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 here at The Red Tree. It’s 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.

The first, and arguably most important cost is the brand strategy. We recommend this stage is outsourced to an agency with experience who can provide an unbiased and objective view to ensure the foundations of the brand are as strong as possible. This is where the brand’s positioning is defined, alongside the target market, competitive review, price positioning, marketing/communication plans, sales forecasts and investment schedules. Ultimately, this should clearly articulate the Symbolic Brand Value which will guide the next stage – the brand design and copy. Costs of creating the brand strategy can vary greatly, but 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 bring your brand to life, from determining a logo, colour palettes and typography, to the full primary and secondary pack designs. It also encompasses the brand’s tone of voice (will your brand be bold, sarcastic, or understated?), and the brand story and pack copy. Again, costs can vary depending on if you engage with a freelancer or larger agency with more resources and the exact scope of work, but anything from £10,000 to £50,000 would be expected.

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

The next pre-launch stage is product development. This usually runs concurrently to the design and copy stage as the two overlap. This stage involves selecting and appointing a manufacturer or chemist, development or selection of the formula, packaging, regulatory, testing, production, artworking, printing and delivery of the final product.

Contract manufacturers usually charge a development fee (sometimes offset once an order is placed), around £2,000 per SKU. Packaging and formulation costs will be relative to the target RRP of your product, with packaging costs from £1.50 per unit for standard, off the shelf options, depending on minimum order quantities and formulation costs anything from £1-£10+. Regulatory and testing can cost a further £1,000 per SKU. Artworking (where designs are interpreted into exact technical specifications) is usually around £750 per SKU.

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

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

The costs we have mentioned are by no means exhaustive, and we recommend including a buffer to cover unexpected costs. The investment schedule created in the strategy stage is critical to ensure cashflow is sufficient throughout the launch process. The Red Tree have unparalleled experience in creating and adhering to these plans, to help guide brands through this complicated stage.

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