The cosmetic business umbrella has three vital areas. They include color cosmetics, aka makeup, fragrance, and skincare. Although these areas are closely related, they fall under different consumer personal cosmetic routines. In this blog, we will discuss the proper way to develop your cosmetic business plan. Irrespective of the type of cosmetic business you want to start, this foolproof guide may just increase your chances of success.
Before we get started, how big is the cosmetic industry? In 2020, the value of the trade stood at 483 Billion USD. The numbers escalated steeply in 2021, bringing the value of the cosmetic industry at approximately 511 Billion USD. Better still, the annual compound growth rate of the sector stands at 4.75%, meaning that the value of the cosmetic industry could rise to 716 Billion USD by 2025.
- Cosmetic Industry Consumer Trends
- Is A Cosmetic Business Plan Necessary?
- Essentials Of Writing A Cosmetics Business Plan
Cosmetic Industry Consumer Trends
The consumer trends in the cosmetic industry are nothing short of heartwarming. With pop culture and good grooming being an in-thing in the current fashion landscape, those in the cosmetic business are making fortunes. Generally, today’s consumers are open to spending a little more just to get high-quality products.
Moreover, the purchasing power of emerging nations is a force to reckon. Cosmetics are today more globalized than ever before, making the landscape favorable for international cosmetic companies. Locals in various countries are receptive to buying high-quality products from these companies that are not available locally.
Is A Cosmetic Business Plan Necessary?
As you can tell from the above statistics, cosmetic products have a favourable audience willing to spend what it takes to look their best. Hence, you may be wondering whether developing a cosmetic business plan is worth the effort. Well, it is. Even with a growing demand for cosmetics, you need a plan to expand your exposure and make the most of the serious business opportunities.
Think of your business plan as a vital strategic document that dictates where you should focus your resources, time, and energy. Generally, the program gives you a clear view of the game and what you intend to achieve. The tool will come in handy whenever you need to make crucial decisions that may make or break your venture. For most serious entrepreneurs, a business plan helps ensure that the everyday running of their ventures is as smooth and straightforward as possible.
Essentials Of Writing A Cosmetics Business Plan
Running a business requires you to make strategic moves. The cosmetic venture is no exception. Setting up a detailed strategy and ensuring your cosmetic business plan covers all ground is paramount.
Here are essential components you must include in the plan:
Business Mission and Vision
Your mission statement is the first thing to include in your cosmetic business plan. Think of it this way; the statement will be a navigation tool that gives a story about your plans for the future of your company. Moreover, the statement indicates the purpose of your work, making it simpler to identify your company goals and remain committed to achieving your vision.
Generally, the mission and vision statement is the bedrock of your business. It should play three vital roles, which include:
- Communicate the purpose of your venture
- Give direction to your development strategy
- Identify measurable company objectives you can use to gauge the success of your business strategy
Identify Your Business Niche and Audience
There is a whole world of cosmetic products out there. Consequently, you need to define your unique path into the industry to know your target audience. For instance, if you opt to specialize in good grooming products, the chances are that your target consumers are young people and the business class. That said, it will be easy for you to analyze their likes and preferences. Most importantly, you can study their trends and learn how they shop. This is crucial information you can use to move your venture to the next level.
Once your cosmetic business plan focuses on a specific audience, things will suddenly begin to fall in place. You will now have a good idea about the marketing strategies that are likely to work. In the end, if you choose skincare for seniors as your business niche, you may not want to use marketing strategies that mainly work for the youth.
Choose Your Range Of Products
Again, there is a whole world of beauty products available in the market. For instance, if you focus on natural products as your niche, it makes sense to centre your cosmetic business plan on products that fit well together. Most importantly, these products must attract the attention of your target customers.
Launching one product and exclusively selling it is not all doom. However, you may want to consider a bit of product diversity, especially if you are just getting started. Cross-selling or up-selling products that fall under the same classification may just be a good idea. Remember that according to current consumer trends, people use multiple cosmetics in combination. Focusing on one product alone may have profound financial implications that a young business may not bear.
Cosmetics Business Plan; Know the Competition
The next important step of developing your cosmetic business plan is to identify your competitors. The cosmetic industry is ripping fortunes. Hence it makes sense to know the movers and shakers within your chosen product niche. The idea is to know everything about them. Yes, everything about them. This includes their product range, their prices, marketing strategies, and more. This information will help you decide what to do to remain unique and keep pace with respected names within your line of business.
Develop a Manufacturing Strategy
So, do you intend to produce your unique range of cosmetic products? If you do, you need to have a manufacturing strategy. Typically, there are two options you have. One, you could opt to manufacture the products in person from your lab. Two, you could contract a manufacturer to do the hard work on your behalf. Either way, it is crucial to have a plan that ensures a smooth stream of products into your business.
Each of the two strategies has profound pros and cons. For instance, it’s easy to manage quality assurance when producing your cosmetics from your lab. On the downside, this can be a financially challenging option. On the other hand, working with a manufacturer may be cheaper. In this case, it is essential to plan on vital aspects such as logistics, contractual obligations, and finances. Irrespective of your choice, make sure it works well for your business model and aligns with your mission and vision.
Spruce Up Your Retail Strategy
Here’s the deal, you are likely not to grow to your best potential if you opt to sell directly to your consumers and in person. Even if you are a top-notch digital marketer, expanding your profit margins may be an uphill task if you opt not to outsource. Naturally, it is easier to hit your profit goals when you distribute your stock to retailers and e-stores that match your product niche.
Again, nothing is as important as developing a retail strategy that aligns with your product niche. At this point, you know your targeted customers, your competitors, and most importantly, your chosen range of products. With this in mind, deciding where your cosmetics fit naturally should not be a hurdle. Having a solid retail strategy is an integral part of ensuring the success of your cosmetic business plan.
Cosmetics Business Plan; Keep an Eye on Financing
If your goal is to create a cosmetic business empire, it may not be necessary to have a million dollars in capital. However, having the funds to keep your operations running is as important as having a solid cosmetic business plan. Assuming you already have your capital, the next step is to analyze the financial implications of various essential actions, including your manufacturing and retail strategy. The idea is to have a grip on your funds, and by extension, ensure smooth operations.
There are different ways to finance a business. One, you could opt for a safer option and depend on loans from your friends or family. Two, you could turn to a financial institution such as a bank for the much-needed resources. Three, you may choose to involve investors and split the profits. The essential thing is to have a financial plan that keeps your business doors open without significantly impacting your bottom line.
Develop a Clear and Detailed Financial Prognosis
With a detailed financial prognosis, it should now be easier to get your business up and rolling. Think of it this way, your business may not be “thriving,” but you will have a draft to make your deal attractive to investors. Furthermore, even with no sales, you will have a clear plan of the steps you will take and how you will rip profits. Generally, a financial prognosis will give you a good idea of your brand’s potential.
As the name implies, a financial prognosis is a forecast or rather an opinion beforehand. Ideally, it is a systematic projection of the expected economic trends through financial statements. You need to have some past business financial, cash flow, and fund-flow records that allow you to predict what you can achieve in a future date if you follow a specific cosmetic business plan.
A detailed financial prognosis must include the following elements:
- Pro-forma income statements
- Pro-forma balance sheets
- Business cash budget
There you have it, a detailed guide highlighting the essentials of a cosmetic business plan. We hope that our tips are instrumental in helping you make or upgrade your current strategies. As we part ways, there are three crucial things to remember. First, this is not a standard guide that works for every business. If you make your business plan and fail to bear the intended fruit, all is not lost; develop a personalized plan. Second, mistakes are an essential part of growing as an entrepreneur. They help you identify areas that need improvement. Third, it’s never a bad idea to seek professional assistance from experts in the field, especially once your business starts booming.
If you’re interested in reading up more about successful strategies to market your fragrance business, we’ve got a post right on that. You’ll also find a list of the most profitable, expensive, and successful fragrances sold worldwide. Here’s the link!