Looking at starting a soapmaking business may seem daunting at the beginning. Still, the process is relatively straightforward, and today, we will be covering the steps on how to start a soap making business in the Philippines.
Additionally, to help you on your way, we will also be going over some tips on how to start the soapmaking business, as well as throwing in a few important pieces of information throughout today’s article.
How To A Start Soap Business In The Philippines
Step 1. Plan The Soap Making Process.
It’s clear that soapmaking follows a formula, but this formula is best examined closely when you start making soap as a business as time and cost come into play.
In other words, some techniques of the soap-making process can take a lot longer than others, and depending on the type of soap business you would like to start in the Philippines, you may find one type of soap-making process is a lot cheaper than another.
I prefer the cold-pressed technique above any other soap making technique; however, the downside is that soap often needs to rest for a considerable amount of time compared to hot press soap or any other soap making process.
The overall cost, including electricity, equipment, lye, etc., may only be a small fraction of each bar; however, if you are looking at how to start a soap business in the Philippines, it is often wise to reduce unnecessary costs without jeopardizing quality.
This stage is also a stage where you can take a step back and analyze the current situation and your overall goal. Including any market research and competition because the analysis will be necessary during steps four and five.
For more information on starting a business and a simple guide, feel free to download our free business plan shown on the tools tab at the top of this page.
Step 2. Work Out Your Costs, Prices And Then Buy In Bulk
Soapmaking in the Philippines is not only an enjoyable hobby, but it can also be turned into a profitable business. Therefore, one area to focus on when looking at how to start the soap making business in the Philippines is the costs, your profits, and how to reduce costs while at the same time maintaining high-quality soap.
The Philippines, in general, is a cheap country for many consumer goods, but there are sometimes better deals to be had in countries such as China and India.
Alibaba & Aliexpress have made the process of importing from other countries much easier. This may be appropriate for some soap business owners looking to buy pieces of equipment or supplies in bulk and cannot find reasonable prices.
These sites also include warehouses and manufacturers in the Philippines. If you are looking to buy locally from a warehouse, you may find it beneficial to visit the above websites or directly contact wholesalers.
But what about soap supplying businesses? Several soap-supplying businesses can be used; however, the prices (even though some are very cheap) are based on consumer prices and not private businesses, which means that you would be paying the same price as a customer rather than a business.
Remember the Golden rule of business and investment. You make your money when you buy and not when you sell.
In other words, the buying price is significant, and if you are looking at how to start a soap making business in the Philippines, then it’s critical that your capital is used in the correct places and not wasted.
Once you have a list of suppliers and have worked out all your equipment and material costs, you can start developing your prices and seeing how they reflect in the current market.
How much profit should you be making on products? This is a difficult question to answer as every industry is different; however, a 10 to 15% profit margin tends to be average in most cases. Less than 10% tends to be on the lower end of the spectrum, and more than 15/20% tends to be high.
Due to several factors, such as the rate consumers buy soap and the shelf life of the soap, a 15% profit margin is a good figure to aim for overall.
If you are selling on 3rd party websites such as Shopee or Lazada, they will indeed take a small commission, so it’s important to factor this when deciding how much you should initially price your soap for.
Step 3. Meeting Legal Requirements
The next stage is often one of the most confusing for entrepreneurs looking at how to start a soap business in the Philippines and one of the most important ones.
In the Philippines, soap is classed in the category of cosmetics, meaning that it falls under the Food and Drug administration umbrella.
The Food and Drug Administration (FDA) (formerly the Bureau of Food and Drugs) produced under the Department of Health is responsible for regulating cosmetic products and ensuring the safety, purity, and quality going into the Philippines market.
In the most straightforward definition, cosmetics are classed as any product that consumers use on their teeth, skin, or hair, and thus soap falls under this category.
So what do you need to do?
A. Licence To Operate (LTO)
License to operate is a license that business owners need to apply to operate a cosmetic establishment in the Philippines. This can be applied directly to the food and drug administration.
ndvlaw.com has fantastically covered this topic in detail for those of you who are wishing for some extra information. Directly contacting the Food and Drug administration will be another option available.
B. ASEAN Manufacturing Practice. (GMP)
Additionally, soap producers and manufacturers in the Philippines must comply with the conditions set on ASEAN guidelines on Good Manufacturing Practice (GMP); this is an essential part of securing your license to operate (1).
C. Notification And Packaging
It is a requirement that your soapmaking business notifies the Food and Drug administration before your product is placed on the market. The great news is that the Food and Drug Administration has made this process very simple, and it can be completed online.
Lastly, the packaging and the labeling must be law-abiding, which includes the following;
- Soap Content In Weight And Volume
- Your Brand, Soap Name And Function
- Batch Number / Serial Number
- Manufacturing / Expiration Date Of The Product In Clear Terms
- Country Of Manufacture
- Directions For Use
- List Of All Ingredients
- Special Precautions / Warnings
- Name And Address Of Company Or Person Who Placed The Product On The Market
Additionally, The Philippine National Trade Repository has an excellent article for those looking to import or export soap and includes some additional information about the Philippines’ Food and Drug administration process.
Step 4. Market Research, Testing & Soft Launches
Market research is one of the most critical areas of any business, and the great news is that market research is now much more accessible than ever in this modern world of stored information.
What kind of products do you think will be your best seller? How much soap do you expect to sell in the first six months or the first two years? How much is soap at the moment, and where are customers buying this from?
All of these important questions have a relationship with market research. If time is not on your side, there are many services on websites such as Fiverr where you can find freelancers who can research for you.
When starting a soap business in the Philippines, the next stage is the testing and the soft launch stage. Essentially this is opening up your business in a small and easy way to test operations and gather data.
This is not always essential in every situation; however, it can provide some valuable insight before deciding to open up your business entirely, so it’s something you will have to consider to see if it’s applicable for your situation.
Step 5. Marketing Your Soap Business Philippines
Now that you have some vital information about your business, it’s now time to start marketing your business to your customers.
As we mentioned before, market research is critical as it shows us who precisely the customers are, where they are and what they are expecting.
There are many different types of marketing, but one method that is often overlooked is the power of the world’s second-largest search engine, which we call YouTube.
YouTube is an exciting place where many businesses are now turning to gain free marketing for their business.
If you are starting a soap making business in the Philippines, then opening up a YouTube channel that shows people the best kind of soaps or how to make their own soap (depending on your business idea/plan) might be a fantastic marketing funnel for your business.
One of the most critical questions is the “why” of starting a soap business in the Philippines. In other words, why should customers choose your soap, why are you better than your competition, why is your soap unique, and why should customers care?
When you have your “why” answers, it will allow you to choose which marketing strategy is best for your business. As we mentioned previously, there may be an element of testing that needs to happen to find the most appropriate and profitable marketing stream.
Step 6. Reinvesting to Grow your Soap Business
At this stage, you are starting to earn income from your soapmaking business, but the question is, what do you now do with the profits you receive?
Reinvestment is often a wise choice if you are looking to grow your business, especially in the early days. Many large start-ups have gone on record to say that in the early days of business, they did not receive any income from their business for at least a year and, in some cases, even longer.
The reason for this is that they reinvested their money back into the business to fuel its growth. There are many different areas to focus on when building a business but reinvesting your profits is perhaps one of the most important.
Another question is how much should you receive as a business owner? Let’s say, for example, you are earning 30,000 pesos each month from your business. How much of that should you keep for your profits?
It depends on how much stock you have available and how quickly you want to grow. For example, one of my businesses sells herbal tea; however, I only receive a small percentage of 10% of profits from this business as the other 90% is used in business costs and growing the business.
Many other business owners and I do this because 10% may only be worth 1000 pesos today, but if a business can grow thanks to the surplus of cash, then 10% in a few years could be worth 10,000 or even 100,000 pesos.
Step 7. Expanding Your Soap Business
The last stage on how to start a soap business in the Philippines is expanding your soap empire. Many profitable soapmaking businesses venture out into different directions, which increases their cash flow and helps their business grow.
A few examples of this include branching out into producing a DIY book on soap making or becoming an independent soap-making supplier.
Alternatively, some soapmaking businesses branch out into producing other types of soap, such as liquid soap. For example, during the pandemic of COVID-19, many soap businesses branched into producing antibacterial hand soap.
Tips On How To Start Soap Business Philippines
Now that we have covered how to set up a soap business in the Philippines, it’s time we include some essential tips that will help you on your way to building your soap empire.
Imports May Be Cheaper: In some situations (depending on the equipment/supplies), importing from other countries may be a cheaper option. Of course, it’s always important to look at the delivery cost and taxation as this can increase the price, but in some cases, suppliers handle the import tax for you, and it is included in the total price.
Utilize The Power Of The Internet: The average person may not know what soap is suitable for their skin and also may not know if some types of soap can be harmful and strip away natural oils from the skin, so a great idea to expand the business is to utilize the power of the Internet by creating a YouTube channel or a blog.
Offering Soap Kits & Bundles: This is another business extension that can help your soap-making business generate sales. Filipinos often love a bargain; therefore, it may be a winner with your customers if you can offer a soap kit or gift basket.