Starting a soap business is a rewarding venture that combines creativity and formulation skills with business acumen. The market is quite accessible thanks to high consumer demand for natural products, but standing out requires more than just a great recipe.
This guide will take you through the practical steps of validating your business concept, obtaining the right licenses, building supplier relationships, and acquiring equipment to help you launch a successful soap business in the U.S.
Step 1: Plan your business and validate your concept
First, gauge local demand. Visit farmers' markets and craft fairs to see what sells. Note the scents, ingredients, and price points that attract customers. You can also use Google Trends to check search interest for niche terms like "goat milk soap" or "unscented olive oil soap".
A good next step is to analyze competitors. Look at the top soap sellers on Etsy and Amazon Handmade. Pay attention to their branding, packaging, and customer reviews. For broader market data, databases like Statista can provide insights into the natural cosmetics industry.
Startup cost breakdown
Many new makers miscalculate initial costs. When you budget, remember to price for profit, not just to cover expenses. A failure to account for your own labor and a healthy margin from the start can make it difficult to scale later.
- Ingredients (oils, lye, botanicals): $200 - $500 for initial stock
- Equipment (molds, safety gear, stick blender): $150 - $300
- Business license & insurance: $300 - $600
- Packaging & labels: $100 - $250
Here are 3 immediate steps to take:
- Visit one local market to observe customer buying habits for soap.
- Analyze the top five soap sellers on Etsy for their pricing and branding.
- Create a detailed startup budget that includes a profit margin.
Step 2: Establish your legal structure and get licensed
You might want to consider forming a Limited Liability Company (LLC). This structure separates your personal assets from business debts, which a sole proprietorship does not. An LLC costs $50 to $500 depending on your state, but it provides vital protection if your business faces legal issues.
Regulatory compliance
The FDA regulates soap only if it makes cosmetic claims like moisturizing or deodorizing, or drug claims like treating acne. If your product is purely for cleaning, it falls under the Consumer Product Safety Commission (CPSC) and requires proper labeling but less stringent oversight.
Many new makers accidentally make cosmetic claims on their labels. Be careful with your wording. Stating your soap "softens skin" moves it into FDA territory. Stick to its cleaning properties to stay under CPSC rules, which are simpler for a new business to follow.
- Seller's Permit: Apply for this free permit through your state's department of revenue to collect sales tax.
- Local Business License: Your city or county clerk's office issues this for about $50-$100 annually.
- Home Occupation Permit: If you work from home, you may need this permit to ensure you comply with local zoning laws.
Here are 3 immediate steps to take:
- Decide on your business structure, leaning toward an LLC for liability protection.
- Review the FDA's "Is It a Cosmetic, a Drug, or Soap?" guide to understand labeling rules.
- Check your city's website for бизнес-лицензия and home occupation permit applications.
Step 3: Secure your insurance and manage risk
Protecting your business starts with the right insurance. General and product liability are non-negotiable. They cover claims from property damage or bodily injury, such as a customer having an allergic reaction to an ingredient. This is a specific risk for soap makers.
For solid protection, look for a policy with $1 million to $2 million in coverage. Annual premiums typically range from $400 to $900. Do not rely on your homeowner's policy; it almost always excludes business activities, leaving your personal assets vulnerable if a claim arises.
Additional coverage to consider
Once your business grows, you may need more coverage. If you set up a dedicated workshop, Commercial Property Insurance protects your equipment and inventory. If you use a vehicle primarily for deliveries or market runs, you will need a Commercial Auto policy.
You can find policies through providers that focus on handmade businesses. Consider getting quotes from the Handcrafted Soap & Cosmetic Guild, the Indie Business Network, or Veracity Insurance Solutions. They understand the industry better than general agents and can offer more relevant coverage.
Here are 3 immediate steps to take:
- Request a quote for a combined general and product liability policy with $1 million in coverage.
- Contact an insurer specializing in handcrafted goods, like the Indie Business Network.
- Review your homeowner's policy to find the business activity exclusion clause.
Step 4: Set up your workspace and buy equipment
Workspace and zoning
A dedicated 100-150 square foot area in your home is a great start. You will need to check local zoning laws for home-based businesses. Pay close attention to rules about storing chemicals, as this applies to lye.
If you decide to lease, look for a space zoned for "light industrial" use. When you negotiate the lease, you might want to ask for a clause that lets you exit the agreement if you cannot secure the proper permits for soap making.
Equipment and suppliers
Many new makers overspend on decorative molds right away. It is better to perfect your recipe with basic silicone loaf molds first. You can always buy more elaborate designs once you have consistent sales.
Here is a breakdown of initial costs:
- Stick Blender: $30 - $60
- Digital Scale (0.01 oz precision): $25 - $50
- Silicone Loaf Molds: $50 - $100
- Safety Gear (goggles, gloves): $20 - $40
Once you have your equipment list, you can look at suppliers. Bramble Berry and Bulk Apothecary are popular choices because they have low or no minimum order quantities. This allows you to buy oils in smaller 16 oz sizes to test recipes.
Here are 3 immediate steps to take:
- Review your local zoning code for home-based business regulations.
- Price out a starter equipment list from two different suppliers.
- Check the minimum order quantities at Bramble Berry for your main oils.
Step 5: Set up payment processing
Most of your sales will be immediate, whether online or at a market. When you choose a payment solution, pay close attention to transaction fees. Many new makers overlook how a 2.5% or 3% fee can shrink profits on small items like a single bar of soap.
For soap businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done. It is a great fit for market sellers.
At just 1.99% per transaction with no hidden costs or extra hardware needed, it's a cost-effective option. Other payment solutions often have higher commission rates and require you to buy card readers, which adds an expense you can avoid.
Getting started is straightforward:
- Get Started: Download the JIM app for iOS.
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
- Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers.
Here are 3 immediate steps to take:
- Calculate the total fees on $100 of sales using JIM's 1.99% rate.
- Download the JIM app to explore its interface.
- Compare JIM's features with one other payment processor for small businesses.
Step 6: Fund your business and manage finances
Plan for at least $1,500 to $3,000 in working capital for your first six months. This covers ongoing ingredient restocks, market fees, and initial marketing. Many makers underestimate this and run out of cash just as they gain momentum.
With that budget in mind, you can explore funding. The SBA Microloan program is a solid option, offering loans from $5,000 to $10,000 for startups at 8-13% interest. You will need a detailed business plan to qualify.
You might also look at Kiva for a 0% interest crowdfunded loan or apply for grants like the Amber Grant for Women. Grants are competitive but provide funds you do not have to repay, which is a huge advantage.
Once you secure funds, open a dedicated business bank account immediately. A common mistake is mixing personal and business money. This complicates taxes and can even remove the liability protection your LLC provides, putting personal assets at risk.
Here are 3 immediate steps to take:
- Calculate your working capital needs for the first six months.
- Review the application requirements for an SBA Microloan.
- Open a separate business checking account.
Step 7: Hire your first employee and manage operations
Hiring your first team member
You should consider hiring help once you consistently sell over 500 bars a month. Many new owners hire too soon, which puts a major strain on cash flow. Wait until production, not sales, is your main bottleneck.
Your first hire will likely be a part-time Production Assistant. This person would handle tasks like weighing oils, cutting soap, and wrapping finished bars. Expect to pay around $15-$20 per hour. No specific certifications are required, but you must train them thoroughly on lye safety.
Streamlining your operations
As you grow, managing inventory becomes complex. A system like Craftybase is designed for handmade sellers and helps track raw materials, recipe costs, and profit margins. This prevents you from running out of a key oil right before a big market.
If you have multiple helpers for markets or production days, a scheduling app can be useful. A program like When I Work helps you coordinate shifts and communicate with your team without endless text messages.
Here are 3 immediate steps to take:
- Calculate your average monthly bar sales to see if you meet the 500-bar threshold.
- Draft a simple job description for a Production Assistant, focusing on safety and daily tasks.
- Explore Craftybase with a free trial to track the inventory for one of your soap recipes.
Step 8: Market your business and acquire customers
Start with visual platforms like Instagram and Pinterest. Post high-quality photos of your soap, packaging, and process. Aim for 3-5 posts per week to stay visible to potential customers.
Many makers only post product shots. Instead, you should mix in customer photos and reviews. This social proof builds trust. An engagement rate of 3-6% is a solid goal for handmade goods on Instagram.
Build your email list
An email list is a direct line to your customers. You can offer a 10% discount for sign-ups at markets or on your website. This channel can be very effective, often generating a high return on investment.
Once you have subscribers, send a monthly newsletter. You might feature new scents, share a behind-the-scenes look at your process, or offer a subscriber-only deal. This keeps your audience engaged between purchases.
Local and collaborative marketing
Do not overlook local opportunities. You could partner with a local boutique or spa to carry your soap on consignment. Another idea is to collaborate with a complementary maker, like a candle company, for a joint giveaway to cross-promote.
Here are 3 immediate steps to take:
- Plan one week of Instagram content, including one customer testimonial.
- Create a sign-up sheet to collect emails at your next market.
- Identify one local boutique to approach for a consignment partnership.
Step 9: Price your products for profit
Your pricing strategy directly impacts your profitability. A common starting point is the cost-plus model. First, calculate your cost per bar by adding up the price of all ingredients and dividing by the number of bars in a batch. Don't forget to add a cost for your labor.
Many new makers fail to pay themselves. You should assign a value to your time, even if it's just $0.50-$1.00 per bar. Without this, you cannot accurately price for growth or future hiring.
Pricing models and margins
A standard industry formula is to double your cost per bar to get your wholesale price. Then, you double the wholesale price to set your retail price. For example, if a bar costs you $1.75 to make (including labor), your wholesale price would be $3.50 and your retail price $7.00.
This 4x markup from your initial cost ensures a healthy profit margin, typically around 50-75% on retail sales. Once you have a price, compare it to similar soaps at markets and on Etsy. If your price is much higher, your branding and ingredients must justify it.
Here are 3 immediate steps to take:
- Calculate the cost-per-bar for your main soap recipe, including labor.
- Apply the 2x markup formula to determine a wholesale and retail price.
- Research the prices of three comparable soaps to see how yours fits in the market.
Step 10: Maintain quality and scale production
Your reputation depends on consistency. A customer who loves a lavender bar expects the same experience every time. To maintain quality, keep a detailed batch log for every recipe. Record ingredient weights, lye concentration, temperatures, and cure dates to ensure each bar is identical.
Quality control standards
You should check every batch for quality. A simple metric is the pH level, which should be between 9 and 10 for properly cured cold process soap. You can test this with pH strips. Also, visually inspect for dreaded orange spots (DOS), which indicate rancidity.
Many makers get excited and sell their soap too early. A standard cure time of 4-6 weeks is not just a suggestion; it creates a harder, longer-lasting bar. Selling under-cured soap results in a soft, quickly dissolving product and unhappy customers.
Scaling your production
Once you consistently sell out at markets or have a customer waitlist, it is time to scale. This does not mean you need a factory. It could be as simple as investing in larger loaf molds or a dedicated soap pot that handles bigger batches.
As you grow, tracking becomes more complex. A system like Craftybase helps manage raw material inventory and calculates the cost of goods sold (COGS) for each batch. This data is vital for accurate pricing and tax preparation when you operate at a larger scale.
Here are 3 immediate steps to take:
- Create a batch log template to track your next soap-making session.
- Order pH strips to test a bar from your most recent cured batch.
- Analyze your last three months of sales to see if you consistently sell out of any products.
Starting a soap business is a journey of patience. Remember that a great recipe is just the start; consistent quality in every batch builds a loyal following. Now you have the roadmap, so go ahead and make that first batch.
Once you have products ready, payment should be simple. A solution like JIM turns your smartphone into a card reader, so you can accept payments anywhere without extra hardware for a flat 1.99% fee. Download JIM to get started.
