Beauty market

How to Start a Beauty Business, According to a Financial Planner

Entrepreneurship is rooted in sacrifice and requires immeasurable commitment, but the financial rewards are worth it. According to Federal Reserve Board data, in 2019 the median family net worth was $122,000; for self-employed families, it was $380,000. This difference was at the heart of 35-year-old Pittsburgh resident Andrea M. Robinson’s mind when she set out to create Forever Drea Marie, a luxury botanical skincare line. Robinson plans to launch her beauty brand in the second quarter of 2022, but wants to make sure she makes smart financial decisions. Here, Brittney Castro, Certified Financial Planner for Mint, an online budgeting tool, shares the financial strategy that will propel Robinson’s business to short- and long-term success.

Andrea’s financial statistics

Estimated annual pre-tax income: $25,000.
Monthly expenses:
$900, including product and marketing costs, plus office space.
Estimated Total Net Worth: $25,000.
Debt: $20,000, including website creation, inventory and photos.
Savings: $20,000.
Financial objectives for the company: Double income in the first year, with the hope of generating enough capital to expand into the makeup category.

Decide how you will fund your business

Andrea should first research the beauty market, figure out how much money she needs to start the business – that’s what we call capital. All financial sources (traditional bank loan, angel investors, venture capitalist) have their pros and cons. For example, traditional loans are attractive because you can remain the sole owner of your business, but you usually need to show financial statements and have a good credit score to qualify. Meanwhile, angel investors and venture capitalists are asking you to hold pitch meetings to get people interested in your business idea.

Determine how much capital you need to get started…

Although not all businesses are built equally, one way to understand the basics is to talk to other beauty business owners about the capital they used to start their journey – the website of the Small Business Administration is an excellent resource. Starting a business tends to take more time and money than initially envisioned, so it’s always good to give a buffer.

…While keeping in mind that you will not be profitable at first

Andrea should store as much income as possible. Create a profit-oriented account, accumulating at least 10% of revenue per year, rather than spending it all on business expenses. Andrea should also plan for the possibility of not being able to afford a salary for a few years.

Create a budget

It is important for Andrea to keep not only a business budget, but also a personal budget. It is equally important to consider where other sources of finance for the business might come from, whether it is a loan, family or friends, or personal reserves. She can start by reviewing her personal budget in the Mint app, which includes identifying areas where she might be able to cut spending.

Plan how to repay lenders

If Andrea needs to take on more debt to fund the business, she should create a debt repayment strategy. Start by making the largest debt payments with the highest interest rate first, while paying the minimums on the rest.

This story appears in the May 2022 issue of Marie Claire.

Cover Marie Claire Amanda Seyfried 2022

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