Do you own a successful soap making business? Then, do you know what is your soap business profit margin. If not, then, what is it that one thing that makes it a success?
Does your business bring in enough money to cover your bills? Or it brings way more than that?
Is it that you get repeat orders from loyal customers? Or your stores run out of products?
Do you know how much profits you make per bar of soap? Are you happy with the profits or would you want to make more profits in your handmade business?
If you keep asking these questions. Then, you should read further.
How to Make More Profits in a Soap Business
Calculating the soap business profit margin is an important aspect of understanding profits. That is why you should know —–>
How to Calculate the Soap Business Profit Margin
Profit is the difference between revenue and expense. This difference lets you know how much money you made. But it does not help you know how good that profit is. Meaning it does not tell you if you can sustain your business.
To determine if your handmade business is on the road to success, you need to know the profit margin.
Profit margin refers to the amount you make per dollar sales. If you sell more than one product. Then, the profit margin indicates how much you make in your entire sales portfolio.
Hence, it is important to go beyond profit to know your soap business profit margin. The more the profit margin, the more money you have at your disposal. The profit margin helps you know how successful your business will be in the long run.
The simple calculation for the same is as follows:
Profit Margin = Revenue – Costs/ Revenue *100
In the above formula, you should include all your costs. So, it can have the cost of equipment that is a one-time purchase along with the regular materials cost.
For example, if your costs for a batch of soaps are as follows:
- Carrier oils – 200 $
- Essential oils – 100$
- Packaging, Labelling, and Shipping – 100$
- *Utensils – 500$
- Revenue – 1000$
Then, we can calculate the Profit Margin as follows:
[1000 – (200+100+100+500/100)]/1000*100 = 59.50%
* Since it is a one-time cost, it is divided by 100. It is an assumption that the utensils will last to make 100 batches of soap.
That means for every 1$ spent, you are earning almost 60 cents. Then, by all means, these numbers show a healthy business.
As a handmade business owner, your soap business profit margin should keep increasing. Therefore, it is essential to know —–>
How to Increase Profits in a Soap Business
1. Reduce the Cost of Soap Making Supplies
This one is the universal rule of business to increase the profit margin. But you have to practice it with caution.
Reducing the cost of supplies can hurt the quality of the final product. Therefore, instead of using cheap supplies, you should buy them in bulk. That way you will be able to reduce the cost of raw materials without compromising the quality.
But to execute this you must know your sales figures. It is important to know your current sales figures so that you can —–>
2. Increase Your Sales Volume
To increase your sales volume, it is important to know what your current average sales are.
If you know your average sales volume per month. Then, you can identify what factors contribute to it. That way you will be able to do more sales by increasing the factors that increase sales.
For instance, during fall, pumpkin spice soaps could see an upsurge. Or charcoal soaps may form the bulk of sales every month. Both of these sales trends can give valuable data on customer shopping preferences.
If you can pinpoint trends from your sales data. Then, you can use it to boost your sales.
3. Improve Your Soap Distribution Business
Shipping and logistics form a significant cost in the business. That is why it is necessary to keep them low to increase the soap business profit margin.
Because we are living in a pandemic era, in-store purchases are an all-time low. Hence, shipping the products via postal services is the new normal.
Hence, to save costs, the soap business should strive for the cheapest shipping rates. A lot of it depends on where you live and where your customer lives as well as the weight/volume of your soaps. For the same, you can use services like Pirate Ship to bring down your shipping expenses.
4. Reduce Your Marketing Expenses
Marketing is the necessary evil that no business can do without. Irrespective of the stage that a business is in, it has to invest in marketing.
Print/TV/billboard ads are beyond beginner handmade business entrepreneurs. But they can promote craft business with digital marketing which is low in expense. Furthermore, digital alternatives deliver marketing goals despite being cheaper than the traditional ones.
5. Diversify Into Appropriate Extensions
Once you know what ticks with your customers. Then, it is easy to funnel them into similar products that pique their interests.
Meaning if you know that unicorn-themed soaps sell the best. Then, instead of coming up with a new theme of soaps. You can rather introduce other unicorn based bath and body products. So, the options could be bath bombs, scrubs, or lotions with a unicorn theme.
This way you get to dive deeper into your handmade business niche. This in turn increases your chances to make more sales. Thus, more the chances of better profit margins.
How to Make a Good Profit Margin in Soap Manufacturing from the Beginning?
1. Start With a Solid Business Plan
If your business cannot talk numbers. Then, trust me you will never be confident about its profitability.
Sales and expenses determine how much money you bring to the table.
One of the best ways to have a sustainable creative business is to come with a handmade business plan.
A plan lets you visualize how to achieve financial goals with your handmade products. Though a business plan may seem daunting for the novice creative entrepreneur. But it is fine to determine and track only the basics in the initial stages.
Average product price, expenses, and time to break even are some of the crucial figures in the plan.
2. Understand the Niche That You Are Selling To
Every successful handmade business upscales by staying true to its niche. In simple terms, a niche refers to the branding that you have built for your enterprise.
The branding helps the audience understand what your business is all about. If you can communicate to your audience what you do as a business. Then, the next step of expanding becomes much easier.
If you are doubtful about your handmade business niche. Then, sit back and think who would be your ideal customer. From there you will get answers to most of your questions.
This post may contain affiliate links. That means if you purchase any of the products mentioned in this article through routing via the links in this post. Then, I may end up receiving a certain monetary percentage from the sale. Though the one who purchases through the link does not end up paying anything extra apart from the mentioned MRP on the product. Full disclosures on the Affiliate Page.
3. Build and Serve a Loyal Fan Base
If you have experience in running a business. Then, you would agree with the fact that it is much easier to serve existing clients than to find new ones.
Thus, it is important to stay connected with customers. For the same, newsletters work the best. They are a cost-effective means to update about your new product line and offers.
Moreover, unlike social media, newsletter services are not subjected to algorithm changes. That means there is not a constant learning curve that will keep you away from your business. Rather, with time it will become one of the best marketing channels for your business.
If you intend to start a soap making business. Then, you must grow and nurture it.
Growth requires a sustainable healthy soap business profit margin.
That means an increase in your profit margins should be an ongoing activity.
Selling more soaps and keeping expenses to a minimum ensures good profitability. But apart from that, you should also invest in appropriate marketing channels. That is how all the cumulative efforts bring in holistic gains.
Do you own an artisan soap making business? What do you do to maintain healthy profits?
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