The makeup industry is fast growing - around 5% growth per year for the last several years!
In light of this, basically all of the biggest names in the online “influencer” world are now creating and selling their own makeup kits:
Including people like Kylie Jenner, James Charles, and Jeffery Star, just to name a few.
While there are these big name players making massive income (Kylie Jenner became a billionaire at 21 through makeup)...
There still are countless other makeup brands that you’ve never heard of raking in six or even seven figures a year: you can make a killing in the world of makeup!
I'm Ippei, and I'm a master of all things online business, passive income, and local lead generation...
And while there are some hurdles to jump, and a large audience you must fight to convert, starting a makeup business can come with a huge reward.
So without further ado, here are your steps to starting a makeup business in 2021.
How to Start a Makeup Business in 2021
Start a Makeup Business Summary
The makeup industry is growing around 5% growth per year, with notable celebrities starting their own product lines with their massive social media following. Whether you’re into lip kits, foundation, concealer, mascara, or highlighter, if you do things right, you can create a viable brand in the makeup industry today.
Start Up Costs
While this list is not a comprehensive compilation of every you need to start a makeup business, it provides a snapshot of what you need to add into your business plan.
Annual Revenue of Established Cosmetic Business
According to Starter Story, the average annual revenue of a small startup makeup brand was around $90,000.
Profit Margins of Established Cosmetic Business
According to the same story above, the average profit margin for a makeup business was approximately 53% at $4,000 per month.
5 Quick-Start Tips:
Step 1. Know Yourself in the Makeup Market
The first step in starting any kind of business is deciding exactly who you want to be in the marketplace.
This refers to:
Makeup Niche Ideas
So the question then becomes, “Is my eyeliner or highlighter going to be worth $5 per package, or $150?”
There are few considerations that must be accounted for to answer this question honestly.
Firstly, you need to actually provide a higher-quality product, if applicable.
Some products don’t necessarily have much going for them in the quality department…
As long as they are safe to the skin, stay on your face when you need them to, smell fine, and look good, then you have a real product.
But most importantly, you need to justify your cost in the social and aesthetic realm.
If you spend money on marketing that makes your brand the attractive new option, if you pay influencers to promote your products, or if you spend a lot on pretty packaging…
Then you can afford to increase your price.
Perhaps more important than the quality is actually the social perception of a brand.
That being said, it may be safer - and DEFINITELY less expensive to you - to start with a lower product price point.
Maybe not $5 per bottle, but aim for a happy medium.
Then there’s the scope of your business.
Which refers to where you want to go and who you want to be.
Provided you’ve figured out the past three essentials, this should be a fairly simple decision.
Do you want to be a huge business manufacturing thousands of products per year to average consumers…
Or an alternative business with lower production volume, but higher cost for more organic materials?
Step 2. Create Your Business
Now that you know the type of business that you want to run, it’s time to really get started.
Starting a makeup brand can turn into a headache without careful planning….
But fortunately there are resources everywhere to make it much easier!
This being said, it is important to weigh your options and understand industry-specific licensing and permits before getting started.
There are a few key ingredients to a successful - and legal - makeup business that you should prepare for:
Naturally, these are probably the most annoying aspects of starting a business.
After all, they have little to nothing to do with actually selling makeup products…
But they are essential in operating and growing a profitable makeup business.
The last thing you want is to be punished for evading taxes, personally sued, or penalized for not having the proper permissions, right?
Forming Your Business:
Forming your business is the act of registering yourself as an LLC, Corporation, Sole Proprietorship, or any other business entity in your state.
This does involve quite a bit of paperwork, but that can be taken care of for you for a nominal fee through services like LegalZoom or ZenBusiness.
It requires that you pick a business name and an entity type so that you can start to make money legally and protect yourself from certain risks involved with business.
For people starting up a makeup business, LLCs are the most practical business structure.
This is a perfect option because it protects you from being held personally liable should your business be sued (among other things).
As far as the name - get creative!
You don’t need to spend a week figuring out what you want to go by (a DBA can be created later and will allow you to do business under a different name should you come up with another one).
Registering for taxes:
Before selling any products or even formally opening up your business, you need to acquire an EIN number and register yourself for federal and state taxes.
This is simple enough: Registering online with the IRS for an EIN is completely free, and you can use the previously mentioned services like LegalZoom and ZenBusiness if you need help.
Opening a business bank account/credit card:
Despite what people regard as “common knowledge,” you don’t always need to have a credit card for your business or even its own dedicated bank account. But I do highly recommend it.
Although you can hold it off until you’re actually bringing in significant income with higher business expenses…
If you link personal assets to the bank account you do business from, they can be put at risk in a company lawsuit.
Plus, having a business bank account and credit card will Another, make doing your taxes much, much easier at the end of the year.
And getting a credit card early can allow you to build strong business credit and open up larger lines of credit sooner.
Obtaining Permits and Licenses:
The appropriate permits and licenses can be required specifically at your local state level or more broadly at a federal level.
The penalty for operating your business without the proper permissions can leave you with hefty fines, or even being shut down completely…
Or at the very, very worst: in jail.
It simply isn’t worth it to forgo this aspect of your business.
But to start with, you’re going to need a business license.
And if you plan to apply makeup on clients yourself, then you’ll need a cosmetology license.
But if you plan on manufacturing and selling products, then you’ll primarily need a manufacturer’s license.
Licenses and permits vary greatly depending on your specific set of circumstances or location, so do your own research before moving forward!
A good place to start is to give the FDA a call to see what you’ll need and which inspections (if any) you’ll need to pass.
Your Accounting System:
You don’t have to hire a full time accountant or bookkeeper right off the bat.
But you will need to set up the framework for your personal business accounting before you start making money.
This will set you up to outsource your bookkeeping and accounting needs down the road.
Use your business bank account, a Google Sheets document, or a software like QuickBooks, to get started.
You can also browse YouTube for videos on how to do business bookkeeping yourself if you need some pointers.
The key here is to take detailed and accurate notes of your expenses, income, and even your future financial projections.
Now that we have the boring, non-makeup related stuff out of the way…
Let’s talk a little about the makeup industry more specifically, and about how you can maneuver through it to set your new business up for success...
Good luck in advance!
Step 3. Planning It Out
Now that you know the identity of your business, you need to create your business plan.
Come up with one solid plan that is backed by thorough research, and then rely on your wits to deal with challenges as they come.
“Analysis paralysis” as they say can kill a business before it even starts, so don’t get hung up on making your business plan perfect.
The important thing is that you create a solid structure that can help you plan for the future, prevent common business pitfalls, and effectively analyze your chosen market.
You have to consider a few things:
But I’m not just gonna leave you hanging with single-word considerations. Let’s go a bit into each topic listed.
Profits:
This goes back to setting up your business accounting bookkeeping.
Makeup businesses have an average profit margin of 40%, with a range of 25% to 80%.
Keeping up on your accounting can help you to not only reach this number, but potentially even surpass it.
Unfortunately, increasing profit margins is usually best done after you already have established infrastructure and customers.
Some big companies own their own manufacturing plants - this can cost millions of dollars, and is usually attainable for those starting out in the makeup industry.
And other brands profit well off of strategic marketing campaigns.
Although many good strategies are reserved for the high-performing, you can grow through attending trade shows, visiting workshops, and promoting your products to social media influencers.
Production:
If you are just starting out, watch out for minimum order quantities.
A manufacturer’s price point might look low at first glance, but if they require a minimum order quantity of 50,000 products.
It probably won’t be practical for a small startup makeup brand.
When you are dealing with the creation of your product, you must also take into consideration the quality of the factory.
Not every manufacturer will follow the rules…
Yours or the government’s.
It’s best to order samples from several different manufacturers and then weigh the pros and cons of each against each other.
Marketing:
There are plenty of options: social media presence, paid ad campaigns, influencer marketing, writing blog posts, or even affiliate marketing through other online marketers.
But the marketing method that is most effective in this industry is influencer marketing.
You don’t have to be someone like Kylie Jenner, who has 200 million Instagram followers, though.
Reaching out to other social media influencers for a brand deal can gain your business a lot of new business.
Some influencers will require payment for a brand deal, but some smaller influencers will be content with free products from your business!
Like manufacturing, you’ll need to evaluate and weigh your options.
Luckily for you, we have a ton of resources on this site for you to effectively market products, so explore around!
But even with all this planning, no matter how sure you are of yourself, you will deal with significant challenges going forward.
No business plan is perfect.
There are too many variables that are outside of your control.
Pro Tip:
Don’t freak out or stress too much… You need to become resistant to the stress of running a business if you want to grow. View each challenge as an opportunity for growth!
But a strong marketing strategy requires more than just a social media presence, blog posts, and influencer brand deals
Ultimately, you will have to be prepared with a lead generation strategy that will attract new customers to your business on a consistent basis.
Fortunately we can teach how to do exactly that through our local lead generation coaching program and online course.
Step 4. Overcoming Obstacles to Growth
A major part of business that cannot be fully planned for OR avoided, is the set of challenges that come up when you are starting out.
The fact is, that the only way to deal with such challenges is to consistently and actively monitor the performance of your business:
Let’s go through some common areas for growth and how to prepare for them.
Quality Issues:
This article goes into detail about the dangerous chemicals commonly found in makeup and their negative health effects on consumers.
You don’t want to be outed as a dangerous brand, or worse yet, sued for being liable in damaging someone’s face.
Political Issues:
If you or your brand is found spouting off what can be interpreted as racist, sexist, or something insensitive, you can face serious consequences at the hands of social media.
Even if you associate yourself with someone who has done the whole “third rail” thing, you stand to lose money.
Avoid political and social conversations that are controversial, and do your best to keep these things out of your online presence.
(And preferably your life in general…)
Staying on Trend:
The world of fashion trends and makeup is bound to evolve: it’s the nature of the game.
That’s why you’d with 1980’s haircut, or early 2000’s low rise jeans if you wore them today.
It goes without saying then, that keeping your business lookin’ slick and “with-the-times,” can be more important for growth in this industry than almost anywhere else.
Social Media:
But the single greatest difference between those who make money and those who just brag about followers is ability to convert followers into actual sales.
You can have thousands of followers, but it won’t automatically make you successful.
So don’t get caught in the trap of obsessing over the Instagram algorithms changing or losing followers here and there.
Focus on providing consistent, quality content that backs up a high quality product that you can be truly proud of.
Step 5: Preventing Potential Damage
One of the best things that you can do to set your business up for success is to take preventative measures.
Most of these problems is going to be dealt head-on as they come up, but there are three stand-out ways to avoid serious problems altogether (or at least lessen their effect):
The first, and most important, is to get your business in order. Legal order.
This means, as stated earlier, getting the appropriate licenses and permits, getting your business registered, and paying your taxes.
Just like for serious criminals, the easiest way to have your freedom (or business) taken from you, is through the government.
And while that does apply, it is also important to consider the public as an equally formidable force.
Make sure your makeup is safe to apply and try not to engage in any dialogue that excludes or offends people.
You don’t need a superstar in the makeup industry - though that would help…
You can speak with anyone who has more experience than you and has proven results in sales, marketing, related industries, and especially entrepreneurship.
Mentors can provide extremely valuable information that hungry start-uppers like yourself can use to your advantage.
After all, if you find a mentor that has “made it” already, their advice and business input can be a game changer for your own business.
I can say all of that from personal experience, too - my mentor Dan was able to not just show me the ropes of the business, but help me with the sales aspects.
And with dealing with the difficult challenges that I had to face: like hiring, quality issues, etc.
Having a business plan is extremely important, because you can more easily pinpoint issues than if you’re flying blind and operating out of pure instinct.
In other words, noticing a chink in your armor is easier if you actually have armor.
Seriously, just write your damn business plan.
A solid business plan should include the following steps:
If makeup is your passion, and you can’t stand having a boss and waking up for another man or woman’s payday, then starting a makeup business may be just right for you.
But be warned: you will need to hustle and grind, prepare for wins and losses, and become resilient in the face of stress.
What separates the biggest makeup brands in the world from those that failed is simply that they persisted, learned from their mistakes, and evolved.
Pros and Cons
of starting a makeup business
Pros
For many aspiring entrepreneurs, one of the greatest draws to launching a business is the freedom to set your own schedule. There’s no boss to dictate your day, or look over your shoulder… You are in control of your time. This can be both freeing, and stressful. But for most small business owners, it is one of the most gratifying aspects of being self employed.
The beauty industry is ever expanding, and this is going to work heavily in your favor. More now than ever, putting on makeup is a routine event for many women. Whether we like to admit it or not, appearances do matter in today’s modern society, and investing in high quality makeup has become an integral part of maintaining an image for many individuals. In light of this, you can safely assume that your makeup business isn’t going to become obsolete anytime soon.
Whether you are passionate about creating vegan makeup products that are friendly towards the environment, or a racially inclusive branding and foundation shades… There is a wide opportunity for creativity within the makeup industry.
Cons
Just because you have a winning skin serum that you’ve been using for years and gifting to your friends, doesn’t mean you can start marketing it to the mass public. You will need to pass strict FDA regulations before your makeup line can be released to the public or sold in stores.
Everyone has to start somewhere, but there are some big name players in the makeup world that your company will probably be up against. The best way to combat this is to heavily niche down and provide clear value. Eventually, you may be able to directly compete with the big name competitors around you, but it’s best to start small and focus on doing one thing really well in the beginning.
Creating makeup products requires a lot of upfront investing. Not only will you have to test multiple formulations for every product, but the manufacturing, branding, and packaging itself will be expensive. Be prepared that even a small batch makeup company will take a considerable amount of startup capital.
Starting a Makeup Brand Can Be Profitable... If You Do This First:
When I first decided to start my own business I was making around $2,200 a month, and I was trading my time for money.
It was exhausting, and frustrating...
And my life didn't look anything like I wanted it to.
Chances are, if you're considering starting a makeup brand...
It's because you want to run a business that you are truly passionate about, and hopefully one that will start to generate passive income.
Rather than clocking in and out to create passive income for someone else.
But starting a makeup brand can be extremely expensive, and small business loans are hard to get.
Plus they're risky.
If you're wondering how the heck you're going to ever get your makeup brand idea off the ground...
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