How much does it cost to start a skincare business? – Part 1

The cost of starting a skincare business is one of the most frequently asked questions we receive at The Red Tree. It is no secret that the beauty industry is investment heavy, especially in today’s saturated market.

This article breaks down the costs each brand should consider when building a brand launch strategy.

Brand strategy

The first, and arguably most important, cost is the brand strategy. We recommend outsourcing this stage to an experienced agency. They can provide an unbiased and objective view to ensure the foundations of the brand are as strong as possible. This is where you define the brand’s positioning, alongside the target market, competitive review, price positioning, marketing and communication plans, sales forecasts and investment schedules.

Ultimately, this should clearly articulate the Symbolic Brand Value, which will guide the next stage: brand design and copy. Costs for creating the brand strategy can vary greatly. However, you can expect to pay anything from £10,000 to £30,000, depending on the complexity of the initial idea and how much development is required.

Design and copy

Design and copy bring your brand to life. This covers everything from determining a logo, colour palette and typography, to the full primary and secondary pack designs. It also covers the brand’s tone of voice (will your brand be bold, sarcastic, or understated?), along with the brand story and pack copy. Again, costs can vary depending on whether you engage a freelancer or a larger agency with more resources, and on the exact scope of work. However, you can expect anything from £10,000 to £50,000.

Company setup and legal fees

On top of these costs sit aspects such as company setup and legal fees. These cover trademarking, patents, and various forms of IP protection.

Product development

The next pre-launch stage is product development. This usually runs alongside the design and copy stage, since the two overlap. It involves selecting and appointing a manufacturer or chemist, developing or selecting the formula, and managing packaging, regulatory requirements, testing, production, artworking, printing and delivery of the final product.

Contract manufacturers usually charge a development fee, sometimes offset once you place an order, of around £2,000 per SKU. Packaging and formulation costs depend on your target RRP. Packaging costs start from £1.50 per unit for standard, off the shelf options, depending on minimum order quantities. Formulation costs can range from £1 to £10 or more. Regulatory checks and testing can add a further £1,000 per SKU. Artworking, where designs are translated into exact technical specifications, usually costs around £750 per SKU.

Logistics

The final pre-launch cost to consider is your logistics partner, who will play a key role in your company. Usually, 3PLs charge a setup fee of around £1,000. They will then charge for inbound deliveries, pick and pack costs (around £2 per product), postage (usually charged at the courier’s cost price), assembly where applicable, and licensing fees for portals or integrations for your B2C or B2B orders (which could be around £200 per month). You may also face an account management fee on top of these costs.

Other miscellaneous costs include barcodes, a responsible person (RP), and insurance.

Plan for the unexpected

The costs we have covered here are by no means exhaustive. We recommend including a buffer for unexpected costs. The investment schedule created during the strategy stage is critical to ensuring sufficient cashflow throughout the launch process. The Red Tree has unparalleled experience creating and adhering to these plans, helping brands navigate this complicated stage.

Our next instalment covers further considerations, including marketing and retail investment costs.