If you are starting a cosmetics company, it is likely that you will require investment at some point. The experts at Pro Business Plans have extensive experience preparing plans for investors and strategy for cosmetics companies. This article is designed to provide information regarding what is typically included in a cosmetics business plan and how it is generally structured.
Cosmetics Business Plan
Cosmetics Business Plan
There are several things to consider if you are starting a Cosmetics company including the method in which products will be manufactured, the scale at which they will be produced, and the method in which they will be procured. Most Cosmetics companies focus on the manufacturing and distribution of Cosmetics in the United States, several companies provide this service, but range considerably in quality and price.
The business model for a cosmetics company is based upon several factors including the positioning of the brand, procurement process, and distribution strategy. Creating a powerful cosmetics brand is an exceptional challenge, but several companies have been able to do it by either acquiring a great product at a competitive price, identifying an untapped market niche, or an array of other factors that contribute.
The positioning for a cosmetics company can vary substantially, but is almost vital in the highly competitive market. Many cosmetics companies are competing for the same market share in the mainstream market and the most successful ones that have entered identify a market niche that they may capitalize upon. The market positioning is critical when determining the strategy of your company and is a core aspect of your business model.
The supply chain for a cosmetics company can range wildly depending upon the structure of the company. Some cosmetics stores sell a third party brand, others do white label from a manufacturer, and some contract a manufacturer using proprietary blends. The unique supply chain also works from a downstream perspective as some choose to work through distributors whereas others sell direct to consumer or through wholesalers at trade shows.
The marketing strategy for a cosmetics company is perhaps one of the most important qualities of the overall plan. The marketing strategy must be able to effectively introduce and scale the brand as to establish customer loyalty and strong demand. If you are selling direct to consumer , it may mean also performing digital advertisements or attending trade shows if you opt for the wholesale distribution model. Either way, marketing in cosmetics is unavoidable and all companies must confront them.
One of the most important factors related to the marketing section is establishing a strong brand identity. Companies must be able to carefully articulate an image which consumers identify with and lasts against the plethora of competing brands continually entering the market. The brand is the main value of cosmetics companies, even for those at the retail level selling third-party products, as loyalty is essential in this industry.
There are many promotional tactics that brands have when they enter the cosmetics market whether they are retailers or brands, it is essential for them to construct strong awareness within the market and perpetuate demand. This generally includes a combination of public relations, pay-per-click direct advertising for consumer sales, as well as mass marketing in fashion or other related glamour magazines. A recently emerging trend is in the area of influencer marketing , whereby companies will solicit for assistance by mainstream celebrities to adopt the brand in the eyes of the public.
When forming the financial projections for a cosmetics business plan, investors will analyze several parts. The income statement will be reviewed in order to determine the revenue projections, along with the cash flow projections to assess the possibility of liquidity issues, and likely a consolidated profit and loss statement to create a holistic picture. It is important, when forming financial projections, to be both conservative and rational when forming assumptions. Investors are more likely to discount financials if they lack third party information to substantiate claims.
The revenue projections for a cosmetics company should either be based on its historical performance, or the performance of similar companies, if it is new to the market. It can, however, be challenging to compare to other companies if their brand is much more established. Cosmetics companies can be quite lucrative, but only for those who have enough traction to be recognized and this is not often the case for a new company. The revenue projections should be well justified and correlated with the marketing budget to show traction generated from the promotional campaigns and branding strategies.
The budget forecasts should reflect the expense structure of comparable companies at your stage and ideally, compiled based upon the quotes from third-parties . That means calling manufacturers, real estate agents, marketing firms, and receiving a quote for their services to generate a detailed twelve-month budget While this method is tedious, it reduces the risk of not requesting enough capital and potentially minimizes asking for more than necessary. Having a budget based on third-party quotes also builds a stronger investment case that is less speculative than being based on hypothetical scenarios.