herbal soap making manufacturing business

How to Start a Soap Manufacturing Business in 10 Steps

Do you want to start a soap manufacturing business on a small scale? If so, find here a detailed project business plan guide covering the manufacturing process, licenses, machinery, etc.

A simple production method with a high return in toilet soaps is invariably used in every household. The non-edible oil soap has huge market potential. The market is spread from remote villages to metro cities alike. In modern society due to awareness of hygiene, soap has now become a necessity of life and one of the top-selling products in the FMCG industry.

Increasing awareness of health and hygiene has led to an increase in health soaps across the country. New technologies have also contributed a bit to the development process. As a result, the market is flooded with a variety of soaps varying in both physical and functional attributes. 

Is Soap Manufacturing a Profitable Business?

Various types of soaps available can broadly be categorized into three categories namely perfumed soap, carbolic soaps, and medicated soaps. There is tremendous scope for production on both small and large scales due to the exponential growth of soap demands.

The Indian Soap Industry includes about 700 companies with combined annual revenue of about $17 billion. Indian Soap Industry volume is Rs 4,800-crore. For the purpose of gaining a competitive edge, Indian companies are now relaunching their brands with value additions to woo consumers across India.

Total annual soaps sales by companies marketing their brands at national or state levels are estimated at 14,000 tonnes of a total soaps market considered to be about 126,000 tonnes.

10 Steps to Start a Soap Manufacturing Business

Here are the important steps to follow to start a profitable soap manufacturing business with a small investment:

1. Learn the Process of Manufacturing Soaps 

Both continuous and batch processes produce soap in liquid form, called neat soap, and a valuable by-product, glycerine.

The next processing step after saponification or neutralization is drying. Vacuum spray drying is used to convert the neat soap into dry soap pellets. The moisture content of the pellets will vary depending on the desired properties of the soap bar.

In the final processing step, the dry soap pellets pass through a bar soap finishing line. The first unit in the line is a mixer, called an amalgamation. Here, you will need to blend the soap pellets together with fragrance, colorants, and all other ingredients.

Then,  homogenize the mixture and refine it through rolling mills and refining plodders to achieve thorough blending and a uniform texture. Finally, the mixture is continuously extruded from the plodder, cut into bar-size units, and stamped into its final shape in a soap press.

2. Equipment for Soap Making Business

Before buying a machine for manufacturing soaps, the first thing to consider is the output. There are manual, semi-automatic, and fully automatic machines. According to your budget and scale of production, choose the one which fits you best. The machine cost starts at a minimum of Rs. 75000.

3. Choose a Location for Manufacturing Soaps

You don’t need much space to manufacture soaps if starting on a small scale. Other than the plant area, you must make separate spaces for administrative work and storage. The location of the soap-making plant must be in an area that must not be far from the local immediate market.  This increases transportation costs and thereby reduces profitability.

An area of a minimum of 1000 sq. ft of floor space will be required to manufacture soaps commercially on a small scale.

4. Register Your Company

If you are starting on a small scale with a low budget, a sole proprietorship is a popular option. The minimal cost is the least in this kind of company formation. However, there are other options too like OPC, partnership, LLP, etc. If you are planning to start on a larger scale and looking for funding, register your business as a private limited company.

5. License for Soap Making in India

Check with the local concerned authority and obtain the required licenses and permits needed to start soap manufacturing. Within 30 days of starting the business, it is advised to get the GST registration. Enlist your company with the Udyog Aaadhar scheme for securing certain benefits from the government. You can also apply for trademark registration if you intend to protect your brand.

6. Arrange Finance

If you are looking for finance, the most important tool will be your business project plan. Talk with investors and financial institutions including banks and pitch your business proposal effectively. Check this guide to know more about how to raise capital for a small business.

7. Pricing Your Product

Pricing your soap is one of the most critical decisions you have to take before launching the product. If you are launching a regular soap, you have to come at a competitive price with other best-selling soaps. However, if your product comes with rich features and caters to buyers who are looking for value-based products, you can go for premium pricing.

8. Setup a Proper Accounting Process

You have to be very careful about accounting processes from day 1 of your business. Having a proper accounting system will not only help you in understanding the financial health status of your company but also in filing annual returns with the income tax authority. Check the list of best accounting software available at present.

9. Cost of Soap Manufacturing Plant

Mentioned below is an estimated project cost of a small soap-making plant.

If the production capacity is set at 100 kg/day, plant machinery costs at Rupees 10 Lakh and working capital at Rs. 50 Lakh. The total capital investment will be around Rs. 1 Cr. in India Rupees. The expected return will be around 49.41% and the break-even stands at 40.34%.

10. Sell your Products

As soap comes under the FMCG segment, it caters to a wide range of customers. So, you must have a clear idea about your target audience. Who is going to use your product? Who are the prospective buyers?

So, you will need to prepare advertising materials like that. Also, you will need to create a marketing plan accordingly. In India, Television advertisements, billboards, and newspaper advertisements play an important role to get the market share.

Develop a network of wholesalers, distributors, and retailers for the effective distribution of your soap items. Check this guide to know more about low-cost ways of promoting a product. Packaging, and creating promotional tools like brochures, and visiting cards are a must.

Nowadays having a website is a must. If you want to sell online, list your product with marketplaces like Amazon, Flipkart, etc. If you can afford it, create an online store and thereby attract a much wider audience.