How Long It Really Takes Indie Beauty Brands To Become Profitable

In this edition of Beauty Independent’s ongoing series posing questions to beauty entrepreneurs, we ask 15 founders and executives: How long did it take you to reach profitability?

CRYSTAL WILLIAMS Founder, The Balm Shop & Co.

When your business is self-funded, reaching profitability can take years. For me, profitability was reached in my third year of business. I used much of my savings to gradually build my brand and product line to where it is today.

Year one was all about beta testing the one product I had in a practical setting, so that I could receive instant feedback from my customer on performance. This phase also presented a unique opportunity to interact with my customer and learn what was most important to them. During year two of the business, we focused on perfecting the brand and the sales pitch and, by year three, we hit our stride.

If I had a chance to do it all over again, I would do the following: 1). Don’t over buy. There’s nothing worse than being stuck with a lot of packaging that you no longer use, so leave room for your business to evolve. 2). Don’t be afraid to pivot away from what isn’t working. If a product isn’t resonating with a customer, consider rethinking your strategy, presentation and pitch. 3). Avoid trying to be all things to all people. This is virtually impossible! Your perfect customer is out there. You just need to find him or her.

Jacinta Kanakaratnam Disruptor and Founder, The Veddas

By definition, we were profitable within the first month we launched. Not very profitable, but we turned a profit after all expenses were deducted. We would ideally love to run solely on passion, but passion, of course, does not pay the bills, and it is not sustainable! 

A mistake that we made was not building in small, but mounting costs into our budget, items as minuscule as local travel and client meals. In hindsight, we would have spent more time researching and establishing pricing formulas. However, one of our goals was to create an affordable product for consumers, which we have done. We are satisfied with that.

Phoenix Gonzalez Co-Founder, Silked

It took us two years to reach profitability. One of our biggest mistakes was agreeing to bring on a sales rep/contractor on a trial basis as a potential third partner with decision-making power in our business. It did not turn out well and cost more than it was worth to sever ties legally. We now have learned that contractors need to stay contractors and, as founders, we do not need anyone else on our founding team. 

Our second big mistake was agreeing to produce a larger number of units for one of the largest beauty conferences in the United States which wanted to sell our products alongside other indie brands at a pop-up shop they launched for the conference in 2019. We had offered to give them what we had in stock, and they insisted that we produce new units. It was a huge financial risk for us as we produce our product locally in LA and, as a result, pay higher costs. 

They ended up doing a poor marketing job even though they had 25,000 people attend, and still to this day, one year later, after 15 emails and numerous calls, they have never paid us what we're contractually owed. We learned that sometimes the promise others make is too good to be true. You should follow your gut and not cave because you think what they are telling you is real.

Elin Dannerstedt Co-Founder, NCLA Beauty

We reached profits in year one of our business. However, like many small businesses, every year was not profitable. Investing in product development and growing our team were a few of many things that affected our profitability. As we celebrate our 10-year anniversary this year, we can truly say we’ve learned a lot! While we do believe that success comes with failures, we have learned a ton, and there are some things we would have done differently. 

Looking back, we would have told our younger selves to follow our gut instincts more. There were times we did not develop a product line out of fear that it would not be well received or would not perform well. We saw a lot more success when we followed our gut and developed product lines we were passionate about. 

We also would have changed the way we felt pressure to be like other brands or competitors. Instead of growing at our own pace, we sometimes felt that we needed to catch up or be like other brands. Once we were secure and found our own brand identity, we found that growth was much easier.

Anika Goodwin Founder, OpulenceMD Beauty

I have been in business for almost six months, and I am not profitable. I could be, but I have instead chosen to reinvest any surplus back into the business in order to grow and scale. As a very young business, I believe this is more important than being profitable at this stage. I have made mistakes that have been quite costly, inventory being a large one.  

After selling out each month for my first three months in business, I went a little crazy with stocking up on inventory and way overspent, leaving very little operating capital. Inventory planning and forecasting is a big deal in the early stages of your business. It is an area that directly impacts both sales and customer service, so consider having a consultant give you advice on this part of your business. Thank goodness I was able to ride it out and stay solvent. Mistakes like this can be catastrophic.

Avalon Lukacs Founder, AURA Inner Beauty

As a small brand in the growth stage of our business, we are much more focused on cash flow than profitability at the moment, especially with all of the uncertainties surrounding COVID. Profitability is important, but so is gaining the customer and not overextending ourselves in doing so. With such grand aspirations for AURA, it's important that we continue to focus on steady, organic growth within specialty retailers while holding true to our long-term vision. 

Mistakes often turn into valuable lessons, ones you wouldn't learn had the mistake not happened. You just have to be careful not to lose too much money in the process. It's very easy to spend too much money on marketing, and I've made mistakes when selecting influencers to partner with, but it's forced me to understand the industry much better and be more careful with the partnerships I move forward with.   

Kenyata Gant Founder, Pink Lipps Cosmetics

It took me five years to reach profitability because I was making all of the wrong mistakes by myself. I had no guidance, and I was just winging it. What I would have done differently, which is what I do now, is invest and hire someone to handle my financials instead of investing in inventory as much as I was.

GARONNE DECOSSARD Founder, The Ronnie Shop

I had a very interesting trajectory. I was profitable in the beginning of my business, but, once I started mass producing and marketing, I took a loss. It wasn’t until three years that I started turning a profit. If I had to do anything differently, I would stay away from spending large sums of money to attend big expos and trade shows hoping to score retailer deals and new customers. I also spent a lot of time and money at pop-ups where, although I gained exposure and new names on my email list, they didn’t necessarily translate to sales. 

I would advise any brand starting out to spend some time researching how to reach their target customer. The key is to get in front of the person most likely to purchase your product, that sometimes include age, socio economics, behavior, interests, etc. Really build your customer profile and constantly review it based on your sales and return customer data. 

For in-person brick-and-mortar stores, it might mean partnering with other businesses who serve your target customer. Online, it’s pretty easy to run ads targeting that customer. When you look at the cost it takes for you to rent a corner booth at a big expo, where all sorts of customers will walk by with only a small percentage being your target, you can run ads for two to three months delivering your value to your customers 100% of the time or you can even buy shelf space from a small boutique who actually serves your customer for months with that sum.  

For me, it has been partnering with hair salons who use my product line in servicing the client. During the service, they will use the shampoo, the hair mask as a treatment and use Ronnie's Oil to style. They then retail the product for the customer to take home with them. This has been a very effective strategy for me and builds customer loyalty. The key is to use data and strategic partnerships to spend your marketing dollars wisely. Target your customer and retarget them. That’s how you drive sales and free up your time to grow your business.

Shadi Ghanim Founder and CEO, Fashionsta

We are continuously on the journey toward prosperity. Like many small businesses, COVID-19 altered our projected and anticipated 2020 goals, but we are grateful to still have our loyal subscribers and continuing growth. Mistakes are essentially learning curves, and our biggest lesson and curve stems from our early business model as a beauty marketplace with a heavy focus on influencer marketing.

Unfortunately, in our experience, the influencer market has become extremely oversaturated, often overpriced with minimal returns. So, we brainstormed, shifted gears and had the courage to revamp and start our subscription boxes. Word to the wise, if you’re not pivoting, you’re not paying attention.

BRITTA CHATTERJEE Co-Founder, Odele

We reached profitability within our first six months in business. Having profitable sales was a core part of our financial strategy. Our initial fundraise protected us through the uncertainties of a new launch, and our generated profits fuel our growth from there.

While this leads to more conservative growth plans out of the gate, it allows us to maintain more equity, and grants us multiple options via traditional banking partnerships or another fundraise should we choose. What’s important is the profitability grants us options—and a better night’s sleep.

Jas Chung Founder, Bombay Hair

We were lucky to become profitable in our first year, 2013. Selecting the right influencers for your brand is huge, and one thing we wish we started earlier was retargeting ads. We are heavy into it now, but, if we did that when we started, would have been even better.

ADODO ROBINSON Founder, Delali Robinson Cosmetics

It took about three years to show profitability. I made a lot of mistakes at the beginning like overstocking inventory that didn’t sell, spending money with individuals and companies without proper research on their success records, and much more. Knowing what I know now, I will not rush the launch timeline nor wanting everything to be perfect and overspending on the glitz and glam.

Heath Wilson Founder and Creator, Heathmade

It took three years to reach profitability. There have definitely been some mistakes along the way. Packaging is by far the toughest thing to get right. Whether it be the size of the labels, typos or the labels are not speaking to the consumer, I have had to invest quite a bit in fixing labels. Now, we have a thorough review process.

Joni Rogers Founder and CEO, SeneGence

We have been profitable since year one. We’ve built the company step by step, using only the funds generated from product sales. Therefore, we never had to go into debt or borrow money. I made careful financial decisions, even when it was inconvenient, to avoid making too many mistakes. Turning the kitchen of our trailer home into our warehouse and the bedroom into our packaging center, we were rooted in the principle of expanding solely from product sales. This allowed us to later expand into our first office space.

We still operate our business in this manner today, investing back into the brand as we grow. As I look back over the years, I know I was spared of the immense pressures of borrowed debts in exchange for a better night’s sleep. I can’t say I would do it any differently.

Olufunke Tonye-Preghafi CEO and Founder, Blot Beauty Cosmetics LLC

We reached profitability a few weeks shy of 12 months since commencement. We work with a factory that we have negotiated favorable margins and minimum order quantities.

If you have a question you’d like Beauty Independent to ask beauty entrepreneurs, please send it to [email protected].