##### Article by: Perry Romanowski

Deciding on the use level of raw materials in a cosmetic formula is an important aspect of formulation. However, product performance is only one factor that you should consider when formulating. Additionally, you have to consider the cost of a formula. But before you can consider the cost, you have to be able to figure out how to determine the final cost. In this short post we’ll show you how.

### Step 1 – Start with a formula

We are going to assume that you already have created a formula. Use this cosmetic formulation spreadsheet. The key is that when you make your formula you have to know what % of the ingredient is in your formula. This means you have to equalize your formulas by weight. For example, if you are following a formula like this that calls for cups, teaspoons, and tablespoons of ingredients, you have to convert those units to % weight. The best way is to weigh all your ingredients and determine the number of GRAMS that you are using. Once all the ingredients are in terms of grams, you can figure out what % in the formula they are. The cosmetic formulation spreadsheet does this for you automatically.

### Step 2 – Get your raw material costs

To get your formulation costs, you need to know the costs of each of your raw materials. This is something you should be able to get from the supplier. Although if you work at a large company you might have to go to your Purchasing department because they will have the real prices that your company pays. All the costs should be in the same units. Since I formulated in America, we took all the costs in terms of Dollars per Pound. Most other places in the world you are going to use Cost per Kilogram. It doesn’t matter which you use as long as all the raw materials are consistently in the same units. Also, the final number that you get will be in the same units as the cost of the raw materials.

### Step 3 – Multiply formula % and cost

Next, multiply the % of the ingredient by the cost and divide by 100. So, if your ingredient is in the formula at 20% and it costs $4 per pound, you multiply 20 * 4 / 100 = 0.80. The partial cost of that ingredient in the formula is $0.80. This is what I call the residual cost.

### Step 4 – Add up the residual costs to get total formula cost

Then it is just a matter of adding up all the residual costs to find the final formula cost. Pretty easy (especially if you are using the cosmetic formulation spreadsheet).

There you have it. 4 steps to calculating the cost of your formulation. No complicated math required. If you have any questions, leave a comment below.

I used to cost a lot of formulations in my previous career. I used to cost in many factors – such as cost of manufacture, packaging, labels, QA/QC testing, preservative efficacy tests, ambient stability, accelerated stability and so on on top of the fixed costs such as labour and other manufacturing fixed charges.

For some materials, were I might have to use 3 kilos, but may have to buy 5kgs. My costing would reflect the full cost of the material bought just in case the remainder was thrown out once past expiry.

Having recently had a vitamin/mineral premix costed by two other contract manufacturers (as well as by my old employer) I can see there can be a massive difference in manufacturing costs with one manufacturer having a charge for opening every single bag of product used.

Costing yourself will give an indication, but contract manufacturers will give you more accurate costings.

I’d say use your costs as a guide. If the manufacturer is buying a lot of (Say) SLES, his prices are going to be better than yours, but if you’re specifying a unique claims product, your prices and his are going to be similar. It just gives an idea if the guy is making a reasonable margin for his work.

If in doubt get them to work on open book costings, where all the materials costs and conversion costs are laid out on one sheet.

People are probably thinking that this applies to costs that are too high. If the quote comes in and its a lot less than you expect, I would be cautious in that if the guy hasn’t costed up properly and is making a paper thin margin, you might end up having to change suppliers when he goes bust. I’ve seen that happen and its not good for anyone concerned

From the last 3 years experience I would like to stress that if you are going to outsource Production, these cost estimates should just be used for planning purposes. Contract Manufacturers will have other related internal costs which will change the pricing. Don’t make the mistake of using these figures to try and dictate raw material costs to your manufacturer.

Great point Mark!