Cosmetic business is one of the promising ventures, proving resilient even in the face of economic turmoil and business sector upheavals during the pandemic. The beauty industry, in particular, has witnessed a surge of up to 300 percent and is expected to continue growing.
The good news is that this business not only holds significant potential in the national market but also globally. Unfortunately, not everyone can effectively capitalize on this opportunity, especially novice entrepreneurs who may be perplexed about the initial steps to start a cosmetic business.
If you find yourself in this situation, consider the following steps as a guide.
1. Determine Your Target Customer
According to Seth Godin, having a product with an existing market makes it easier and faster to grow compared to selling a product without an established market. Therefore, conduct initial research on which cosmetic products are most in demand in the market.
When deciding which cosmetic products are sought after, identify the most potential market. For instance, cosmetic products targeting the 25 to 40 age group may have higher sales (due to their purchasing power) compared to products for teenagers. Thus, focus on the 25-40 age group and determine the most desired products within that range.
Additionally, gather information about various demographic and psychographic aspects of your target customers. This will facilitate your promotional efforts.
2. Research Your Competitors
In Indonesia, there are already numerous cosmetic businesses, with a notable increase of 913 industries from 2021 to mid-July 2022, 83% of which are in the MSME segment.
Competitors serve as benchmarks, especially in terms of pricing. For example, if you plan to sell a toner with ingredients A, B, C, find out the general market price for toners with similar features.
Study what makes competitors attractive to the target market, such as their marketing strategies. However, remember not to copy exactly what they do—follow the ATM method: Observe, Imitate, and Modify.
3. Develop a Solid Business Plan
Once you’ve identified your product, target market, and assessed the competition and market conditions, it’s time to create a comprehensive business plan. You can use the Business Model Canvas as a simple yet complete starting point.
Understand the sources of your funding and how these funds will be distributed. Additionally, map out the channels that will be used for sales and promotion activities.
Furthermore, have a deep understanding of the product you are offering: what sets it apart from similar products, what makes it superior to competitors, and other distinguishing features.
4. Prepare Adequate Funding
Ensuring you have sufficient capital is crucial. The amount of capital needed should be determined by the calculations required to run the business, covering both product and operational aspects.
Create projections for how long the capital can sustain your needs. For example, if the expected sales targets are not met for three consecutive months, is there still enough capital for improvisation or other adjustments?
Additionally, set aside emergency funds and allocate a budget for promotions. Many business beginners neglect separating funds for promotions, even though the allocation for promotion needs, especially for new products and brands, can be substantial. Avoid letting your business’s cash flow become chaotic due to misallocated funds.
5. Maximize Promotion
As mentioned earlier, you are not the only cosmetic business player. As a consumer, you would likely choose a product from a well-known and proven brand over a new brand, right?
Therefore, convincing potential customers in the early stages will require extra effort. You need sufficient capital and the right strategy for promotions.
Fortunately, in today’s era, digital marketing makes promotion easier. Utilize social media and advertising services on platforms like Google, Facebook, Instagram, or others according to your needs and capabilities. This approach will help increase public awareness of your business and products.
These are some steps to kickstart your cosmetic business. Beyond funding, there are many other strategies you must undertake to thrive in the promising yet competitive cosmetic business landscape.
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