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.
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.
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.
|Research and Development||$15,000|
|TOTAL START-UP EXPENSES||$75,000|
|Other Current Assets||$30,000|
|Start-up Expenses to Fund||$40,000|
|Start-up Assets to Fund||$30,000|
|TOTAL FUNDING REQUIRED||$0|
|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|
|Accounts Payable (Outstanding Bills)||$0|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$120,000|
|Loss at Start-up (Start-up Expenses)||$50,000|
|TOTAL CAPITAL AND LIABILITIES||$30,000|
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.
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.
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.
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.
|Potential Customers||Growth||YEAR 1||YEAR 2||YEAR 3||YEAR 4||YEAR 5||CAGR|
|Schools and Day Care Centers||17%||18,000||15,000||18,000||21,000||24,000||11.00%|
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.
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.
|Unit Sales||Year 1||Year 2||Year 3|
|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|
|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|
|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|
|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|
|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|
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.
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.
|Year 1||Year 2||Year 3|
|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|
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.
|Year 1||Year 2||Year 3|
|Current Interest Rate||20.00%||25.00%||30.00%|
|Long-term Interest Rate||10.00%||10.00%||10.00%|
8.2 Brake-even Analysis
The Brake-even Analysis for Soapex is shown in the graph below.
|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 calculated on a monthly and annual basis.
|Pro Forma Profit And Loss|
|Year 1||Year 2||Year 3|
|Direct Cost of Sales||$40,000||$45,000||$50,000|
|TOTAL COST OF SALES||$540,000||$575,000||$610,000|
|Gross Margin %||74.00%||80.00%||86.00%|
|Sales and Marketing and Other Expenses||$6,000||$8,000||$10,000|
|Total Operating Expenses||$320,000||$350,000||$400,000|
|Profit Before Interest and Taxes||$30,000||$35,000||$40,000|
8.3.1 Monthly Profit
8.3.2 Yearly Profit
8.3.3 Monthly Gross Margin
8.3.4 Yearly Gross Margin
Profit and Loss Analysis for Soapex is shown below.
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.
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|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|
|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|
|SUBTOTAL CASH SPENT||$45,000||$51,000||$57,000|
|Net Cash Flow||$20,000||$23,000||$26,000|
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|
|Other Current Assets||$6,000||$8,000||$10,000|
|TOTAL CURRENT ASSETS||$331,000||$374,000||$408,000|
|TOTAL LONG-TERM ASSETS||$3,000||$2,000||$1,000|
|Liabilities and Capital||Year 1||Year 2||Year 3|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$16,000||$19,000||$22,000|
|TOTAL LIABILITIES AND CAPITAL||$200,000||$230,000||$260,000|
8.6 Business Ratios
The following is the Ratio Analysis, Business Ratios and Business Net Worth for Soapex Manufacturing.
|Year 1||Year 2||Year 3||INDUSTRY PROFILE|
|Percent of Total Assets|
|Other Current Assets||6.00%||4.00%||3.00%||33.00%|
|Total Current Assets||105.00%||110.00%||130.00%||56.00%|
|Percent of Sales|
|Selling, General & Administrative Expenses||65.00%||75.00%||70.00%||55.00%|
|Profit Before Interest and Taxes||25.00%||30.00%||34.00%||2.40%|
|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.|
|Accounts Receivable Turnover||7||10||13||N.A.|
|Accounts Payable Turnover||15||18||21||N.A.|
|Total Asset Turnover||2.5||3.7||4.9||N.A.|
|Debt to Net Worth||0||-0.08||-0.04||N.A.|
|Current Liab. to Liab.||0||0||0||N.A.|
|Net Working Capital||$300,000||$320,000||$340,000||N.A.|
|Assets to Sales||1.45||2||0.5||N.A.|
|Current Debt/Total Assets||7%||4%||1%||N.A.|
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