Keys to Startup Success for Beauty Brands
Over the past decade we have seen a significant increase in the number of beauty brands flooding the market. It’s no surprise; it’s an exciting industry! The barriers of entry are relatively low, profit margins for beauty and personal care are the highest of CPG brands categories, it’s creative and can have great impact. If the stars align, one could even enjoy a lucrative exit. But statistically, a whopping 90% of startups fail, and a majority of them within the first 2-5 years of operation. To put that into perspective; only 1 in 10 startups will actually “succeed”. If you are considering starting a cosmetics brand or are in the startup stage, this is for you! Let’s take a look at what I would consider non-negotiables when creating your beauty business plan.
Get super clear on what sets you apart from your competition and get specific about your niche and brand story. For example; it’s not enough anymore to just be a “clean” or “natural” skincare brand. This category is crowded and you will get lost if you aren’t further differentiating yourself. Dig deeper here. Are your product formulas built around a specific ingredient? Do you have a unique product for a tired category that lacks innovation? If you can’t clearly define your unique selling proposition, keep working on it until you do. Ask yourself - why would customers choose my brand over X? You don’t have to reinvent the wheel, but you should have a unique take on it. Craft a compelling brand story around it.
You must have a deep understanding of your customer and confidence that they want what you are selling. Don’t make the mistake of keeping your target customer too broad to increase your chances of sales. Instead it dilutes your efforts and makes it less likely you’ll reach your ideal customer who is actually looking for and will benefit from your products. Once you have dialed in on your target customer, get to know them intimately and stay up on evolving preferences.
Create strong branding and learn how to effectively communicate and reach your target customer. Here is where #1 and #2 above come together. You know your USPs, you have dialed in on your ideal customer; now you have to effectively reach them. Creating a strong brand includes all the ways you communicate with your customer; from your logo and visual identity, to brand voice and personality, your values and brand story. Customers increasingly value personal connection, trust and transparency - so don’t forget to keep it real.
If you nail everything above, but can’t deliver on product integrity and reliability, you won’t last (and vice versa - speaking to expert product formulators that don’t understand the business of beauty). When I speak of product quality, I include; formulations, ingredients, ethical sourcing, good manufacturing practices, regulatory compliance, efficacy, etc. Reliability includes product consistency (meeting customer expectations) and availability. You must be able to produce quality product(s) and deliver on time. Manufacturing is an in-depth topic in and of itself, but whether you manufacture in-house or use a contract manufacturer/co-packer, the ability to scale production with demand is essential to customer retention and brand longevity.
The ability to budget and manage cash is a critical component of startup success. In my experience, this is one of the least enjoyable and highest stress producing parts of running a business. Founders should have a full understanding of COGS (costs of goods sold), create forecasts and projections and regularly review financial reports in order to make informed, strategic decisions about the business and bottom line.
Continuing on the topic of finances; stay lean! A common mistake is for a brand to get overzealous and begin hiring and making purchases that are unnecessary and not congruent with their stage of growth. Work out of the smallest space possible, hire as few contractors and employees, and bootstrap what you can until you have to take the next step up. Investing in fancy furniture and equipment, employees and perks or taking unnecessary risks before your business can support it is unwise and will diminish your ability to put your funds where they are needed most.
Be prepared and then be nimble. Put together a working business plan document that provides details about your company and products, marketing plan, operations plan, sales and pricing strategy, human resources, and financial plan. It doesn’t have to be perfect, to begin - it will surely be adapted as you go. No matter how much you plan, there are guaranteed to be surprises and things that go differently than expected. However, being aware of the importance of each part of the plan and anticipating how you will manage them will give you the best shot at beating the odds and building a successful beauty brand. For help creating your business plan, contact me and let’s get started!
