How to Start--and More Importantly, Finance--Your New Cosmetics Line
Something I've learned time and time again in the beauty business is the reason why so few beauty lines make it from idea to reality is not for a lack of dreams or dreamers. There's plenty of men and women who want to create their own beauty line. Everybody dreams about their beauty line, but few make it a reality.
In fact, I have good evidence sitting in my inbox here at Genie Supply that much less than 5% of those who contact me about making their own cosmetic line end up taking their idea to a reality stage. It's not because of a lack of vision.
I'm not even talking about how many businesses "succeed" or "fail". The old statistic is that only 10% of new businesses will make it past the 5 year mark. But no, I'm talking about the less than 5% that make it from the idea stage to the new business.
Why do so few make it?
Because they lack the funds to start.
Or, they think they do.
In entrepreneurship--or life in general, I supposed--there's one thing that separates the highly successful from the moderately successful, or the successful from the unsuccessful at all: resilience.
I speak on resilience quite frequently; it's as important as having a vision in the first place.
"But what the hell does resilience have to do with a lack of funding?" one might ask.
Resilience has everything to do with a lack of funding.
Lack of funding is the #1 reason why I see new business ideas stay parked at the idea stage, often abandoned and forgotten before they even have a chance.
Now not every idea needs to become a full-fledged business; that's a proposition that borders on recklessness. But if you're at the research stage--the stage where you are emailing me and requesting quotes on products and packaging--then you know that this is not just some idea you have. It's an idea that's been rattling around in your head enough times to take the next step.
But once the quotes roll in, you decide "I don't have enough cash for this! This is nuts."
Even at Genie Supply, where my personal goal--for a reason--is to help entrepreneurs take their ideas to market and scale their businesses without breaking the bank, yeah, sometimes what you want is going to seem expensive.
If you're a current market player, a $20k or $30k P.O. seems like nothing. If you're just getting started, a $2k or $3k minimum order seems like everything. It seems insurmountable.
It seems surmountable, but it's not.
I want to talk about something today--a dirty little secret, if you will.
That is: How the HELL do you finance your new cosmetics line?
Again, here is where resilience comes into play. Resilience and patience, which go hand in hand.
First, let's talk about my own product line, Amalie. Then, I'll circle back and talk about an example of how to get started with your own line and how to finance it, so that your dream becomes a reality instead of being parked at the ideation stage.
Megan's Personal Start-Up Financing Story: Amalie
I've told this story many times, but when I decided to start Amalie back in 2013, it was because I hated my internship enough (which paid sh*t money, by the way) to quit on a whim and hop on a plane back home. When I got home, I had $1,812 to my name. Actually, that seems like a lot now, looking back, because I was flat broke for most of college.
In any case, that was it. That was all my cash, scraped and pinched together.
This was no Maureen Kelly / Tarte situation--heck, I didn't even HAVE credit cards or a line of credit--but I was still determined to make my little WINK formula into a full-blown market-ready product.
After a lot of negotiation and even more luck, I was able to make my first order on $1,806. I didn't even have money to ship samples to bloggers, but I had 500 units of WINK in hand.
With some scrappiness, an entire lack of shame, and again--a whole lot of luck--I was able to land enough press to sell through that inventory in a month and make my next purchase order.
Since then, I've continued to grow Amalie from the organic growth on that $1,812 investment. I've now made over $500,000 on that investment in the past 4 years, without any additional funding.
I did take a small interest-free loan from a relative at one point (which I've paid back), but that was more than 2 years into my business, and it wasn't investment: it was just a loan. Any business or bank could've given me a loan. Taking a loan is not an anomaly--although taking an interest-free one may be--it's just a part of doing business.
So first of all, YES, it can be done, even if you're broke. You may need to scale down, wait patiently, grow your funds, and negotiate and renegotiate, but it can be done.
And starting small is actually a great idea.
I was able to finally find a vendor who would make 500 screen-printed WINK bottles for me. That's amazing. That's 20x less than the average factory; I was continually receiving quotes at 10,000 unit MOQs.
But eventually, with luck and negotiation, I made it happen.
Now, I made it my mission to make that same luck happen for entrepreneurs every day.
I have found factories willing to do 500 unit screen-printed packaging and formulation MOQs. I've spent the last 3 years in China building those relationships, so that even more entrepreneurs can take their businesses from ideation to creation, without having to go through the same struggle I did, or give up in the process.
Because that is JUST step 1, ladies and gents. That is JUST your first challenge, in a line of the many, many challenges of starting and running your small business.
So let me just help with ONE of those challenges.
(Side note: If you're ready to see how I can help you now, go ahead and request a quote, but keep reading, because the rest of this article is mad juicy).
Next: How to Finance Your New Cosmetics Line
Now, back to you and your new cosmetics line--or dream of one. Let's talk.
Yes, you can always look for investment and angel investors to fund your dreams. Go ahead and get on Tech Crunch or look for an incubator/accelerator if that's what you want to do. I personally don't look for or take investment and don't believe others should, especially in their first business. Half of the battle is figuring it out before you bring in rocket fuel (i.e. mad cash, yo).
So let me work through one example of how to fund your new beauty line, which is a very real example to me, because it's exactly what I do every time I want to buy some new inventory.
Example: Starting Your New Lipgloss Line
Let's say you want to start a new lipgloss or liquid lippie line. You find us, and see that we can do 500 units of your custom lipgloss line with screen-printed packaging, for just $2,500.
Wow, $2,500 is kind of a lot, right?
In the business world, that's nothing. BUT, if you're in high school, college, or just getting started in the working world, that's a lot of cash to scrape back.
So how would you handle it?
Let's say you're not risky at all. You have no idea how well this will sell, but you don't want any lasting debt. You want to finance this, but don't want to wait until you've saved up all the cash.
At Genie Supply, we do offer Credit Card and Paypal (Paypal Credit, too) as payment options. There's a 3% or 5% processing fee, respectively, but you can do it.
First step, take a part-time job to raise some funds. Secure that first. Let's say you work 20 hours/week at minimum wage. After taxes, you'd take home just over $400/month for this new job. Alternatively, at 10 hours/week, you'd take home about $200/month.
Once you get hired and start, you then open a new credit card with 0% APR for the first 12 months, with a $3000 or more limit.
After that, you contact us and get started on your lipgloss line. The charge is $2575. To pay off the balance, you need to make payments of $215/month for the next 12 months. You could pay it off in less time if you want, but the payments won't change, because you're still in your 0% APR period.
Need I say more?
You'll still need to keep the part-time job at ~10 hours/week, but just until sales pick up enough that you can use the money you earn to pay off the debt. In fact, if you're reselling those lippies for $20 each, you'd only need to sell about 11/month to pay off your monthly installment.
If you sell 130 or more units, you can pay off the entire purchase and you're now debt-free.
Depending on who you are/your circumstances and how hard you can hustle, that may not take too long. After all, I sold all 500 units of WINK within a month, so I know first-hand that it is doable.
Between press, ads, blogging and some help from instagram and youtube influencers, you could be debt-free, financed, with 370 units more to sell (that's $7,400 in cash, by the way), which will help you take that next step, whether it's buying 500 more units of the same lippies, 500 units of new colors, or taking a step up to 1000 or more units (my suggestion). The more you buy, the cheaper each unit gets. In the beginning, yes, it is about $5/unit for 500 units, but as you climb up and up, your units will discount to $4, $3, then $2, and when you're at scale, less than $1. Your profit margins will continue to climb as you increase your minimum orders.
Another option that I mentioned earlier was Paypal Credit. They offer much higher credit lines on worse credit. Even though the transaction rate is 5%, each transaction over $100 comes with 6 months of 0% interest.
It's a big more aggressive, but at $437.50/month over 6 months, you'd have that starter lippie line all paid for.
And did I mention anywhere in that mess of numbers that, you'd literally make your dreams come true in the process?
Because, let's be real, who doesn't want their own beauty line?
Takeaways: How to Start (and Finance) Your New Cosmetics Line
Whether you decide to finance with sales, savings, freelancing or another part-time job--that's all up to you. I went through an example with a MINIMUM WAGE job. I had a minimum wage job at 10 hours/week when I was 15. ANYBODY could do this. Heck, most people could TRIM $200/month from their budget just by cutting out their daily Starbucks!
There's hardly an excuse for not getting started on your beauty line.
Like literally, no excuse.
Paypal credit, credit cards, and loans are all an option, though I will ALWAYS suggest to go an APR-free route. Nobody needs 16-25% interest knocking on their door. That's a recipe for disaster.
I hope you all enjoyed this no-holds-barred guide to financing your new cosmetics line from this super geeky math-minded beauty queen.
If you have any questions, want to get a quote, or just discuss financing options in general, shoot me an email at firstname.lastname@example.org or fill out our quote form here.
Oh, and by the way: Those lippie line numbers above were real. So seriously.. what the heck are you waiting for?