How much does a supplement company cost?
So you are considering starting a supplement company? Before you begin you need an answer to one very important question: how much does a supplement company cost?
Every business will be slightly different and the costs will vary based on the ingredients of your product as well as the packaging and marketing that you choose to use. This article will provide some detail on the sorts of things that you may have to pay for so that you have all of the information that you need before you start. If you are unsure about whether to start a supplement company in the first place, we cover that topic here.
Things that you will need to pay for
Starting a business is complicated with many things to consider before you can confirm whether it is the correct choice. One of the barriers to starting any business is estimating and managing the initial costs prior to making sales. The money will need to come from your own savings, investors to the company or from a loan.
Where to get your starting capital
Loans are a great option to get some initial starting capital to expedite the first stages of your business. However, you need to put together a watertight business plan for the loan provider to approve your application. If you are unable to convince them of the investment then you may be stuck looking at another option.
Investors will be similar to a loan, but may have more flexible conditions, such as taking shares rather than repayments. As with loans, you will need to be able to present your business plan to them in a manner which will convince them that your business is worth their time and money. One benefit of investors is that they may provide you with expert advice from other investments that they have made and guide you in your business decisions. If you get the right investor, this can be invaluable.
The most difficult option is to use personal savings. Obviously, these take time to save up, but if you are able to put in your own capital to start the business, then you will have nobody to answer to and won’t have to worry about any of your profits having to go into repayments or other shareholders.
Take the time to research the options in detail and choose the one that is most appropriate for your business. Whichever option you choose, its vital to have a detailed business plan that can guide your initial decisions.
Business Setup
The first thing that you will need to consider is insurance and legal fees that might be necessary. Since you will be selling products to the public, particularly ones that they will ingest, it is wise to have some product liability insurance just in case somebody gets ill. Do not treat the insurance as immunity, remain vigilant throughout the process to ensure that your products are high quality and ingredients are suitably disclosed to prevent any problems.
It can also be prudent to purchase inventory insurance to cover against anything that might happen to your stock. This is especially important if you are expecting to store large quantities in a warehouse somewhere. This means that you won’t lose everything and be stuck with a business that hasn’t even had a chance to start if there is an incident that is out of your control.
Branding
Your company brand is vital to the success of your product. You will need to put significant time and at least a small amount of funding into creating a brand identity that will inspire and reassure your customers. We recommend that you work with a graphic designer for company logos and packaging ideas as their expertise will help you create professional assets which convey your desired company image. While label design comes at a later stage, this is another aspect of the process which can be aided by a graphic designer. You may also want to find a supplement label printer to assist with the label printing service. Since the label is the thing that your customers are likely to see most, it is arguably the most important part of your branding so don’t cut corners with it!
Formulation
When it comes to supplement products, there are two main options in the industry. Either you can sell an existing product under your own brand, or you can develop a new product with a unique formulation based on ingredients or properties that you would like your supplement to have. If you decide you would like a unique formulation then you will need to have it developed by a qualified nutritionist to ensure that it is safe and legal and will have the desired effects on the consumer.
If you, or someone within the company, holds such a qualification then you can carry out the formulation process in house, but if not, you will need to consult with a nutritionist for a fee. Since many of these nutritionists are self-employed the costs can vary greatly. Carry out careful research on the best person to work with your business.
There are also some manufacturers who offer this service, but again this will come at an extra cost. Whether you are working with a nutritionist or with a manufacturing company for your product development phase you should make sure to ask lots of questions and only accept answers that you understand. Learn why every ingredient is included in any formulation under your brand despite formulation being a very complicated process. That way, you can make sure that the supplement is doing what you want it to and you can remove or reduce the right ingredients at a later stage if you run into problems with supply or costs.
Supplement Company Manufacturing Cost
You need to find a good manufacturer as this is key when starting a supplement company. Your products’ quality can be significantly affected by the manufacturers methods. Reputable manufacturers will use trusted suppliers for ingredients and carefully maintain high standards across all areas of the manufacturing process. While there are cheap ingredients on the market, don’t cut corners. Many of them are from unreliable suppliers and may not be fully tested, or contain the desired compounds in reliable quantities.
Ingredients
Supplement cost for your company can vary greatly depending on the ingredients that you would like to use. If you have chosen to go down the route of a white label supplement (pre-formulated by a manufacturing company) then there are often some cheaper options available as the company will be able to buy large quantities of the required ingredients in. Costs depend on the ingredients used so creating your own formula does not necessarily mean that costs will be higher. Good manufacturers should help you with this process, advising on which of your ingredients are expensive and giving you alternatives. Some manufacturers will have in-house formulators who can help you put together your product from start to finish. Make sure to find out about this before working with an external formulator.
Classifications and certifications
Depending on the type of product that you would like to sell, there may be additional classifications, testing or certificates required to meet with certain standards. For example, if you would like an organic, kosher or halal product you will need to have your product assessed. The assessors make sure it meets the required standards before you can advertise it as organic, kosher or halal.
These assessments often come as an additional cost which can be hundreds of pounds. Make sure that your manufacturer is of a suitable standard to pass the requirements set by the relevant assessment body. Things to look for are GMP certification, connections with the Soil Association for organic products and certification with an organisation such as the The Halal Trust for halal products. G&G is an example of a manufacturer who possesses all of these certifications (amongst others). This means G&G can produce any of these specific types of products without issue.
Packaging
The label is not the only part of the product that your customers will see and use to recognise products. The packaging itself can play a big role in making your product distinctive and supporting your brand. For example, if you are promoting your company with values of sustainability and care for the environment then you will need to make sure that the packaging you use is recyclable or your brand will come across as insincere.
Most manufacturers will work with a Minimum Order Quantity(MOQ). This is because the ingredients need to be mixed, machines need to be cleaned between products, and a certain amount of labour is required for every capsule that runs through the factory. For most startups lower MOQs are preferable because they allow for products to be made with less initial capital. Make sure you ask your manufacturer about MOQs so that you do not waste your time sorting out all of the logistics only to find out that they won’t work with you unless you order five times as much as you were hoping to.
For most products you should allow at least £1000 for ingredients, manufacturing, labels and packaging, although this can differ greatly. Supplements containing Vitamin K and probiotics are often more expensive due to the cost of these ingredients from suppliers.
Supplement Company Marketing Cost
People often place branding and marketing together, but they are very separate and each incurs different costs and considerations. You present your product to the customer through branding. Marketing is responsible for how you make sure that your customers see this presentation. While they are separate, your branding and marketing need to work together to coherently convey your company values.
You need to think about what sort of advertising you will use, whether on tv, social media, search engines, YouTube, your own website, or through a variety of physical mediums like leaflets and billboards, all marketing will cost you money. How much you would like to spend is up to you, and the strategy that you want to employ. Depending on the scale of your project, you could end up spending a few hundred pounds or tens of thousands.
Set realistic targets for your marketing and we generally recommended to start with targeting a specific group. Then expand your range slowly rather than trying to reach as wide a range as possible from the start. By setting a focus you will be able to attract the sorts of customers that are more likely to convert. You will avoid spending a great deal of money informing people of your product who have no interest in it.
Want to sell your own supplements?
Supplement Company Selling Cost
Once customers know about your product and want it, they need to be able to purchase it quickly and easily. The first big choice in how to sell your products is whether to sell online or through a physical store. You do not have to be exclusive in this, many businesses sell both online and at physical locations. However, it can be useful to put more focus on one so your marketing points customers to a single location.
Selling products in a physical store is a more traditional approach and has options for how it can be done. Firstly, you could open your own store to sell the products. This is extremely expensive and can be quite risky. You need the right location, good staff and enough customers in a local area that will want your product. It’s also important to offer various products as it would be unusual if an entire store only offers one product! However, if you are successful then you will have extensive control over how your customers see you brand. You can use this to show off your products and influence their purchasing decisions directly.
Selling in established stores
Alternatively, you can sell your products in an already established store which saves you a lot of logistics and upkeep. Usually you have to pay for your product to be featured, but this can vary depending on multiple factors. Additional promotional material in the store, how much of your product you will be wanting to sell there, the size of the store and even where in the store the products will be placed can affect the cost. Make sure that you choose a store that has plenty of customers that might be interested in your product so that you do not waste your money. You wouldn’t put your ‘Vegan Support’ supplement for sale in a butchers!
The bigger the brand that you sell to, the greater the opportunity for people to see and trust your product. However, this exposure comes with a higher cost to have it displayed. Display your products in smaller, independent stores as it is cheaper and easier, but they are likely to have a lower number of customers. You should conduct as much research as possible. Where possible, monitor or speak to the people coming into the store before committing to selling your product there.
Selling online
If you have decided to opt for an “online first” business model then you have some similar decisions to make. Do you want to sell your products from your own website? Alternatively, you could use an e-commerce site such as Amazon to try and reach a large number of people quickly? If you create your own website then you need to consider the costs of having it made and maintaining it.
While there are many tools available for making websites yourself, you might find that an expert is able to design a much more effective website which drives users towards buying your products effectively. This would incur an initial set-up fee which can vary greatly depending on the developer and the capabilities that you would like the website to have. Whether you make a site yourself, or have it made for you, you will need to pay to keep it running. Often this is a monthly subscription to a hosting provider who will maintain the servers for your website. It is possible to host your own website, but unless you have significant knowledge in this area, as well as the technology and funding to carry it out, it is not recommended.
Selling on Amazon
You may choose to sell on a platform like Amazon which saves the costs of creating and maintaining a website. This will require a fee to be paid for your products to be featured, much like a physical store. Speak to the platform to find out more information about these costs as they can range from small amounts up to thousands every month depending on the exposure that you want to receive. Just like a physical store, it is important to sell your products on a platform that your customers will use. However, it is a lot easier to push them there with marketing as you can provide links within promotional material that takes them straight to the store page.
Supplement Company Distribution Cost
Once you have your product made, marketed and start getting orders in you will need to have a way of getting the products to your customers. Depending on how you sell, there are different options available for getting your supplements in the hands of your customers. If you have a brick and mortar store then this becomes relatively straightforward as you only need to get the goods to a single location and the customers will come to you. If you are selling online then you will need to be careful with the boundaries that you can ship to. Sending goods overseas can add additional costs time and you need to be up front and realistic with your customers. If you aren’t they will be very upset if their products are delivered later than expected, or come with undisclosed costs that they were not anticipating.
Research your options and do not be afraid to limit the locations that you ship to until you are more established if necessary. You can also use distribution centres and dropshipping to get your products where you would like them to be. Make sure to look into these options and decide if you think they would be appropriate. Of course, whichever option you choose to distribute your products will come with some cost to your supplement company. The important thing is to make correct choices for your brand and company values while ensuring that your target audience has access to your products.
Conclusion
There are an awful lot of factors that can affect the cost of starting a supplement company and you need to consider all of them to ensure your success. The industry is growing rapidly and there is plenty of room for more companies in the market. Know that there is a clear trend towards traceability and quality as consumers gain more understanding of their bodies and the effects of what they take in.
This, combined with the fact that there are some very large companies who can purchase in huge quantities and sell at extremely low prices as a result means that it is often better to opt for a better quality product at a higher price point for small businesses. Such an approach comes with slightly higher start up costs, but can increase the chances of success. Ultimately, a business that fails is much more expensive than one that does not.
Speak to any companies/services that you expect you might need to work with to get your product created and find out how much it will cost you. You can also speak to supplement companies to get their experience and advice on things to look out for. It is impossible to say exactly how much it will cost you. Having said that you should expect to pay a minimum of £5000 up front to start a supplement brand at the time of writing.
Back to Blog Posts