First Years of Business

[Cellador]

Hi all!

This will be long & detailed....sorry. Thank you to those who continue to read!

I am finally starting to plan my business. I connected with a branch of my state's small business development center (SBDC) where they offer free consulting and resources for information. They have really been great in helping plan this whole process. I do want this business to be sustainable in the future, so I'm trying to do things the "right" way and not just make money back on a hobby.

So, some details -I'm moving kind of slowly into this venture- I still plan on "keeping my day job" as a stay-at-home mom. I will only have a 10-15 hours a week to focus on the business initially, but I am hoping by the time both of my kiddos are in school, I'll have the details of the business set-up, and I can work on marketing, sales, potential wholesale accounts , etc.

So, to begin, I plan on opening an Etsy store, doing some light word-of-mouth marketing when I can. I also know someone who owns a yoga studio who might be interested in selling some soaps in her boutique. I am not interested in doing fairs or markets....unless I should. (?)

I don't expect that I will make much, if anything, during these years. But, the SBDC consultants think it would be a good idea to formulate a rough financial forecast, for better or for worse, so I can really get a handle on how much I will spend and make in my first years.

Would any of you be willing to share some financial details of your first couple of years of business? How much should I expect to spend in start-up? How much did you sell in your first years? Did you have a profit or loss? How much growth have you experienced since you started?

Any info you might provide is appreciated. Thanks so much for reading!

 

[DWinMadison]

Thanks for posting this mI won’t take time to post too long here...maybe in a PM. I’m in a similar situation and look forward too seeing the responses.

 

[Lin19687]

FYI, Etsy is over run with soapers, many that are bad and many that are from over seas.
Starting a Biz online without a following will not really work in the long run. That is why you do FM and fairs.
There are a bunch of other threads on here where you will find that info.

Many "I want to start a biz" don't work because they only want to do on line.

 

[cmzaha]

Are you going for a Brick and Mortar or an online business? I only do outdoor markets but for approx 4 years my daughter made a living with her products. She specialized in very decorative M&P, scrubs, marshmallow soaps etc., selling online other than what I would take to my markets. At the time I was doing 4-6 outdoor markets a week, but her m&p did not sell well at my markets. After 4 years the market went on a downslide so she eventually gave up with the high influx of B&B sellers. I will say she spent everyday online promoting to keep the business going. It also could not be done with one person only. There were times we made, packaged, labeled and packed 5oo samples for sample box companies. These were at her expense, with a gain of approx 2% yielding a customer. Lots of work and expense. When she stopped she had built a return customer base of 700 return customers, but they did not purchase on a regular basis.

In my area there are a couple of brick and mortar companies but they started when the fad of handmade soap had just really started. The reason I never went for the brick and mortar is the 24 hrs a day expense factor. This includes the rent or payments, insurance, utility bills, Worker Comp insurance, wages, bookkeeping, payroll and the list goes on, it will take employees to run a brick and mortar shop. I am not saying it cannot be done but where I live it is almost impossible. If you live in a eclectic tourist area it can probably be done by owning a shop if there are no others. Either way, online, or brick and mortar it is going to take more than 10-15 hrs per week dedicated to the business.

Sadly, Amazon, Ebay, Etsy, even Craigslist are all inundated with soapmakers selling their products. Tuff business... With my little outdoor market I can average 1k a month, with the least amount of expenditures, but is hard work, and most of the sales are my crochet hats not bath and body products. I have seen many a soapmaker over the years come and go because they could not even make it at hobby level.

This is all my opinion and there is one two in this forum that will disagree which is certainly their prerogative. Problem is they have not tried really selling in this business and/or make statements about their soaps that are not allowed due to FDA regulations.

 

[Lin19687]

Oh, forgot. I planned on selling years ago when I had started, just at Markets. But life turned Ugly for me so that went on the side.
As a single Mum I finally can do this but not F/T. I have a F/T job and plan on buying a Farm. So I wanted to sell the soap along with Farm items. My name is Rustic Life Farm And this is the reason I picked it as I can do anything with the Biz.

$$$ wise.
I spent over $10,000 on product base ( oils, equipment, stuff) and I was able to do this because of an inheritance that I received when my Dad died 2 years ago.
Spent $ on things that were good theory but didn't work.
Spent $$ on items to make things easier.
I sold about $6,000 in soaps and I was late starting but I KNEW the clients I wanted and what was around here.
I am lucky that I have my own 14 x 14 office in my Duplex I rent. And I STILL do Not have enough space

Before you even get going you need to look ALL around you and know the other soapers and what they are also selling / what their product looks like and BE DIFFERENT

 

[Cellador]

I am not planning on opening a brick & mortar store. I plan to sell online and (hopefully) wholesale/consignment to local businesses.

@Lin19687 what things did you spend on that didn't work, if you don't mind me asking?

I only plan on 10-15 hours per week now, since my children are young and require more of me than they will in a few years. If things go well, I can then put more time into really growing the business.

The marketplace here is interesting. While I know there must be other soap makers, I don't see many of them. When I first started soaping, I had to travel 2 hours for a class as there was nothing locally.

Many of the markets here are strict Farmer's Markets and don't allow items other than food/herbs/plants. There are a few craft fairs, but not many. The business consultants I met with had never met with a bath & body enthusiast before, and they see hundreds of people each year- I was surprised by this actually...

What is the best way to "test" the market locally? Any suggestions for market research?

I know lots of soap makers try to do business and many don't succeed. I might be one of them, but that's why I'm seeking help from the small business development center. I want to go into this realistically and with the tools I'll need to make it work.

I hope I'm not coming across the wrong way. I know I'm not going to get rich doing this, and I'm not looking for a quick buck. But it would be nice to make a little income "one day" doing something I love.

 

[dibbles]

Cellador, I have a friend who has a B&B/skin care business. She is now in her 7th or 8th year of doing this. I don't have numbers for you, but I do know that for the first 3-4 years she attended a LOT of markets. She had an online store (not etsy) which people started ordering from once they had tried her products, purchased at those markets. She started dropping markets that weren't good for her, trying others in place of those. Now, she does one market that is indoors (Saturday only) and goes all year twice a month. She does another outdoor market in the summer months once a month (maybe twice). Her web business is successful enough to keep her busy and give her good cash flow. She also sells at a corporate location that has 'pop up' events for the employees. I think she does this 3-4 times a year and does extremely well there. I don't know if you live in an area where there is a large enough business that does this or not, but it might be something to look into. These pop up events are ongoing, with different vendors coming in at different times.

I don't think she would be as successful if she hadn't worked really hard building a loyal customer base through markets. She is very outgoing and friendly, and I think she could sell anything to anyone. People love to meet the maker, and you get a chance to tell people your own story. That said, I don't think it's impossible to do well in another way. You have the limitation of small children and all that goes with that. Would it be possible for you to try a craft fair a couple of times a month? Maybe look for an indoor venue so you don't have to invest in a tent. When it gets closer to fall around here there are lots of one day/weekend opportunities. Just getting your product out where people can see and smell, with your etsy store listed on the label, or handing out a business card would help so much I think.

Are there co-ops in your area? Boutiques? Garden centers where you could put gardner's soap? Salons? I wish you the best of luck in your venture. It sounds like you have the right mind set and patience to see where this might eventually go.

 

[Lin19687]

differnt things... just different molds, bowls cups etc. I just tried it from reading all what everyone has done/tried by reading the Soaping section. The beginners section is really good because you can learn from others mistakes
I 1st soaped back in 2002 where there were not that many forums or internet searches.
What worked for one doesn't work for another

 

[amd]

I'm just going to start by saying: I think it's very brave to put something you love out into the world. And it's very disheartening when people don't love it as much as you (we, the artist) does. I have a lot of soaps that I personally love (design/fragrance) that one else appreciates. Be prepared for those disappointments, and also be prepared to make things that maybe you aren't as much in love with (Lavender soap, I'm looking at you).

That out of the way, I think you are super smart to come at this with a business plan, and that will probably make you extremely successful. Speaking as someone who "wings it" through every business decision - including the decision to start a business - I wish I knew how to do this. I started mostly from scratch with my business - when I was making soaps for myself I was using milk cartons and MW molds. So I spent a lot of money upfront getting myself outfitted with equipment. I did have the huge blessing of my boyfriend-turned-husband who made my molds and bar cutters. My first year (technically it was the last 5 months of the year) budget for expenses was $1000, I made about $500 in profit. My second year was better, although I was still putting all the money I made right back into the business. My third year (last year) I bombed and borrowed 2k from personal funds - but I also tried a lot of "growth" things: more shows, multiple sales avenues, investing in new product ingredients that I knew I wouldn't be launching until this year. What I learned:

• Unfortunately more shows did not equal more sales. Pick your shows very carefully if you choose to do them. I am currently not doing any shows that do MLM vendors, they don't bring enough crowds in my area.
• Customer service is everything. Even if you only five customers.
• Do your homework for website and selling services before implementing. Last year I jerked my customers through 3 websites and 2 different selling platforms because I was too dang lazy to research. It was painful.
• About Etsy: HUGELY saturated with soap. I'm on there, and I get one sale every few months. BUT I also don't link my Etsy account to my social media posts, for those I use my own website to drive sales. I don't want the customers who already see me to go to Etsy and get distracted by something else lol. It doesn't hurt to have it, it's 20cents per listing and the transaction fees aren't insane if you price accordingly. I've started monitoring my listings better, so anything that isn't in someone's favorites or doesn't get views, doesn't get renewed when the listing expires. If Etsy is the only platform you're using, it might work better from the start. I briefly switched to Etsy only while I was getting my website straightened back out, and my regulars did not like it, there was no pick up option for my locals.

This is off the top of my skull. If I think of more I'll be back.

 

[Zany_in_CO]

You're getting excellent advice here... I'd just like to add a few things that helped me when I first started selling to wholesale customers.

1) Open a checking account dedicated to selling soap. $500 was enough to carry me through the first year of selling (it built up during that first year). All income from sales went into that account.
2) Take out a dedicated credit card. Use it to pay for everything -- except writing the check for the credit card once a month.
3) Pay off the CC account monthly by check from your dedicated account.
This creates a simple accounting system to track income vs. expense. I've found that it actually worked better for me than having to enter everything on a spreadsheet -- takes way less time!!!

Balance your checkbook monthly when the statement comes in. You can easily see how well you are doing by the statement balance -- deposits vs. debits from check to pay off credit card.

Next - How to price what you sell.
Every time you receive raw materials, mark the cost per ounce or gram (shipping included) on the invoice and file it. Also write the cost per ounce or gram on the product. Comes in handy when you detail how much it costs to make & package product.

Once you know how much $ it costs you to make it, you then can figure out how much to sell it for:
$ X 2.5 for wholesale
$ X 3.5 for retail
Of course, you also need to consider the competition. Whatever the going rate is for a handmade bar of soap for example, that's where you want to be.

ETA: Send me a PM if you'd like a copy of a cost basis analysis sheet.

For what it's worth, none of the wholesale customers I worked for sold online exclusively. What they did have was a website for the convenience of customers to buy products during the off season or if they were unable to get to the point of purchase.

One sold at markets, events, and Renaissance Faires.
One sold primarily to knitters & followed conventions around.
One had a brick & mortar store in New Orleans area.

Here's an example of this type of online presence by SMF member Minou Bleu (NOT a wholesale customer of mine. I just love her website.)

http://www.minoubleu.com/index.html

I don't have a website, but my understanding is that there are some services that provide them for free and are fairly easy to set up. Might be worth starting another thread on that topic.

 

[Cellador]

Thank you so much, everyone! This gives me a lot to think about. I was pretty dead-set against markets, but maybe I should re-think that approach.
My husband is a computer programmer and has done web development, so he could probably hook me up with a website. I know Etsy is sooo saturated, but it is convenient, especially since I won't have a ton of time initially.
Does anyone do consignment sales for gift shops or yoga studios? We have a ton of those around and I never see B&B products, especially at the yoga studios.

 

[Zany_in_CO]

Starting a Biz online without a following will not really work in the long run. That is why you do FM and fairs.

So true, in my experience. The key to success is building up a customer base. Finding that customer base is the biggest challenge you face.

With my little outdoor market I can average 1k a month, with the least amount of expenditures, but is hard work, and most of the sales are my crochet hats not bath and body products.

This is another key to success. Just selling soap isn't gonna getcha where you want to be in the long run.

I sold about $6,000 in soaps and I was late starting but I KNEW the clients I wanted and what was around here.

This is where you should put your 12-15 hours at this time. The more time you invest in learning your market, the more you'll increase your chance of success once you start selling.

Before you even get going you need to look ALL around you and know the other soapers and what they are also selling / what their product looks like and BE DIFFERENT

One of my wholesale customers sold only goat milk soap. It got them into farmers markets where only locally grown produce and similar products were allowed. Once in, they were allowed to add other products like GM lotion, lip balm, etc.

...I don't think she would be as successful if she hadn't worked really hard building a loyal customer base through markets.

Bears repeating.

Maybe look for an indoor venue so you don't have to invest in a tent. .

An indoor venue also saves you from markets being cancelled due to weather... a real downer for some in the past couple of years.

When it gets closer to fall around here there are lots of one day/weekend opportunities. Just getting your product out where people can see and smell, with your etsy store listed on the label, or handing out a business card would help so much I think.

Getting "your feet wet" initially will go a long way to helping you focus on the best way to build your business from the ground up.

Are there co-ops in your area? Boutiques? Garden centers where you could put gardner's soap? Salons?

One really crafty soaper here in CO used hand made paper with seeds embedded in it to wrap her herbal soaps in. Her first sale was a garden center where they sold very well. Look around to see what kinds of soap might suit whatever local businesses around you. Our local ACE hardware sells a brand of locally made handmade soap. Sell coffee soap to Starbucks! Sell beer soap to breweries! Sell upscale beauty soap to boutiques & salons. Our branch post office stocks locally made products in the gift shop portion of the facility. You are only limited by the depth & breadth of your imagination.

Does anyone do consignment sales for gift shops or yoga studios? We have a ton of those around and I never see B&B products, especially at the yoga studios.

Taking a yoga class might be a way to build up a network of customers. Over the years, I've witnessed soapers who started out by taking soap to the office to sell. You don't have that advantage. It might help to join a group where you could expand your social network.

Consignment: All the threads I've seen on this subject tend to rate it two thumbs down. It's been discussed here before, I think.

 

[cerelife]

[QUOTE="Zany_in_CO, post: 770292, member: 22120"
Here's an example of this type of online presence by SMF member Minou Bleu (NOT a wholesale customer of mine. I just love her website.)
http://www.minoubleu.com/index.html
QUOTE]

Awww, thank you Zany!! You just made my day
And Cellador, if you visit my website you will notice that there is no option to buy online. This was intentional on my part. With a full-time job, it was difficult for me to keep up with online orders and still retain that 'personal touch' that is so important in a small business. As Zany mentioned, a website is helpful to create an online presence for repeat customers and word of mouth customers since they have somewhere to check out who you are and what you do. My contact info in on the website and currently this is much more manageable for me than having an online shopping cart. When my husband retires in the next year or so, I'll most likely add the shopping cart feature back to my website and let HIM manage the orders/shipping!
At this point, I'm simply trying to maintain a loyal customer base and add new customers from the festivals at which I'm a vendor. My goal is that when I semi-retire 10 years from now I will have a steady (modest) income from doing what I love to supplement my retirement income.

 

[SunRiseArts]

I don't mean to be a Debbie downer here, lol, but I found out that costs outweighs the gain, and is not worth it.

UNLESS, you do a lot of marketing, and I mean a lot. Youtube videos, instagram, facebook etc., which I do not like to do. I personally believe selling is 90% marketing. And/or find someone to distribute your soaps in big quantities, which is not easy but possible. Where I am the market is oversaturated, I have seen soap in gas stations, etc. I remember a lady that landed a deal for target in California, but then she had to arm herself with her family and produce 30000 in products if I recall correctly. I personally could not afford that. I think her story is on the soap queen blog.

Going to a lot of farm markets or fairs is ok, but you will make very little after you calculate the cost of all your expenses including labels, booth, materials, etc. So if you do it for the love, is ok. But if you think you can make a living at it, doubt it will happen. A little extra cash here and there. Maybe. A website or blog can be free or run for 10 dollars a month, but if you do not do the marketing, you will have no traffic.

You really need to sit down and calculate how much each bar will cost you, and include your time, and find out if it is really worth it. Girls like royalty soap sell her bars around 10 dollars, but not everyone is willing to pay that much for a bar, but she has a big following and returning customer is my guess, plus I have a feeling she makes more in ads for her videos, and she has partner also with nurture.

So the bottom line is how much time are you willing to spend on social media and fairs.

My opinion for whatever is worth, please be kind with criticism.

 

[Cellador]

No, keep the positives and negatives coming...At heart, I'm a critical thinker, so I like to weigh all the information. You all are giving me so much to consider, which is so valuable and appreciated.
I was talking with my hubby about some of these points last night, and he said, "well, sure, yeah, you'll probably have to do the markets...." So, I am realizing I may have to adjust my plan a little. Or, at least come up with a solid plan for getting my product in front of people.
It's funny that you mention a gas station, SunRiseArts. I have a friend who owns a gas station and she has been asking me to place some soap in her store. I am hesitant to do so because I'm not sure it fits with the vision I have for my products. ?

 

[Lin19687]

I won't put my soap anywhere I am not there. Did that and they all got dropped and dented. I don't think a gas station is a good spot............ unless it is a tourist rest stop that has a bunch of local trinkets ?
Also if it gets stolen, who pays for it ?

 

[amd]

I was pretty dead-set against markets, but maybe I should re-think that approach.

One thing that I hear a lot from people is "I had no idea you existed". Markets are a great way to get yourself out there, but you do eventually out grow them. For at least the first year I would consider shows a marketing expense.

We have a ton of those around and I never see B&B products, especially at the yoga studios.

As someone who recently joined a yoga studio with a boutique, I will tell you that very few people shop the boutique. Most walk in, do their class, and walk back out. The only time I have seen anyone browsing the boutique is during special event classes. I would check with any studio you are considering to see if you could come in during special events with a social "hour" to host a small table in the boutique. Offer them a cut of anything you sell. They might have other ideas to help you promote - especially if they are locally based and not a chain. I mentioned to the owner of the studio I just joined that my daughter (who has done many kids yoga events at the studio) is having a last day of school party and the girls are going to make sugar scrubs. The owner's eyes got wide and said "Oh that would be a great activity for our 3-day camp, do you think you could do that?" So they might have activities you could be part of too (and get paid for) without having product sitting neglected in their boutique.

 

[SunRiseArts]

Do it! The ones I saw where in a station called Buccees that is new around here. I think they are based in Arizona, and they had Texas soaps. Mind you, I thought mine are prettier and better made, but their packaging was beautiful. They actually had beautiful gifts in the station, they are on a main freeway, so I guess people traveling would stop there, and is appropriate. Is huge like those were truckers stop.

I have seen those soaps in several places, so they must be well established. Pic below.

I have tried cracker barrel, and places like that, but all I get is we already sell some and a big no. It might be that I am just not lucky, I also live in the metroplex that is part of Dallas and there is so many people here that are competition. I think people may have better luck at smaller towns. Plus I personally hate facebook, and would not use it even if my life depended on it, and that does not help. As I said, marketing nowadays is most of your sells, IMO.

 

[Zany_in_CO]

Awww, thank you Zany!! You just made my day

You're so welcome, Michaelle. I just hafta add one more thing. In addition to how beautifully presented your products are, this page got me the first time I saw it. Nice touch.
http://www.minoubleu.com/Minou.html

 

[Zany_in_CO]

if you think you can make a living at it, doubt it will happen.

So sad, but so true. Although there are a few extraordinary soapmakers who I've witnessed over the years who were able to do it.

... they had Texas soaps. Mind you, I thought mine are prettier and better made, but their packaging was beautiful.

No packaging discussion would be complete without including the wild success of You Smell! Soap. You may have seen the owner and manufacturer, Megan Cummins, on Shark Tank in 2012. What's incredible about this soap, is that Megan doesn't make the soap! ... she designed the packaging as a college design project! (And it sells for $12 a bar in a well known retail store.)

In a recent interview, Megan said: 'When I went on the show I had nothing. No inventory, no salary, nothing. We started shipping orders in April and now we're in over 200 boutiques, have been contacted by half a dozen major national and international chains, had celebrity orders, I could hire myself and my fiancé full time, we've fully paid for 7 tons of soap, are about to release 8+ new SKUs, and we're already beginning to break even (which is something you'd expect after 2 years, not 5 months."

Bottom Line: Great packaging sells soap.