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Is it better to own your custom formula? (Also how realistic is it to try at home?)
Hi! I’m an entrepreneur looking to start my own skincare line. I don’t have any connections or a lot of experience but I do think I have a great idea for a custom product into which I’m willing to invest what little money I have. I’ve called around to various labs and companies that either seem to
a) charge a larger sum of money to formulate your product and give that formula to you to manufacture with someone else, or
b) charge a less large amount to formulate and manufacture your product, but the company would own the formula and require you to purchase it for $$$$ if you want it, if they offer that option at all
Is it better that I find separate companies to formulate and manufacture my product so that I own the formula (in which case I would have to give the formula to the manufacturer anyway?), or that I get someone to both formulate and manufacture it, but without owning the actual formula? What are the advantages and disadvantages of owning/not owning the formula?
I’m also feeling ambitious and interested in creating the formulation at home by myself, armed with a list of my competitor’s ingredients and some basic idea of what each one does. This would help save a lot of money on creating a formulation with someone else but I do still think to get certified and manufacture I would have to hire some third party for testing and such. I am pretty confident I can do it, but as a third party how realistic do you think this plan is?
Any input is greatly appreciated, thanks!
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9 Replies
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I work with start-ups and I will hit some high points;
- While you may have an idea for a new product, keep in mind that unless you are developing a new material or technology, it is likely that a similar product is out there if you know where to look. Alternatively, it could be a product that is not supported by the limits of Chemistry. For example, I was approached recent;y with the request; “I want to make a product that changes color over time in the hair, but it must use only natural oils and butters.”
- Next, how you proceed relies a great deal upon your budget and Business plan. One of the universal truths in Cosmetics is that honestly designing the product and formulation is about 20% of the task. The bulk for a start-up client will rest in Sales, Marketing and other Business tasks. If you are a Business person by nature, hire and delegate out the tasks to a Formulator. If you are a Formulator such as myself, you would want to delegate some of the Sales, Marketing and Business to someone better able to be effective. Honestly, in a successful line, attempting to fill both roles will quickly become over whelming.
- Many start-ups will need to own the Formula to be competitive. This really assumes that you have a product or two that will be your primary or “hero” products. If so, you would want to likely use a Consultant Formulator to maintain ownership of the Intellectual Property (IP). If you are making a broad line (many products), likely Private label is the way to go.
- In most cases the Contract Manufacturer will want to maintain ownership of the Formula if they do the R&D although there are exceptions. You need to determine how important it is to maintain the ownership in the end.
- Have a realistic budget Being underfunded will doom your project.
We do an initial one hour call at no charge if you have further questions.
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From my own experience, yes, it’s possible. But it will take quite a while. Finding a “star” product is not easy. It’s the public that decides what becomes a star. In our case for instance we have around a dozen skin care products. One of them became a star. We have several shampoos, all of which sell well, but it was the unexpected one, the complete “shot in the dark”, the coffee, which became the star.
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@BelassiAnd in my experience it is not always the product that you believe will be your “hero” product that excels. Usually it is something that catches you unaware.
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If you want to become a cosmetic chemist, then certainly making the product on your own is something you could do.
But if you want to start a product line and be successful at selling it, you should not create your own formula. There are much more important things you need to work on (like marketing, sales & brand building) than coming up with your own formulas.
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After about 20 years of starting a skincare brand, manufacturing, and exporting globally, I have realised some important truths.
You need to separate the formulating and manufacturing functions very clearly from the marketing and sales. One person can’t do both. I have found that the mindset of these is very different.
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To add, you want to ensure there are built-in redundancies in your business and product release process. Like they said, marketing/sales should be separate to formulation. But also…. the formulator should not be your QC expert, regulatory expert and QA expert in addition to formulation expert. You want redundancies in your team, where one may have the expertise to “do it all”, but you have others who bear the responsibility to ensure the redundancies protect you from a very expensive OOPS!
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I think there is a time and a place to own your IP. There are many, many successful brands who dont own the IP and do OK. BUT there are also many brands who suffer because they are locked in with a manufacturer that is problematic.
During the pandemic what I saw as a formulator was many brands in did not own their formula IP and were stuck with a manufacturer that could not meet their demands or were struggling due to the pandemic. The brands were stuck! So they reverse engineered something similar with a formulator, owned the IP and were able to shop around if the manufacturer ever acted up or eventually bring it in house if you have the funding. This is why many push to own IP as you will always be able to shop around. The other option is to offer to purchase the IP from the contract manufacturer however during the pandemic many of my clients informed me that the manufacturers refused or required a ridiculous amount that didn’t make logical sense for the brand, so they reversed engineered something similar.
If you are starting out, I think white/private label options are great. Many brands use bulk white label formulas and simply repackage them. You can purchase these in smaller quantities and see how it does, what the feedback is, etc. The issue here is sometimes the supplier may choose to stop offering these white/private label options with or without any notice, so you may need to pivot in response to this. But this is the nature of the beast! No option is perfect! Its being able to go with the flow and pivot to find good solutions.
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Yes indeed. With the GMP certifications we complied with it was very clear that our QC Manager was not to be involved with formulation/production. This was certainly a focus during regular inspections by the government cosmetics compliance authorities.
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Simple rule: Always own the IP to your formulas unless you are going to private label. Owning the IP is much cheaper to negotiate upfront then after you have a successful product on your hands and you want to sell your business. Also, if you don’t own the IP and the business relationship with your CM has gone sideways, you either have to negotiate a buy-out with a partner who may not be willing to sell the IP to you or you’re stuck having to reverse engineer and start all over again.
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