Beauty

How to launch a beauty brand in 2018

By Lauren Indvik
25 Oct 2018

Perspective looks beyond the big idea and pretty packaging, and asks the experts to drill down into the finances – from product development and backroom costs to the figures involved to bring your brand to market.

Although e-commerce and social media have lowered the barrier to entry, launching a beauty brand costs “at least $1.5 million in capital” to fund your first 12 to 18 months, says Julie Fredrickson, CEO and co-founder of Stowaway Cosmetics.

To get your brand to launch, you’ll need:

$625,000 in salaries for an engineer, head of product, head of brand/marketing, head of operations, customer service and graphic designer. Plus whatever you plan on paying yourself.

$250,000 in initial product purchases if you plan to launch with four to six colour cosmetics in a few colourways. (FYI, most cosmetics have a minimum order quantity of more than 10,000 per item.)

$200,000 for general operational overheads for the first year.

$50,000 for initial brand and creative work to develop your identity, logos, fonts, and the colour scheme for your packaging, website and other customer touchpoints.

$50,000 for initial asset and creative production, including high-res product and lifestyle shots, as well as video tutorials, so you can show press, customers, et al what your product looks like.

$50,000 to find, lease and furnish an office. Even a co-working space like WeWork costs $500 to $1,000 per head.

$50,000 for IT, including systems development and integration.

$50,000 to set up a product supply chain and fufilment, including the cost of a warehouse.

$50,000 for an expert e-commerce firm to help with your first website build.

TOTAL: $1,375,000

Once you’ve got to launch, you’ll need to invest some funds in marketing. In the first year, plan to spend at least:

$120,000 on PR and influencer agencies

$200,000 on paid media, primarily Google ads and search, plus some Facebook or Instagram ads.

$50,000 on product giveaways

TOTAL: $370,000

Don’t expect to break even in your first year, says Fredrickson. That’ll take between two and five years, even if you grow quickly. Stowaway raised an undisclosed amount in a seed round when it launched in April 2014, and another $1.5 million from Aslanoba Capital in October 2015. If she were to do it all over again, Fredrickson says she’d allocate product spend and headcount a little differently — and go slower.

One bet that paid off? Ordering above minimum order quantities to capitalise on bulk discounts (usually around the 25,000 unit mark) and to ensure they had enough product on hand, since getting replenishments to market would take at least six to nine months. “It was a little risky but I’m glad we ended up placing larger orders,” Fredrickson says. “We literally couldn’t keep our eye palette or translucent powder in stock for months.”

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