in equipment and raw material costs. Getting enough raw materials for your business will cost between $1,000 – $10,000, depending on your production scale and the cost of equipment ranges from $10,000 – $50,000. In essence, the total cost of getting raw materials and equipment for your lipstick business range from $15,000 – $60,000.

4. Product development costs

To ensure the safety and effectiveness of your products, you need to research formulas and test your products repeatedly before releasing them for sale. Product development costs range from $5,000 – $10,000.

5. Inventory costs

Once you have finalized your product, you need to build an inventory. Inventory building is a recurring expense, however, you should expect to spend between $10,000 – $40,000 on building your first inventory.

6. Labour costs

Depending on the size of your business, you may need to hire staff to help you out. The cost of hiring staff also depends on the size of your business. Generally, you are likely to spend between $50,000 – $300,000 on building a team for your business.

7. Marketing costs

You also need to consider marketing costs when budgeting for your business. Factors like location, target market’s buying habits, and industry trends affect the cost of promotion and marketing. However, on average, promotion and marketing costs range from $5,000 – $ 30,000.

In summary, the total start-up cost estimate for a lipstick business ranges from $20,000 – $200,000. Depending on the size and location of your business, you can either spend more or less.

How to Start a Lipstick Business

1. Choose a business name

The first thing to do after deciding to go into the lipstick business is to name your business. With a business name, you define your brand and it brings your idea to life. Upon naming your business, you also need to create a brand logo and come up with a catchy brand slogan.

2. Conduct market research

After selecting a name, the next thing to do is to understand your target market and this can be accomplished with market research. By conducting market research, you have a clear idea of what you need to do to lead your business to success. Market research lets you know what your target market needs, what they have, how much they are willing to pay for what they need, and the best ways to reach your target market. This information will lead you to the right products to manufacture, the people to sell them to, and right prices to set. In summary, conducting market research helps you come up with the perfect business strategy.

3. Choose a business location

Pick out a location for business operations. You can build your office space, rent one, or simply manufacture your products from home. Whatever the case is, you must have a designated area for all business-related activities to take place.

4. Select a production style

You need to decide if you want to produce your lipstick products yourself or partner with a private label manufacturer. You can experiment with both options before sticking to the one that works best for you and your business.

5. Source for suppliers

If you have decided to stick with private label manufacturing, you have to source for trustworthy product suppliers. If you have chosen to self-manufacture your lipstick products, you need trustworthy ingredient suppliers. Either way, you need suppliers that provide quality, convenience, and affordability.

6. Draft a business plan

Create a more vivid picture of your plans for your business by drafting a business plan. A business plan is a document that details the current state of your business, your plans for growth, and the predicted state of your business after implementing those plans. By drafting a business plan, your intentions for your business become more than just a nice idea. This is why it is important to draft an excellent business plan.

7. Register your business

After writing out your business plan, you have to register your business. Now that you have meticulously planned your business, you need legal approval to move forward with your plans. The legal obligations you have to fulfill are mostly dependent on the size of your business, your business structure, and your business location.

8. Begin product development

Once your business is registered, you can begin testing out lipstick recipes and formulas. After shortlisting the various recipes and ingredients that you may have tested out, you must send them to a laboratory for safety and quality tests. Once the products have been tested and declared safe for human consumption, you can manufacture more and begin sales.

9. Hire staff

Because there’s only so much one person can handle, you need to hire some assistance. If you are operating a small-scale lipstick business, you may not need to hire staff. However, for a large-scale business, you need to hire skilled labour to reduce your workload. You must bear in mind that your business is only as good as its staff and for this reason, you must be careful when selecting staff to hire.

10. Implement marketing strategies

Your business wheels are now in motion and all you need to do is inform people about your business. This is where your market research results and business plan come in handy. Your market research results will let you know the best way to reach your target market and your business plan will help you figure out how to reach your desired audience. Now, all you need to do is implement the advertisement strategies that you have devised.

How to Start an Online/Home-Based Lipstick Business

The processes involved in starting an online lipstick business are more or less the same as starting a regular one. The major difference lies in the need for an e-commerce store. You also need to pay more attention to digital marketing strategies as most of your customers will come from the online world.

Marketing Tips for Lipstick Businesses

Here are some tips that will guide you to success in the lipstick industry.

1. Pay attention to digital marketing strategies

It is always a great idea to not ignore the online world when starting a lipstick business. Because of the increasing global internet penetration rate, the digital world plays an important role in business success. Many businesses get a lot of customers by implementing effective digital marketing strategies. Some of the most effective digital marketing strategies include:

  • Search Engine Optimization (SEO).
  • Blogging.
  • Video content creation.
  • Social media marketing.

We will also recommend having an e-commerce store whether you have a physical store or not.

2. Build a user-friendly website

Your online store should be easy to navigate, creating no problems for users as they go through your website. In addition to being user-friendly, your website should be aesthetically pleasing too. Your website should make users want to go through it because the more time a user spends on your website, the more likely they are to turn into a customer. The quality of your website plays a vital role in increasing your customer base.

3. Don’t compromise on quality

Your products and customer service should be of high quality as this is what will give you returning customers. Offering excellent products with terrible customer service will cost you some customers as would offering low-quality products with great customer service. To boost your customer base and business reputation, you should never compromise on quality.

4. Get people talking

Utilize the word-of-mouth strategy. As important as digital marketing strategies are, you should not forget to talk about your business at every chance you get. If you are constantly mentioning or referencing your business, not only will you pique people’s interest, but they will also find themselves referencing your business.

5. Keep up with industry trends

The key to business success is satisfying consumer demands and it is nearly impossible to satisfy these demands if you don’t know them. For this reason, you must constantly be aware of consumer preferences. Stay up-to-date with industry trends and keep up with any changes.

Best Countries to Start a Lipstick Business

1. France

France is a sophisticated country with a reputation for high-quality cosmetic products. For this reason, it is one of the best countries to start a lipstick business. In addition to this, the country provides tax incentives for companies researching new products.

2. Japan

Japan is another country with a culture deeply rooted in cosmetics and because of this, the Japanese cosmetics market is ranked the third largest global market. The market also demonstrates an immense growth potential. In addition to having a large cosmetics market, Japanese customers are also known to have a high purchasing power.

3. Italy

Italy has a reputation for elegance and as such, products from Italy are presumed to be luxurious and of high quality. Italian consumers also have a high purchasing power and the make-up industry in the country is promising. In addition to a growing market and high spending power, the country also offers skilled labour. Because Italians embrace effortless sophistication, we recommend that you aim for more natural-looking lipstick shades.

4. South Korea

South Korea is a world leader in innovative cosmetics products and consequently, it makes the product development process easier. The country’s high internet penetration rate fosters the growth of your business as digital marketing is extremely helpful to growing a lipstick business. South Korean customers have a preference for bolder and more daring lipstick shades so prioritizing those shades will boost your business’ growth in the country.

5. The United States

Because of the country’s high population, the United States is an excellent place to start a lipstick business. The large population in the United States also offers the chance to diversify products. Besides, the advantage of a high population, the high internet penetration rate of the US gives your business an edge. The United States can also supply you with affordable and highly skilled labour.

Examples of Successful Lipstick Businesses

1. MAC Cosmetics

MAC Cosmetics was founded in 1984 and is headquartered in New York, USA. The cosmetics brand is known for its inclusiveness and diversity, creating bold lipstick shades for a diverse group of people.

2. L’Oreal

L’Oreal is a cosmetics brand that was founded in 1909 by Eugene Schuller and is globally recognized to date. Since its establishment, the brand has launched many successful lipstick lines with some of the most notable ones being L’Oreal Paris and Maybelline.

3. Kiko Milano

Kiko Milano was founded in 1828 in Italy but they now have stores in different parts of the world. The cosmetics brand is known for its Smart Colour Lipstick because of its rich colour, creamy texture, and long-lasting wear.

4. Shiseido

Shiseido is a Japanese make-up brand with branches in various countries of the world. It was founded in 1872 and is known for its unique and inclusive lipstick lines.

5. Fenty Beauty

Fenty Beauty is a cosmetics brand founded by the singer Rihanna in 2017. The brand is known for its diverse and inclusive lipstick shades. Because of this, they have launched many successful lipstick lines since their founding.

Conclusion

The lipstick business is a great place to start for aspiring cosmetics business moguls. Many successful cosmetic brands started with making lipsticks for sale. In addition to being a great starting point, the lipstick business is also very profitable. However, because of its profitability, it can get very competitive but you have no cause for concern. Why? Because you have read through our article and found out all there is to know about starting a lipstick business. For this reason, we are confident in your ability to create a very successful business for yourself. Now, all you need to do is put the information you have obtained here to good use. We’re rooting for you, budding entrepreneur!

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