How To Start a Skincare Business

Knowing what your customers want can help you develop successful skincare products.

Determine your primary customer base through market research. Comprehensive market research helps you identify the target market for your products before bringing them to the public.

Ask yourself the following questions to find out what appeals to your target market:

• Are they looking for organic skincare with clean, natural ingredients?
• Are sustainably sourced ingredients important to them?
• Are they more concerned with correcting past damage or preventing future damage?
• How much are they willing to spend on their skincare routine?
• Do they value cruelty-free products and ingredients that aren't tested on animals?
• Does packaging matter to them? Do they prefer glass bottles over plastic or want recyclable materials?

Use your research to target your products to the right customers strategically.

All business owners and entrepreneurs need a well-thought-out business plan. Those breaking into the skincare industry are no exception. A comprehensive business plan will outline several key aspects of your business:

• Your customer base
• Competition
• Funding needs
• Startup costs
• Projected profits
• How you plan to implement your business ideas
• Advertising and marketing strategy

Where you will sell your products (like e-commerce online stores, Shopify, brick-and-mortar storefronts, and pop-up shops)

Banks or investors will want to review your business plan before giving you money. So, it's good to have a developed business plan to get the cash you need for your business.

In addition to your initial research, keep current on the beauty industry and skincare market trends. Keep a pulse on what people are talking about on social media, what you see in beauty and lifestyle magazines, and what mainstream beauty retailers (like Ulta and Sephora) are promoting.

Skincare is a rapidly evolving industry with different ingredients taking center stage at different times. But there are staple ingredients. You should familiarize yourself with:

• Hyaluronic acid to increase hydration
• Niacinamide to calm inflammation
• Retinol to address overall tone, texture, and elasticity
• Alpha hydroxy acids (AHA), beta hydroxy acids (BHA) and polyhydroxy acids (PHA) to exfoliate
• Ceramides to restore the skin barrier
• Vitamin C to brighten skin and fight dark marks and hyperpigmentation

By paying attention to what is on trend, you can incorporate hot ingredients into your products' formulations and position your marketing accordingly.

Your market research for your target audience should inform the products you create:

• Will you address targeted concerns like acne, dry skin, or oily skin?
• Will your products address anti-aging concerns like dullness, fine lines and wrinkles, and elasticity?
• Will your products contain sunscreen (SPF) to protect from sun damage?
• Will you have an extensive line or one hero product?

How you stand out against your competition is also a critical step in creating your brand. Your line will need a unique angle to stand out in the highly competitive cosmetic industry. Some niche areas to consider for your beauty brand could be:

• A clean, natural skincare line featuring products with short ingredient lists
• A skincare line with products centered around a singular ingredient (like green tea, snail mucin, or argan oil)
• A fragrance-free line formulated specifically for those with sensitive skin
• A sensory-focused line that incorporates wellness practices and beauty rituals into everyday skincare routines
• A budget-friendly line of simple, quality products

Also, consider the type of skincare products you will sell. The top product categories in the skincare sector include:

• Cleansers, balms, and toners
• Moisturizers
• Serums and treatments
• Balms
• Sunscreens with SPF
• Masks

Determine how to create the products. Are you making formulas or hiring a chemist to develop your skincare products? An option is to enlist a private label company to manufacture your products. This entails partnering with a third-party manufacturer to produce the products according to your specifications, ingredients, and branding.

If you're making your own products, you will need to find a supplier to source the raw materials. This includes the formulation ingredients, as well as packaging.

Trade shows are a great place to identify potential suppliers. You can also use online ingredient marketplaces (like Alibaba, Knowde, and Covalo).

Once you've developed your formulas and product lines, how will you scale them to a large customer base? Even if you start out making your products in-house, you may need to later outsource to a manufacturing company.

If you outsource with a skincare manufacturer, negotiate a contract on your terms. Spell out what ingredients they should use and where they should source them.

• Where is the manufacturer located? Are they in the same time zone and convenient to work with?
• What other customers do they have in the cosmetic, beauty, and skincare space? Will they compete with your products?
• How is their customer service? Can you talk to some of their clients to find out their experiences?
• What is their ability to scale up if you have a sudden surge in business?

When you enter into an agreement with a manufacturer, having a business attorney review the contract terms is helpful. They will advise you of any concerns that could cause future problems.

In addition to forming your company through a corporation or LLC, you should obtain any business licenses or permits to operate your business. Contact your local and state license boards to find out your area's requirements.

The U.S. Food and Drug Administration (FDA) regulates certain ingredients in cosmetic products. But it doesn't require beauty businesses to obtain a specific license to sell. It does, however, mandate businesses to only sell safe products that meet FDA standards.

Although it depends on your area, you may need to acquire other licenses and permits, like a seller's permit.

If you plan to have a brick-and-mortar store, you will also need to look into your jurisdiction's zoning requirements.

Get an Employee Identification Number (EIN) to file taxes on your business. You can file for one online with the Internal Revenue Service (IRS).

There is a lot to know to set up your business legally. You can let our trusted partner LegalZoom handle your business formation filing for $99 plus filing fees.

Because your products may affect a consumer negatively, you want to avoid personal liability.

Two critical ways to protect yourself from personal liability are by forming a corporate entity and securing product liability insurance.

Corporate Entity

Forming a corporate entity (either a corporation, limited partnership, or limited liability company) separates your business profits, losses, and liabilities from your personal assets. Note that if you combine personal funds with corporate funds or fail to act as a reasonable business owner would in certain situations, you may be found personally liable.

You can register your corporation with the secretary of state where you operate.

Product Liability Insurance

Product liability insurance protects you from claims consumers make for defects or damages from your product. Because your product goes on the skin, you want to ensure you aren't liable for personal injury claims.

Investigate all necessary business insurance. It is a good idea to look into a comprenhensive general liability or business owner's policy to cover all aspects of your business. 

Your formulas are proprietary, so you should take steps to protect your work from your competition. An original skincare formula is intellectual property and subject to patent protection.

You should also trademark your business name, logo, and other branding materials.

Consult with a lawyer specializing in intellectual property to safeguard your products.

Almost as important as your product is the brand you create. You should invest time and money into perfecting an image that will captivate your customer base. Create labels, packaging, and logos appealing to your target audience.

There's one caveat when labeling your skincare products—you can't make false or misleading claims. For example, you cannot claim to cure a skincare condition or cosmetic concern. The FDA has specific guidelines on claims made on cosmetic and skincare product labels.

Your brand name, logos, and slogans are also intellectual property you can protect under trademark law. If you create a new package design or process, you may be able to protect it under patent law. Again, an attorney specializing in intellectual property can guide you in what steps to take to protect your brand.

Create a robust marketing strategy leveraging different marketing channels. Use a combination of digital and in-person marketing methods to maximize your business's visibility.

Promoting your skincare products with social media is a low to no cost way to get the word out about your products. Use YouTube, Instagram, and TikTok to highlight the advantages of your skincare line.

Link up with online influencers (also known as “skinfluencers" in this industry) to recommend your products to their followers. This works by providing the influencers with free products so they can sample and talk about them on their social channels. Do your research first to ensure your promoters align with your brand.

Consider partnering with other businesses in your community to promote your line. Spas, hair salons, and boutiques are all great places for potential customers to see and try your products.

Word-of-mouth will always be an effective way to advertise. Encourage customers to tell others about your products by offering an incentive or referral program.

While promoting the benefits, be careful of any claims you make. The Federal Trade Commission regulates truth in advertising.