Do you want to start soap making business?

Are you planning to start a soap business? 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 business idea to venture into.

Executive Summary

2.1 The Business

The soap business 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.

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 intends to target both domestic and commercial customers to boost its market revenue share.

Soap Making Business Plan - 3 Years Profit Forecast

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 soap making business. 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
TOTAL START-UP EXPENSES$75,000
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$0
START-UP FUNDING$90,000
Start-up Expenses to Fund$40,000
Start-up Assets to Fund$30,000
TOTAL FUNDING REQUIRED$0
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
TOTAL ASSETS$0
Liabilities and Capital$0
Liabilities$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
TOTAL LIABILITIES$0
Capital$0
Planned Investment$0
Investor 1$15,000
Investor 2$20,000
Other$0
Additional Investment Requirement$0
TOTAL PLANNED INVESTMENT$120,000
Loss at Start-up (Start-up Expenses)$50,000
TOTAL CAPITAL$60,000
TOTAL CAPITAL AND LIABILITIES$30,000
Total Funding$100,000

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 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

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 business at an advantaged position since Soapex Manufacturing is all about making natural soap products which are safe, proven to effective and gentle on users.

Soap Making Business Plan - Market Segmentation

5.1.1 Households

Households constitute a large percentage of customers the 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 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 soap making business 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 an adequate stock of different types of soap products. This is potentially a great customer target area for Soapex to advertise its products. The business is guaranteed to receive a constant supply of orders from local laundry shops.

Market Analysis
Potential CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
Households25%25,00027,00029,00031,00033,00010.00%
Laundry Shops23%23,00026,00029,00032,00035,00014.00%
Restaurants20%20,00013,00016,00019,00022,00012.00%
Schools and Day Care Centers17%18,00015,00018,00021,00024,00011.00%
Offices15%15,00023,00026,00029,00032,0008.00%
Total100%80,00095,000              110,000125,000140,00010.00%

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 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 business has carried out a pricing survey and plans to have competitive product prices based on the market averages. This business plan soap making outline also recommends offering discounted prices on products especially when the business has just began operating.

Strategy

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, 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

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 SalesYear 1Year 2Year 3
Bathing Soap330,000350,000370,000
Dish Washing Soap300,000320,000340,000
Natural Laundry & House Cleaning Liquid Soap280,000300,000320,000
Car Wash Liquid Soap250,000270,000290,000
TOTAL UNIT SALES1,160,0001,240,0001,320,000
Unit PricesYear 1Year 2Year 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
Sales
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
TOTAL SALES
Direct Unit CostsYear 1Year 2Year 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 soap making business. 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.

Owner/Manager
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 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 1Year 2Year 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 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 will be secure to finance budget deficiencies.

8.1 Important Assumptions

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

 General Assumptions   
Year 1Year 2Year 3
Plan Month123
Current Interest Rate20.00%25.00%30.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate30.00%35.00%40.00%
Other000

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-even10000
Monthly Revenue Break-even$480,000
Assumptions:
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 calculated on a monthly and annual basis.

 Pro Forma Profit And Loss   
Year 1Year 2Year 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%
Expenses
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/Sales25.00%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

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 ReceivedYear 1Year 2Year 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
ExpendituresYear 1Year 2Year 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   
AssetsYear 1Year 2Year 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 CapitalYear 1Year 2Year 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 1Year 2Year 3INDUSTRY PROFILE
Sales Growth5.00%35.00%47.00%6.00%
Percent of Total Assets
Accounts Receivable5.00%6.00%7.00%12.00%
Inventory4.00%2.35%3.00%10.00%
Other Current Assets6.00%4.00%3.00%33.00%
Total Current Assets105.00%110.00%130.00%56.00%
Long-term Assets-7.00%-20.00%-35.00%45.00%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities6.00%5.00%4.00%22.00%
Long-term Liabilities0.00%0.00%0.00%25.00%
Total Liabilities6.00%2.00%1.20%45.00%
NET WORTH95.00%90.00%110.00%40.00%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin75.00%80.00%85.00%0.00%
Selling, General & Administrative Expenses65.00%75.00%70.00%55.00%
Advertising Expenses4.00%3.00%1.50%4.00%
Profit Before Interest and Taxes25.00%30.00%34.00%2.40%
Main Ratios
Current1215201.7
Quick2731353.2
Total Debt to Total Assets4.00%2.50%1.50%65.00%
Pre-tax Return on Net Worth85.00%100.00%95.00%4.20%
Pre-tax Return on Assets70.30%65.00%60.00%8.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin20.00%25.00%30.00%N.A.
Return on Equity54.00%58.00%62.00%N.A.
Activity Ratios
Accounts Receivable Turnover71013N.A.
Collection Days100112124N.A.
Inventory Turnover202326N.A.
Accounts Payable Turnover151821N.A.
Payment Days222222N.A.
Total Asset Turnover2.53.74.9N.A.
Debt Ratios
Debt to Net Worth0-0.08-0.04N.A.
Current Liab. to Liab.000N.A.
Liquidity Ratios
Net Working Capital$300,000$320,000$340,000N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales1.4520.5N.A.
Current Debt/Total Assets7%4%1%N.A.
Acid Test302620N.A.
Sales/Net Worth3.331.4N.A.
Dividend Payout000N.A.