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    Do you want to start soap making business?

    Are you planning to start a homemade soap business plan? Soap is considered to be a staple commodity that has been on the market for thousands of years. For this reason, the soap production industry is increasingly witnessing a growing trend and the sector is thriving. Millions of US dollars are generated annually from the small, medium and large scale soap production enterprises. According to statistics, global bath soap market revenue totaled $18 Billion in 2016. Numerous factors such as population growth, increased hygiene awareness, value addition and increasing demand for emerging markets have positively contributed to the growth of the soap making industry. There is no doubt, this is an excellent soap making business idea to venture into.

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    Executive Summary

    2.1 The Business

    The homemade soap business plan will be registered with the name Soapex Manufacturing and will be situated in Chicago, Illinois. The business will be owned and managed by Victor Smith who’s an experienced Soap Making Specialist.

    2.2 Management Team

    Victor Smith who is the owner and manager of Soapex Manufacturing is an expert soap making specialist with vast experience the soap making industry that spans over 30 years. During Victor’s career, he worked for renowned international brands such as Henkel, Church and Dwight and Procter & Gamble among others. Given his extensive experience, he has all the skills on how to start a soap-making business plan.

    2.3 Customer Focus

    Having an in-depth understanding of customer needs and local soap making trends is the key to targeting the appropriate customer segment. After examining and identifying local emerging opportunities, Soapex intends to reach out to customers who’re looking for revolutionary and unique products.

    2.4 Business Target

    Soapex Manufacturing plans to offer 100% proven, efficient, safe and reliable products to a wide range of customers. The soap-making business plan intends to target both domestic and commercial customers to boost its market revenue share.

    Soap Making Business Plan - 3 Years Profit Forecast

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    Company Summary

    3.1 Company Owner

    Victor Smith is an experienced soap making specialist whose successful career has enabled him ascend the corporate ladder and be put in charge of key positions across various blue chip companies in the United States. Having worked on various related projects, he has in-depth knowledge of how to start small soap making business.

    3.2 Aim of Starting the Business

    Even though the soap making industry has many industry players, the demand continues to grow steadily. Increasing population and the fact that the society is embracing new approaches to better hygiene has contributed to creating new opportunities for soap making entrepreneurs. For this reason, Victor was keen to start his own small soap making industry to meet these changing needs.

    3.3 How the Business will be Started

    With 3 decades of experience in the soap making industry, Victor Smith is an expert in methodologies of setting up a homemade soap business plan. To better understand financial issues and projections, he has teamed up with financial gurus to come up with a comprehensive financial analysis.

    Soap Making Business Plan - Startup cost

    Start-up Expenses  
    Legal $3,000
    Consultants $2,000
    Insurance $15,000
    Rent $25,000
    Research and Development $15,000
    Expensed Equipment $12,000
    Signs $3,000
    Start-up Assets $0
    Cash Required $140,000
    Start-up Inventory $50,000
    Other Current Assets $30,000
    Long-term Assets $10,000
    TOTAL ASSETS $25,000
    Total Requirements $28,000
    START-UP FUNDING $90,000
    Start-up Expenses to Fund $40,000
    Start-up Assets to Fund $30,000
    Assets $20,000
    Non-cash Assets from Start-up $150,000
    Cash Requirements from Start-up $0
    Additional Cash Raised $45,000
    Cash Balance on Starting Date $20,000
    Liabilities and Capital $0
    Liabilities $0
    Current Borrowing $0
    Long-term Liabilities $0
    Accounts Payable (Outstanding Bills) $0
    Other Current Liabilities (interest-free) $0
    Capital $0
    Planned Investment $0
    Investor 1 $15,000
    Investor 2 $20,000
    Other $0
    Additional Investment Requirement $0
    Loss at Start-up (Start-up Expenses) $50,000
    TOTAL CAPITAL $60,000
    Total Funding $100,000
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    Services for Customers

    Soapex Manufacturing has the intention of offering its clients a wide range of soap products. Unlike large manufacturers who produce their products using conventional methods, Soapex plans to adopt an organic and natural approach to ensure its range of products contains natural ingredients. This is amongst the best and most creative soap-making business ideas as it sets the business apart from many competitors. In order to be successful with how to start a soap business, you must study the market thoroughly and offer products that customers really need on a daily basis. In this regard, the soap making business plan intends to offer customers the following products:

    • Offer bathing soap in a wide range of varieties i.e. strawberry, lavender and passion fruit among others
    • Sell dish washing liquid detergent manufactured using natural ingredients and is completely safe to use
    • Natural laundry and house cleaning liquid soap produced uisng the finest and powerful natural ingredients to effectively clean any type of clothes, fabrics, floors and surfaces
    • Car wash liquid soap to give cars a perfect and attractive shine
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    Marketing Analysis of Soap Making Business

    The soap making industry is highly lucrative and competitive at the same time. With the industry stable and growing, growth rates of over 4% have been witnessed since 1998. The soap making industry is quite fragmented and in the past, big brands commanded a huge market share. However, this has changed a lot with the entry of small soap-making businesses. Given the fact soap is practically used everywhere, the demand keeps increasing. In this soap making business plan, the business has identified the opportunities it can tap into to generate revenue.

    5.1 Market Segment

    In order to effectively meet the market needs, Soapex plans to sell different types of soap products after a careful market analysis of what is needed most in the market. The rise in demand for natural soap products has put the homemade soap business plan in an advantaged position since Soapex Manufacturing is all about making natural soap products that are safe, proven effective, and gentle on users.

    Soap Making Business Plan - Market Segmentation

    Business Plan for Investors

    5.1.1 Households

    Households constitute a large percentage of customers the homemade soap business plans to reach out to. Chicago is the 2nd largest city in the U.S. and with approximately 2 million households and Soapex stands a chance to gain handsomely marketing its products to domestic consumers. Homes are increasingly looking for natural home cleaning products which are free of chemicals. This is the reason why this business plan for soap-making company strictly emphasizes on the provision of domestic natural soap products.

    Households provide a ready market for the business given the fact they require an all-inclusive product range from bathing soap, household cleaning, washing detergents and car liquid soap. The secret to success depends on a well-executed marketing strategy to target Chicago households as the competition for this market segment is extremely tight.

    5.1.2 Restaurants

    Because of their nature of business, restaurants, caterers and any other food-related industry business must have a constant supply of soap products for use in day-to-day activities. The food industry in Chicago is vibrant and for this reason, Soapex has a good opportunity to reach out to numerous restaurants and hotels to market its products. Players in the hotel industry are highly regulated to boost safety of food production and ensure clients come to a clean environment to enjoy business strategy services. Adequate emphasis is therefore put on using the right kind of soaps and detergents.

    5.1.3 Schools and Day Care Centers

    In the recent times, a lot of emphasis has been placed on boosting school hygiene standards with various initiatives started to ensure children wash their hands with good quality products to prevent spreading of dirt and germs. This is a good market the homemade soap business plan can reach out to increase revenue.

    5.1.4 Offices

    Offices have unique cleaning needs which demand quality cleaning products. Soapex produces various products aimed at serving the needs of corporate customers. This Chicago soap manufacturer business plan sample aims to find ways of adverting products to offices which are expected to generate a good source of revenue.

    5.1.5 Laundry Shops

    Laundry shops cannot run their businesses without having adequate stock of different types of soap products. This is potentially a great customer target area for Soapex to advertise its products. The soap making business plan is guaranteed to receive a constant supply of orders from local laundry shops.

    Market Analysis
    Potential Customers Growth YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 CAGR
    Households 25% 25,000 27,000 29,000 31,000 33,000 10.00%
    Laundry Shops 23% 23,000 26,000 29,000 32,000 35,000 14.00%
    Restaurants 20% 20,000 13,000 16,000 19,000 22,000 12.00%
    Schools and Day Care Centers 17% 18,000 15,000 18,000 21,000 24,000 11.00%
    Offices 15% 15,000 23,000 26,000 29,000 32,000 8.00%
    Total 100% 80,000 95,000              110,000 125,000 140,000 10.00%

    5.2 Business Target

    Given the high demand for soap products around the city, Soapex Manufacturing deals exclusively with natural soap products. There are numerous health and value added benefits associated with natural soaps and detergents. The soap-making business plan has also chosen a strategic location within the city to allow for faster distribution of products. With a diverse and unique product range, the soap making business plan template expects to realize an annual sales growth of 15-20%.

    5.3 Product Pricing

    In order for Soapex to penetrate the market, the soap making business plan has carried out a pricing survey and plans to have competitive product prices based on the market averages. This soap-making business plan outline also recommends offering discounted prices on products especially when the business has just begun operating.


    There are numerous opportunities to explore in the soap making industry. We have been using conventional soap products for several years but market trends have begun to shift. More consumers are beginning to appreciate the benefits of using soaps made using natural ingredients. With the best strategies in place, Soapex stands a good chance to compete favorably on the market.

    6.1 Competitive Analysis

    When starting a soap making business plan, there is need to analyze the market in order to come up with an idea model that will sustain business operations. There are numerous soap making businesses in Chicago. However, Soapex is a natural oriented soap maker and has identified the best strategies to help the business stay ahead of its competitors.

    6.2 Sales Strategy

    For Soapex to effectively advertise its natural soap business idea to the target market, the following strategies will be used to market the business.

    • Management to effectively market products and let the public know about the benefits of using natural soap products. This will be achieved by obtaining major corporate endorsements
    • Advertise the soap making business using local media channels such as radio, television and newspapers
    • Offer clients free product samples to allow them appreciate the benefits of using Soapex natural products.
    • Direct mailing to households in targeted areas and corporate customers. Pamphlets will be dispatched to target customer locations.
    • Emphasize on staff training to enable staff fully understand the benefits of natural soap products since they are the first point of contact for the business
    • Advertise the business on digital media platforms such Facebook, Twitter and Instagram
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    6.3 Sales Forecast

    To achieve its targets, Soapex has come up with a sales forecast to determine how the soap making business will perform when it starts operations.

    Soap Making Business Plan - Unit Sales

    Sales Forecast      
    Unit Sales Year 1 Year 2 Year 3
    Bathing Soap 330,000 350,000 370,000
    Dish Washing Soap 300,000 320,000 340,000
    Natural Laundry & House Cleaning Liquid Soap 280,000 300,000 320,000
    Car Wash Liquid Soap 250,000 270,000 290,000
    TOTAL UNIT SALES 1,160,000 1,240,000 1,320,000
    Unit Prices Year 1 Year 2 Year 3
    Bathing Soap $400.00 $420.00 $440.00
    Dish Washing Soap $350.00 $370.00 $390.00
    Natural Laundry & House Cleaning Liquid Soap $300.00 $320.00 $340.00
    Car Wash Liquid Soap $250.00 $270.00 $290.00
    Bathing Soap $350,000 $370,000 $390,000
    Dish Washing Soap $320,000 $340,000 $360,000
    Natural Laundry & House Cleaning Liquid Soap $300,000 $320,000 $340,000
    Car Wash Liquid Soap $280,000 $300,000 $320,000
    Direct Unit Costs Year 1 Year 2 Year 3
    Bathing Soap $3.00 $4.00 $5.00
    Dish Washing Soap $2.00 $3.00 $4.00
    Natural Laundry & House Cleaning Liquid Soap $1.50 $2.50 $3.50
    Car Wash Liquid Soap $0.60 $2.10 $3.00
    Direct Cost of Sales
    Bathing Soap $250,000 $270,000 $290,000
    Dish Washing Soap $230,000 $250,000 $270,000
    Natural Laundry & House Cleaning Liquid Soap $200,000 $220,000 $240,000
    Car Wash Liquid Soap $180,000 $200,000 $220,000
    Subtotal Direct Cost of Sales $860,000 $940,000 $1,020,000

    Personnel Plan

    Soapex plans to employ a team of staff to run the soap making business. How to start soap making business entails coming up with a personnel plan with the roles of each staff member well-defined. A staff budget should also be determined to enable a business know how much it will spend on salaries.

    7.1 Personnel Plan

    Soapex is owned by Victor Smith who will also be the manager of the homemade soap business plan. While preparations are being made for the business to open its doors to public, the following staff will be hired in the soap making business plan.

    Plant Manager
    3 Soap Making Machine Operators
    2 Marketing Associates
    2 Distribution Truck Drivers
    1 Security Guard

    Successful applicants will undergo extensive training in order to know soap making business plan activities and how to manage the facility on a day-to-day basis.

    7.2 Average Salaries

    Soapex plans to pay its staff members the following salaries in the first three years of operation.

     Personnel Plan      
    Year 1 Year 2 Year 3
    Manager $60,000 $80,000 $100,000
    Plant Manager $30,000 $40,000 $45,000
    3 Soap Making Machine Operators $75,000 $80,000 $85,000
    2 Marketing Associates $60,000 $65,000 $70,000
    2 Distribution Truck Drivers $50,000 $55,000 $60,000
    1 Security Guard $25,000 $30,000 $35,000
    Total Salaries $300,000 $350,000 $395,000

    Financial Plan

    Soapex has formulated a comprehensive financial plan that will determine how the business will run and what shall be invested when starting a soap business. It is important to clearly define all the financial parameters in order to adequately plan business finances. In this soap making business plan, Victor Smith will finance the business and will be assisted by two investors. How to start your own soap business comes with numerous expenses and therefore, a bank loan for business plan will be secure to finance budget deficiencies.

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    8.1 Important Assumptions

    Financial forecast for Soapex will be based on the assumptions below.

     General Assumptions      
    Year 1 Year 2 Year 3
    Plan Month 1 2 3
    Current Interest Rate 20.00% 25.00% 30.00%
    Long-term Interest Rate 10.00% 10.00% 10.00%
    Tax Rate 30.00% 35.00% 40.00%
    Other 0 0 0

    8.2 Brake-even Analysis

    The Brake-even Analysis for Soapex is shown in the graph below.

    Soap Making Business Plan - Brake-even Analysis

     Brake-Even Analysis  
    Monthly Units Break-even 10000
    Monthly Revenue Break-even $480,000
    Average Per-Unit Revenue $200.00
    Average Per-Unit Variable Cost $5.00
    Estimated Monthly Fixed Cost $500,000

    8.3 Projected Profit and Loss

    Below is the Profit and Loss information for the soap making business plan calculated on a monthly and annual basis.

     Pro Forma Profit And Loss      
    Year 1 Year 2 Year 3
    Sales $500,000 $530,000 $560,000
    Direct Cost of Sales $40,000 $45,000 $50,000
    Other $0 $0 $0
    TOTAL COST OF SALES $540,000 $575,000 $610,000
    Gross Margin $350,000 $400,000 $450,000
    Gross Margin % 74.00% 80.00% 86.00%
    Payroll $300,000 $330,000 $36,000
    Sales and Marketing and Other Expenses $6,000 $8,000 $10,000
    Depreciation $4,000 $6,000 $8,000
    Leased Equipment $0 $0 $0
    Utilities $9,000 $11,000 $13,000
    Insurance $2,000 $4,000 $6,000
    Rent $12,000 $14,000 $16,000
    Payroll Taxes $35,000 $40,000 $45,000
    Other $0 $0 $0
    Total Operating Expenses $320,000 $350,000 $400,000
    Profit Before Interest and Taxes $30,000 $35,000 $40,000
    EBITDA $10,000 $14,000 $18,000
    Interest Expense $0 $0 $0
    Taxes Incurred $20,000 $23,000 $26,000
    Net Profit $120,000 $13,000 $140,000
    Net Profit/Sales 25.00% 35.00% 45.00%

    8.3.1 Monthly Profit

    Soap Making Business Plan - PROFIT MONTHLY

    8.3.2 Yearly Profit

    Soap Making Business Plan - PROFIT YEARLY

    8.3.3 Monthly Gross Margin

    Soap Making Business Plan - GROSS MARGIN MONTHLY

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    8.3.4 Yearly Gross Margin

    Profit and Loss Analysis for Soapex is shown below.

    Soap Making Business Plan - GROSS MARGIN YEARLY

    8.4 Projected Cash Flow

    Below is a summary of pro forma cash flow, subtotal cash spent, subtotal cash received, subtotal cash spent on operations and subtotal cash from operations.

    Soap Making Business Plan - Projected Cash Flow

     Pro Forma Cash Flow      
    Cash Received Year 1 Year 2 Year 3
    Cash from Operations
    Cash Sales $100,000 $120,000 $140,000
    Cash from Receivables $10,000 $13,000 $16,000
    SUBTOTAL CASH FROM OPERATIONS $110,000 $133,000 $156,000
    Additional Cash Received
    Sales Tax, VAT, HST/GST Received $0 $0 $0
    New Current Borrowing $0 $0 $0
    New Other Liabilities (interest-free) $0 $0 $0
    New Long-term Liabilities $0 $0 $0
    Sales of Other Current Assets $0 $0 $0
    Sales of Long-term Assets $0 $0 $0
    New Investment Received $0 $0 $0
    SUBTOTAL CASH RECEIVED $110,000 $133,000 $156,000
    Expenditures Year 1 Year 2 Year 3
    Expenditures from Operations
    Cash Spending $25,000 $28,000 $31,000
    Bill Payments $20,000 $23,000 $26,000
    SUBTOTAL SPENT ON OPERATIONS $45,000 $51,000 $57,000
    Additional Cash Spent
    Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
    Principal Repayment of Current Borrowing $0 $0 $0
    Other Liabilities Principal Repayment $0 $0 $0
    Long-term Liabilities Principal Repayment $0 $0 $0
    Purchase Other Current Assets $0 $0 $0
    Purchase Long-term Assets $0 $0 $0
    Dividends $0 $0 $0
    SUBTOTAL CASH SPENT $45,000 $51,000 $57,000
    Net Cash Flow $20,000 $23,000 $26,000
    Cash Balance $25,000 $30,000 $35,000

    8.5 Projected Balance Sheet

    Below is a Projected Balance Sheet for Soapex Manufacturing that shows capital, assets, liabilities, current liabilities and long term assets.

     Pro Forma Balance Sheet      
    Assets Year 1 Year 2 Year 3
    Current Assets
    Cash $300,000 $330,000 $360,000
    Accounts Receivable $20,000 $25,000 $30,000
    Inventory $5,000 $6,500 $8,000
    Other Current Assets $6,000 $8,000 $10,000
    TOTAL CURRENT ASSETS $331,000 $374,000 $408,000
    Long-term Assets
    Long-term Assets $8,000 $10,000 $12,000
    Accumulated Depreciation $12,000 $14,000 $16,000
    TOTAL LONG-TERM ASSETS $3,000 $2,000 $1,000
    TOTAL ASSETS $250,000 $280,000 $310,000
    Liabilities and Capital Year 1 Year 2 Year 3
    Current Liabilities
    Accounts Payable $16,000 $19,000 $22,000
    Current Borrowing $0 $0 $0
    Other Current Liabilities $0 $0 $0
    SUBTOTAL CURRENT LIABILITIES $16,000 $19,000 $22,000
    Long-term Liabilities $0 $0 $0
    TOTAL LIABILITIES $14,000 $16,000 $18,000
    Paid-in Capital $30,000 $30,000 $30,000
    Retained Earnings $25,000 $35,000 $45,000
    Earnings $120,000 $140,000 $160,000
    TOTAL CAPITAL $230,000 $260,000 $290,000
    TOTAL LIABILITIES AND CAPITAL $200,000 $230,000 $260,000
    Net Worth $230,000 $260,000 $290,000

    8.6 Business Ratios

    The following is the Ratio Analysis, Business Ratios and Business Net Worth for Soapex Manufacturing.

     Ratio Analysis        
    Year 1 Year 2 Year 3 INDUSTRY PROFILE
    Sales Growth 5.00% 35.00% 47.00% 6.00%
    Percent of Total Assets
    Accounts Receivable 5.00% 6.00% 7.00% 12.00%
    Inventory 4.00% 2.35% 3.00% 10.00%
    Other Current Assets 6.00% 4.00% 3.00% 33.00%
    Total Current Assets 105.00% 110.00% 130.00% 56.00%
    Long-term Assets -7.00% -20.00% -35.00% 45.00%
    TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
    Current Liabilities 6.00% 5.00% 4.00% 22.00%
    Long-term Liabilities 0.00% 0.00% 0.00% 25.00%
    Total Liabilities 6.00% 2.00% 1.20% 45.00%
    NET WORTH 95.00% 90.00% 110.00% 40.00%
    Percent of Sales
    Sales 100.00% 100.00% 100.00% 100.00%
    Gross Margin 75.00% 80.00% 85.00% 0.00%
    Selling, General & Administrative Expenses 65.00% 75.00% 70.00% 55.00%
    Advertising Expenses 4.00% 3.00% 1.50% 4.00%
    Profit Before Interest and Taxes 25.00% 30.00% 34.00% 2.40%
    Main Ratios
    Current 12 15 20 1.7
    Quick 27 31 35 3.2
    Total Debt to Total Assets 4.00% 2.50% 1.50% 65.00%
    Pre-tax Return on Net Worth 85.00% 100.00% 95.00% 4.20%
    Pre-tax Return on Assets 70.30% 65.00% 60.00% 8.00%
    Additional Ratios Year 1 Year 2 Year 3
    Net Profit Margin 20.00% 25.00% 30.00% N.A.
    Return on Equity 54.00% 58.00% 62.00% N.A.
    Activity Ratios
    Accounts Receivable Turnover 7 10 13 N.A.
    Collection Days 100 112 124 N.A.
    Inventory Turnover 20 23 26 N.A.
    Accounts Payable Turnover 15 18 21 N.A.
    Payment Days 22 22 22 N.A.
    Total Asset Turnover 2.5 3.7 4.9 N.A.
    Debt Ratios
    Debt to Net Worth 0 -0.08 -0.04 N.A.
    Current Liab. to Liab. 0 0 0 N.A.
    Liquidity Ratios
    Net Working Capital $300,000 $320,000 $340,000 N.A.
    Interest Coverage 0 0 0 N.A.
    Additional Ratios
    Assets to Sales 1.45 2 0.5 N.A.
    Current Debt/Total Assets 7% 4% 1% N.A.
    Acid Test 30 26 20 N.A.
    Sales/Net Worth 3.3 3 1.4 N.A.
    Dividend Payout 0 0 0 N.A.

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