Handmade Soap Business

Author: Balaji Shankar, Jun 1, 2024

In this article we will study the pros and cons of a handmade soap business: its viability, capital required, risks involved, branding, marketing and so on.

Soap making at home

Soap is one of the easiest things we can make at home with very few ingredients and equipments. But while soap making is easy, making a very good soap takes years of practice. In this respect soap is like tea ; almost anyone can make tea, but it needs a lot of expertise to make excellent organic green tea. It requires a lot of practice and courage to waste before one can become a good soap maker.

Ingredients to make handmade soap

At the bare minimum handmade soap requires three ingredients: caustic soda, RO water and a vegetable oil. One can improvise and try blends of oils instead of one oil and fragrance oils or essential oils for flavor. There are several hundred additives to soap to give you a mind boggling variety including various clays, vegetables, fruits, coffee, carbon, mica and so on.

How to make handmade soap

In our opinion, cold process soap is the only true handmade soap. Melt and pour from a bought out base or using glycerin are all merely dressing up someone else's soap. In cold process soap making, there are a few steps (for obvious reasons I am not discussing recipes here. You got to try out a lot of combinations and ingredients and then come out with your own recipe).

1. Measure out your lye crystals (caustic soda) and dilute them slowly in twice the amount of RO water. (Make sure you understand all the risks of working directly with caustic soda. It can be very corrosive and dangerous). Watch a lot of youtube videos before you try this - you need protective gear for eyes, body, hands, feet and so on. This is the first step. Let the lye solution cool until it reaches room temperature. Always mix your lye solution in an open space. If you cannot do that then you better not do soap
.
2. Measure out your oils (in India it is best to use coconut oil with other oils)
3. When it traces pour it into a mold.
4. Unmold after 24 to 48 hours
Thats all ! Your soap bar is ready.

Let it cure for 3 to 4 weeks if your weather is hot; 5 to 6 weeks if you live in a cold place.

Steps Involved in Handmade Soap Business

1. You need to be an expert in making cold process soaps. You should be able to produce a predictable number of soaps per batch and each should be of a fixed weight (+/- 10%).
2. Use your soaps at your family and listen to user feedback - do not try to push it down their throat.
3. Keep perfecting your recipe until you can confidently produce N number of soaps per day or week or whatever.
4. Find a good name for your soap
5. Print cartons or at least buy plain cartons and have sticker labels printed.
6. Once it is a decent package, give free samples to friends and family.
7. Once everyone likes your soap, arrive at a price and sell them to friends and family. (we will discuss costing and marketing later)

Equipment for soap making business

You need a fair bit of equipment to make handmade soap

. 1. Vessels Always use pure stainless steel vessels for measuring and mixing lye as well as blending. NEVER use aluminium or glass. If you can get HDPE plastic you can use it.
2. Blender - a power driven stick blender is recommended.
3. Soap molds (silicon or wooden - as you like)
4. Protective Gear Welder's glasses , gloves, apron, shoes, mask
5. A working table (like a kitchen table)
6. A sink (for washing vessels, blender etc) - do not use your kitchen sink or kitchen table .
7. A curing table or shelf (for air curing the soap for 3 to 4 weeks.
8. Soap mold
9. Soap cutter
10. Miscellaneous things like knives, waste cloth, a secure dust bin (for discarding lye related waste cloth)

Other things you can buy on a need basis as you go and grow.

Capital required

How much capital you need is very much dependent on your business plan.

You will need capital for 4 things mainly

• equipment purchase - this may be around Rs.10,000 - 15,000 for a single person operation
• production and packaging (raw materials, packing materials, consumables and so on) - 5,000 - 7,000
• marketing &
• working capital

Working capital is the amount of money you need to keep the operation smoothly running. It is a good rule of thumb to have money for 3 months' expenses and production.

If you want to sell 2000 soaps in the first year, and if your recipe costs you Rs 35 for raw materials for a 100gm soap, then you need 500 x 35 = 17,500 for producing 3 month's worth of soap.

Marketing we cannot predict, because it depends on where and how you plan to sell your product. It is recommended to first work on friends and family and then try to go and pitch to your social media groups like facebook, whatsapp etc.

So in all, if you can sustain yourself for a year without any revenue (and you are willing to work 16 hour days!) and if you have a spare 50,000 rupees for production and another 1,00,000 for marketing then you can think of handmade soap as a full time activity.

Profit % in soap making business

Profit of course depends on your pricing. Generally it is a good idea to price your MRP at 3 times the material cost. This is assuming you are supplying your free labor. It is a fair practice to allocate 1/3 to marketing (whether it is dealer or amazon or whatever way you sell. It is called cost of selling), 1/3 to production and 1/3 as your profit (labor).

Many handmade soaps are exorbitantly priced at 7 times the material cost or more. In our opinion this is unfair trade.

GST for Handmade Soaps and eCommerce

The GST laws for handmade soap are very funny in India. Till you reach a turnover of 20 lakhs a year, you are considered a tiny business and you are exempt from GST. However, this is only if you sell within your state. If you want to put a shopping cart or if you try to sell through amazon or flipkart, then you have to register for GST and pay a whopping 18% as GST!

Registration & License for Handmade Soaps

If you are selling locally (within your state) and your sales is less then 20 lakhs a year, you do not need a license or registration for handmade soap making and selling. Since soap is not a food item there is no requirement for FSSAI certification or license.

Business Plan for Handmade Soap

Production of Handmade Soap

Make sure you can produce an excellent soap with a predictable weight, texture, fragrance and lather no matter how much demand is there. Do not go to the market until you have solved all problems of production, curing, storing, packing and dispatch.

Pricing of Handmade Soap

After you perfect your recipe and production, please sit down and write a detailed costing for your soap. Once you know the cost, see if you can sell it at 3 times the cost of raw materials. If you cannot then your business will not be viable or scalable. You cannot grow and accommodate your other costs like selling, delivery, taxes etc. If you do not have an MRP that is 3 times the material cost, you are better off not doing this business.

Marketing of Handmade Soap

This is the toughest part. It is difficult to differentiate yourself in an overcrowded market. I do not have a magic formula or Alladin's lamp to solve this. You got to reach more people with a good product and a decent price tag.

Social media marketing may work if you are a respected member of large groups. But friends & family generally don't like spam posts or nagging cousins!

Internet marketing is very expensive if you do not know the workings of SEO or Google Ads. If you can learn facebook or google ads and manage it yourself (paying only for the clicks) then it may work. But even then it is very daunting and may take a lot of time to give results.

Farmer's markets or direct interaction fairs (like home expo) are effective if you can man the stall yourself (with an on call assistant for moving boxes, transport etc). But you have to do a proper cost-benefit-analysis and break-even sales to cover the cost of the stall.

Dealer Sales

If your soap is comparable in price to commercial soaps like rexona or cinthol (meaning 20-25 rupees more), then you can try to do a local distribution through retail stores. But this involves extra effort and also extra working capital (as the dealers will take their own sweet time to pay you!).

The advantage with this method is the scalability. If you can get 50 shops to stock your soap and they each sell 10 soaps a month you will end up with a 500 soaps a month market. You may have to give 25% discount to the dealers.

Is soap making a profitable business?

It is and it is not. In my opinion as a soap maker of 5-6 years, it is a very creative and self-reliant way of self-employment. It is possible to earn 1000 to 1500 Rs a day if you can market all the soap you produce. But it is not a scalable business. If you earn 1 lakh in the first year then you can scale to 5 lakhs earnings in the the third or fourth year, but after that it is difficult to grow because of resource constraints.

If you are the creative and contented type of person who values independence and harmony, then soap making is a very good option. If you want to earn 20 lakhs a year and keep growing then soap making may not be a good option.

Is there a demand for handmade soaps?

Oh yes! The demand keeps growing day by day. It is a sunrise industry. According to the imarc group study, The Indian bath soap market was valued at US$ 3,063.9 Million in 2023. (Something like 25,000 crores a year!).

The handmade soap industry is not even 0.1% of this. So there is plenty of market for good, handmade soaps.

The problem is reaching the customers interested in handmade soaps and fulfilling their order. If your soap is good, then customer retention is very high in handmade soap business.

Conclusion

You can look at handmade soap as a part time activity until you establish a market for your soap. You can make it a full time activity when your numbers give you that confidence.

At Doodle Soapery we make the finest organic, cold process, natural handmade soaps at an affordable price of Rs 95 for 100g.