Starting a cosmetic company can be very exciting. Whether it’s starting from a home kitchen, working with a private label manufacturer, or even starting a brand-name manufacturing company, there’s the thrill of something new and daring.
However, much of the risk lies in the budget and how it’s used to try to further the company. For any company, the right business decision can be the difference between success and failure. Below, we have come up with three common pitfalls to avoid as a budding cosmetics company:
1. Lack of Budgeting
Creating a new cosmetic line is an investment. Recall the old saying “It takes money to make money.” This statement is as true today as it ever was. In creating a cosmetic line and making it successful, you will need to be sure your budget accounts for product creation, safety testing and marketing materials, etc. Underestimating the initial costs of a new cosmetic company is a common pitfall and a devastating one.
2. No Marketing Niche
Many companies just starting out with a new product line believe that everyone will want it and try to market it to everyone. Due to the mass variety of cosmetic and beauty products on the market today, and having to compete with the large well established cosmetic companies, it is near impossible for a small company to compete even for large segments of the market, much less the entire market. As a new cosmetic company, it is vital that you find a niche within the market that you want to appeal to, such as consumers with a particular type of hair or skin type. Narrowing your market to a target group of people who will most likely want your product will help you minimize your advertisement budget and maximize your sales within your niche.
3. No Safety Testing
When attempting to place cosmetic products on the market for the first time, one of the most important things a new cosmetic company can do is safety testing. Of course, the biggest reason companies choose not to is the initial cost of the testing. Sending products to a lab is rarely inexpensive and many companies have not budgeted for the testing. Money has already been spent on ingredients, formulation, manufacturing, packaging, and logistics. With all of that, the first corner companies try to cut is the testing. This has the potential to become much more detrimental to the company than going over budget to to ensure the safety of the cosmetics. While the FDA does not require pre-approval prior to marketing cosmetics, they do inspect and regulate cosmetics post-market and proof of testing will be required. Some examples of how the FDA regulates and reprimands companies that fail to ensure the safety of their products can be found here in Cosmetic Contamination Cases. It’s always better for a new company to have the security of knowing their products are safe through proper testing in a reputable lab than to assume the products are safe and suffering potentially crippling repercussions later.
While there are many other pitfalls to avoid as a new cosmetic company, these are are some key pitfalls to avoid when attempting to develop a healthy, thriving business geared toward a profitable future. The excitement of starting a new company always comes with the risk and fear of loss. Starting any sort of new financial movement requires careful consideration and planning prior to creation and fearless determination during the youth of the idea. With this, the tools to success have already been laid out and what is left is the potential of a great idea becoming a reality.
