The supplement industry. It is often described as the wild west full of products promising to give you sick pumps, massive gains, and endless energy.
It’s a 150 billion dollar a year money-making machine with such a low point of entry that I see 5-10 new companies popping up every day.
You may be thinking to yourself I work out, I like fitness, I take supplements, and I want a piece of that 150 billion dollar pie. I’m just going to go ahead and start a supplement company and watch the money roll in.
I’ll be like those other supplement company owners living in a massive mansion with a hot girlfriend hanging off my 40-inch arms cannons while rolling around in my $200,000 Ferrari. Ahhhh, won’t life be swell!
I admit it’s easy to fall into this trap. The internet is full of articles telling you in 10 easy steps how to start the next supplement behemoth.
Unfortunately, starting and growing a supplement company isn’t all rainbows and unicorns. A large percentage of supplement company start-ups fail in the first year.
I’m here to give you the unfiltered truth on how INSANELY hard it is to start and grow a supplement company.
Sorry to burst your bubble, but the money doesn’t fall into your lap without some significant start-up capital, unique offerings, good formulas, a savvy marketing strategy, great content, and a mega sh*t ton of your time.
I’m not saying it can’t be done. Just prepare yourself for a bunch of sleepless nights, endless frustration, anxiety-inducing stress, and bleeding money out your ears.
Can it be done? Of course. But as Big Daddy Kane once said Pimpin’...I mean starting a supplement company ain’t easy. Let’s get started.
Starting A Supplement Company Is Insanely Easy
Ok, so I lied a little. Starting a supplement company is pretty darn easy. Growing one is a different story. More on that later.
All it takes to start a supplement company is $5,000 - $10,000, and finding a manufacturer who has pre-made formulas that need your brand’s label slapped on them. Hint...there’s a lot of them.
You’ve probably even seen two identical formulas in your local supplement shop and wondered how in god’s green earth how both companies have the same formula. Well, now, you know.
A Quick Word On Why Pre-Made Formulas Are A Bad Idea
Trust me on this point, though. You DO NOT want pre-made formulas.
There is nothing novel or unique about them. Unless you have a 2 million dollar marketing budget to run digital ads, your product will NEVER, AND I MEAN NEVER be seen, and you’ll be lucky to sell ten units.
What’s that you say? Your pre-workout product has creatine, caffeine, beta-alanine, and citrulline in it. It’s groundbreaking? It’s novel? That’s cute.
Newsflash! Almost every pre-workout on the market has those.
And some of those products are owned by supplement giants with bottomless pockets who aren’t afraid to spend money to make sure their product is seen, and yours gets buried on page 1000 of google.
Growing A Supplement Company Is Hard
Just for kicks, let's say you go against my advice and decide to get three pre-made supplements (I’ll remind you again later why this is a bad idea). A pre-workout, BCAA, and protein powder.
I bet you’re happy with yourself, but you may be asking what now? It’s time to get your supplement company up and rolling, and it’s going to cost more than you think.
Let’s break this down into several sections:
- Forming the business, branding, and trademarks
- Building a website
- Shipping costs
- Product development
- Product pricing
- Finding a manufacturer
- Quality assurance program
- Labels and proofing
- Debts and other costs
Honestly, you probably should have had all this figured out before you made products, but it’s surprising how may supplement start-ups don’t. Prepare to have your dreams crushed.
The First Steps In Starting Your Supplement Company
You have the idea for your supplement company, and you're ready to rock n’ roll.
But hold on sparky, there are a few things you need to do first.
We’ll keep this brief, but you need to:
- Determine how much money you’re willing to spend and lose on your new venture. This will let you know if and when it’s time to pull the plug.
- Will you sell your products online, through retail channels, or both?
- Determine what consumers you’ll target and create your marketing strategy. For example, will you primarily be selling to the gym crowd, endurance athletes, vegans, keto freaks, etc.?
- Come up with a name for your brand and MAKE SURE someone else doesn’t already own it (sorry, swolepatrol.com is already taken). I can’t tell you how many times a brand starts up only to be shut down two months later because of this. Use the USPTO database to cross-check.
- Trademark your brand name. Legal zoom will do it for you for around $600.
- Develop a brand logo. A service like 99designs.com is an excellent place to start but be prepared to spend $1,000 - $2,000 to get quality ideas from graphic designers.
- Trademark your logo. Again, legal zoom will do this for you for around $600.
- Structure your company. Will it be an LLC, C-Corp, or S-Corp? Maybe a partnership? Do your research as it could have substantial tax implications. Also, fail to do this, and a bunch of liability comes back on you as a person. When you decide on the structure file your company with this state. This will cost $200+ depending on where you have your business.
- Get an EIN from the IRS. You’ll need this for yearly taxes and bookkeeping.
- Get insurance.
- Find a graphic designer who can create product labels, website images, etc.
- Find a company that can print labels for you.
- Figure out where you’ll get your shipping supplies. Uline.com is a great place to start.
- Determine profit margins after considering all costs. The industry average is 30%.
- Decide what platform to develop your e-commerce site on. Shopify gets my vote. It’ll cost you $50 - $300+ per month.
- Get a company credit card unless you’re independently wealthy and can pay for everything with cash. I like the American Express Business Gold Card.
This list isn’t all-inclusive but will get you to 95% of where you need to be before you start selling a product.
Now that’s out of the way, let’s get started with the fun stuff. How much capital you’re going to need to sink into your supplement company to get it off the ground.
Consider The Costs Involved To Get Your Supplement Company Off The Ground
Selling A Supplement All Starts With A Great Website
Do you consider yourself a jack of all trades or a one-trick pony? This may seem like an odd question, but it can save you a lot of money when you are just starting a supplement company.
Right now, you are $10,000 in debt from buying your products and sitting on inventory that needs to sell. The fastest way to start selling is to get your products online via your brand’s website.
Building an attractive and FAST (this is important to google) website yourself requires you to be part coder, graphic designer, copywriter, troubleshooter, and a host of other skills.
Don’t know how to do this? You better learn or be prepared to spend another $1,000 - $50,000 to hire someone to do it for you. And also spend another $500 - $5,000 per month for someone to maintain it for you. AND spend another $500 - $1,000 on apps for your site.
Oh yeah, and another $500 per year for website hosting, SSL certificate, and company email address. This is all on top of the cost to buy your domain name, which could cost you a mint if someone already owns it.
I’m going to say this ONCE.
Nothing kills a brand quicker than a POS website with crappy graphics, lack of flow, and terrible product write-ups that appear to be written by a kindergartner who hasn’t learned to spell yet.
Are your eyes opened yet? They better be because things are about to get A LOT more expensive and you still haven’t sold anything yet.
You may be saying, “Well, I just plan to sell my products on Amazon, so I don’t need a website.”
To that I say, get your head out of your nether regions because Amazon is a COMPLETELY different animal with millions of competing products owned by brands who have a lot more money to spend than you to get their products seen.
As an Italian mobster might say, fuhgeddaboudit!
Did You Remember To Get Insurance?
For the love of God, I hope so. You see, we live in a lawsuit-happy world, and there are a lot of “Bob The Body Builders” eager to sue the pants off you and your company because your product gave them explosive diarrhea.
Think that’s funny? It happens all the time for the dumbest of reasons. I know 20 companies who have gone under because they failed to protect themselves with insurance. I even know one individual who sued a company because they lost too much weight.
Guess what? Insurance costs money too! To the tune of $2,000 - $50,000+ per year depending on your company’s annual revenue.
And you need it! If you fail to get some, you should stop operations now BECAUSE not only can your company be sued but you, as a person, can too.
We’re not done yet with insurance.
You also need coverage to protect your products.
Think burned down in a fire, theft, water damage, etc. That’s going to cost you another $1500+ a year depending on how much inventory you have.
What about worker’s comp insurance? Yep, that costs money too if you have employees unless you plan to box and ship everything yourself.
Things are starting to add up, and your dream of starting a supplement company is about to turn into a complete nightmare.
Here Comes The Overhead. And It Will Be One Of Your Biggest Expenses
Brace yourself for another kick in the teeth. A word that strikes fear into all company owners. OVERHEAD. What is overhead when it comes to running a supplement company?
- The cost to lease a warehouse unless you plan to ship from your house/garage.
- Labor costs. Will you have employees, and how much will you pay them?
- Utilities: The cost to keep the lights on, stay connected to the internet, heat and cool your space, and running water to flush your vomit down the toilet when you start to realize the supplement industry is hard!
- You have to pay them.
- Bookkeeping fees unless you plan to do this yourself.
You can also include marketing, interest on your credit card (you will need one), and supplies like boxes and tape in your overhead costs but we will discuss those in a separate section.
Leasing A Space
Unless you’re made of money (which if you are, why are you starting a supplement company) you’re probably not going to buy a building but instead, rent an office/warehouse.
Starting out you’re probably not going to need a big space and rent might be reasonable depending on the area you live in. I would budget at least $1000 so you get a halfway decent space with things like walls and doors.
All kidding aside this may not seem like a lot of money, but IT IS when you first start.
This is why I usually recommend starting your supplement business from your home/garage and wait until you are bursting at the seams before leasing a warehouse.
If your supplement company grows (and that’s a BIG if) you will inevitably need more space. Mo’ space = mo’ money ($2,000 - $5,000+/month). Let’s hope at this point; you are selling enough products to cover your overhead and other expenses I have listed so far.
Some supplement companies will avoid leasing a space altogether and have a 3rd party fulfill, box, and ship orders. This is a good idea, BUT this WILL cost you more money.
The industry average is a charge of $3 per order, a box fee of $1-$2 dollars, PLUS you have to reimburse shipping costs. Either build this cost into your margins or bite the bullet and fulfill orders yourself for as long as you can.
Hiring Employees. The Good Ones Are Hard To Find & Want To Be Paid Well
If picking products, shoving them into boxes, taping them up, and slapping on a shipping label doesn’t seem that glamorous to you, you may want to hire an employee or two.
I HIGHLY recommend you do this yourself to save money in the start-up phase, but I understand some people have a distaste for manual labor.
If I’ve discovered one thing in my life, it’s this. Good employees are HARD to find.
And the good ones want to be compensated fairly. The bad news for you, as a start-up, is you can’t pay premium wages. That means you’ll be losing Sally the Superstar to your local Burger King.
That also means you’re probably going to have to settle for a run of the mill, unmotivated, somewhat dependent individual who still wants to be paid $12-$15 per hour and work at least 20 hours a week (even if you don’t need them that many hours) so they can afford their Bud Light habit.
Doing the math on the low end, a $12 an hour employee at 20 hours a week will cost you $12,500 a year plus payroll taxes.
Is it worth it? Honestly, it depends on how much you can put up with or if it is just easier to do it yourself and skip the stress.
I vote for the latter until you can AFFORD to hire GREAT employees who don’t mind mundane tasks and are eager to grow with your company.
Paying To Keep The Lights On
So you have your space, and you have your first employee (maybe). You’ll both want a comfortable working environment for yourselves and for your products (extreme heat and humidity can ruin supplements).
What this all means is you need electricity, heat, air conditioning, running water, sewer, and the most important thing. THE INTERNET so you can run your business.
These costs can fluctuate during the year but expect to pay at least $500 - $1000 per month for the above-listed utilities and remember to turn the lights off and turn the heat down when you leave for the day.
Every penny counts right now.
Taxes & Bookkeeping Expenses
As the old saying goes, two things are inevitable in life: death and taxes. And if you don’t pay the taxman will cometh for you.
Depending on the state you live in, you'll have to pay quarterly sales taxes on what you sell, plus taxes on all products and services you use that are out of your state (think apps and shipping supplies).
The bottom line, this will eat up another chunk of your change.
You’ll also have to file annual business taxes with the IRS….YAY! For the first year or two you may operate as a loss so it may not be painful but eventually (if and when you are profitable) you’ll have to pay your cut to Uncle Sam.
Last but not least, you may want to hire an accounting firm to handle your books/finances.
You might be able to slide by with Quickbooks for a while, but eventually, you will need to hire a qualified tax advisor that will cost you $50 - $200 per hour
Fees, Fees, And More Fees!
When you run an online supplement e-commerce store, one thing will always stick out like a sore thumb...fees!
Most of these relate to the companies you use to process credit card payments on your site.
Here are some examples of what various companies charge based on the amount of each sale:
- Paypal Payment Processing: 2.9% plus 30 cents on each transaction.
- Shopify: 1% on each transaction.
- Amazon Payment Processing: 2.9% plus 30 cents on each transaction.
Say for example you sell $10,000 worth of product (500 orders) on your Shopify site for any given month. That’ll cost you:
$10,000 x 3.9% = $390 plus
$500 x .30 = $150
Which gives us a total of $540 worth of fees. This is not a drop in the bucket, so BE SURE to build fees into your margins when pricing your products
There are other payment processors out there that are cheaper but guess what? Some of these won’t allow you to use them because you sell supplements, which they deem as too risky.
To add injury to insult you WILL spend A LOT of time on the phone with PayPal or Amazon trying to convince them that your supplements are safe.
You’ll need to send product labels and provide proof, and they still MAY NOT even allow you to use their payment processing services.
Even if they do approve you, they can drop you at any time. So have a back-up in place unless you want all sales on your website shut down in a blink of an eye.
Shipping Costs Add Up Quick & Everyone Wants It For FREE
Average Cost To Ship A Package With USPS:
- 1 pound and under = $5.00 via first class mail
- 1-2 pounds = $7.00 - $11.00 via priority mail
- 2-5 pounds = $10.00 - $18.00 via priority mail
- 5 pounds + = Lots of $$$$
These numbers have you scared yet? They should because that’s how much it is going to cost you to ship a package. UPS isn’t better.
If I had to do things over, I would only sell products that were under a pound but lo and behold my supplement company, EndurElite, sells products that weigh up to 3 pounds.
But I digress. The point is shipping is expensive, AND everyone wants it for FREE, and FAST. You can thank Amazon for that.
So what do you do? Well, you have one of three options:
- Provide free shipping and build that cost into your margins.
- Charge what the carrier charges you.
- Provide flat rate shipping and eat some of the shipping costs.
Option 1 will probably lead to the highest conversion rate (the number of people who come to your store and buy something compared to total web traffic on a given day), but it isn’t going to do you any good if you’re not making any money to cover your costs.
Option 2 is going to seem expensive to the customer, especially considering your pre-workout is $39.99 like every other pre-workout on the market. Expect to have some abandoned carts.
Option 3, in my opinion, is the best route. Make shipping costs reasonable so the customer is happy and you don’t lose your ass.
On a side note, you’ll want to add the cost of boxes, labels, and labor to your shipping costs. If it is beginning to seem like the expenses don’t stop, well, that’s because they don’t.
Let’s move on to the next topic. Marketing & Advertising and how much that will cost you.
Without A Savvy Marketing Strategy, Your Supplements Won’t Be Seen Or Sell
Hard fact. You can have the most exceptional products in the world but if they aren’t seen you don’t have diddly squat.
Ergo, you better have a robust, yet cost-effective (remember you’re a start-up) marketing strategy planned out that revolves around these five avenues; which again all cost some serious money.
- Digital ad spend
- Social channels
- Email lists
- Well written, engaging content
Digital Spend. Google Ads Will Become Your Best Friend
Unless you live under a rock, you know what the search engine Google is. You go there, type in a phrase or question, and voila Google gives you an answer.
You might also see, from time to time, a result that has the word “ad” next to it. This, my friend, is a digital ad, and companies pay big bucks to have them appear at the top of search results.
Using Google ads is probably one of the best ways to get your supplement in front of the masses. But it’ll cost you and as a start-up, and you may not have the capital.
Let’s use an example. You want your product to show at the top of Google results when someone types in the phrase “best pre-workout.”
You figure you'll create the ad, get people’s attention, and your website will be flooded with orders.
I envy your optimism but as they say, “you gotta play to pay” and you aren’t the big dog on the block...more like the yippee little poodle barking from the other side of the fence.
I know, odd correlation, but this means you are going to have to compete with other companies for this “keyword” or phrase and it’s going to cost you some serious dough.
Approximately $1.00 CPC (cost per click, or what you’ll pay when someone clicks on your ad).
Considering some supplement companies spend millions of dollars on digital ads per month...well...your products don’t stand a chance.
On top of this, you may not know how to develop digital ads.
You either learn quickly, get an app that does it for you or be prepared to hire a digital marketing agency that will cost you $3,000+ per month plus ad costs ($1000+).
Not such a rosy picture, eh? My best advice.
Bid on less competitive keywords in the beginning.
There are many free tools on the internet (google keyword planner) you can use to discover these. Also, bid on your brand name as this will be relatively cheap.
As your brand grows, you can reallocate more funds to google ads, but in the start-up phase, there are better options to get the word out, which brings us to our second marketing avenue.
Social Media. Using Facebook, Instagram, And Twitter As Low Cost, Grassroots Marketing Tools
What do FaceBook, Instagram, YouTube, Twitter, and almost every other social media app have in common?
They’re free and a great way to get your brand in front of a large number of people.
If you are really on top of your game you’ve snagged your brand name on all social media avenues and developed these pages out.
Let me tell you it sucks to have a brand up and running only to find out someone else already has the social media handle.
But back on topic. In the old days, we had radio, newspapers, and TV as marketing and advertising avenues. These cost money and reached a limited amount of people.
But now, with social media, supplement brands can have a HUGE voice and influence that reaches millions of people. All for free (for the most part).
Sound too good to be true? It isn’t if your social pages provide engaging and relevant content that keeps people coming back.
The problem arises when you try to regurgitate the same old crap every other supplement company is putting out (i.e., increase your bench press by 500% or hard selling constantly).
My best advice for social media.
Don’t use it as an avenue to sell ALL THE TIME. That’s annoying.
Provide value to your followers with occasional giveaways, exciting content, and make them feel like they are part of something.
This builds trust, and in the long run, will create loyal, life long customers.
Now, what if social media isn’t your cup of tea? Well, you’re going to want to hire someone to do it for you, and that’ll cost you (I bet you thought this article was going to turn optimistic).
To the tune of $500+ per month or more, especially if you want them to develop your social media strategy and manage multiple social channels.
Like it or not, your brand needs a social media presence. It’s THE BEST, most cost-effective way (if you do it yourself) to grow your supplement business.
Start Building An Email List ASAP
I bet you get annoyed when you receive an email blast from a company trying to sell you something.
At some point in time, you gave them your email address, and you get a message from them as frequently as you have a bowel movement every morning.
Super annoying? YES! Super effective for the company sending the email? A big hell, yeah!
That’s because these types of emails have the highest conversion rate (leads to a sale of the product) compared to all the other marketing avenues listed above.
Think about it. These messages are coming directly to your inbox with a specific pitch (most often a sale and who doesn’t like a deal).
How does this help your supplement start-up? I think it’s obvious. You need to start building an email list right away. There are a few ways to do this:
- Offer a discount on your site in exchange for the customer's email.
- Have customers opt-in for email communications when they check out.
- Create a monthly newsletter that customers can only receive by providing an email address.
The app MailChimp can assist you in developing strategies to collect customer emails, but as with all things listed above, it’ll cost you. At least $50+ per month depending on the number of emails you have.
This cost goes up more if you have someone manage your email program.
Save yourself the money and do it yourself in the beginning. It’s worth your time and money to learn it.
Using Influencers To Spread The Word On Your Brand
Nothing sells supplement quite like fit women, jacked dudes, and copious amounts of booty and cleavage pics on Instagram.
Cleverly place your product in said pics, and you’re set to jet!
While I’ve never liked using half-naked people to sell my supplements, it does work for some companies.
Like it or not using social influencers can be a great way to get your brand some exposure. These people usually have a larger audience, die-hard followers who do anything they say, and have some degree or “influence” when it comes to buying decisions.
So far, so good.
In the best-case scenario, an influencer will buy your supplement and promote it because they genuinely love it. This is rare but does happen.
Other influencers will do a post promoting your brand in exchange for a product or two. Still reasonable but you are giving away free products which directly impacts your bottom line.
Last but not least, some influencers will charge you cold, hard cash to promote your brand. These individuals will usually have a larger following and charge $100+ to post on your brand.
Is it worth it? Yes, no, maybe so? My best advice. Choose an influencer who matches your brand personality and feel. If you sell a running supplement, seek out runners. No duh!
Measure return on investment if you can. Use the average influencers one time only and enter into long term agreements with the ones who go above and beyond.
Try to use product giveaways, in the beginning, to get influencers talking about your brand to their followers.
Use your cash wisely if you do decide to pay an influencer or do revenue share instead using an influencer specific code or URL.
Generate Interesting Content Often To Drive Organic Website Traffic
Do you consider yourself a good writer? Do you feel comfortable talking about supplements, nutrition, training, or anything else related to the supplement industry?
If so, you are the minority, and you have a considerable advantage over your competition.
This is because well written, relevant content drives potential customers to your supplement website. Heck, some may even buy a product or two since you are such a wordsmith.
And all it costs you is time and effort being a keyboard warrior 10-16 times a month writing 500 - 2000 word articles.
Warning: If your content is crap or copied, google is seriously going to hate on you, and all your effort is for not.
As we said earlier, when people type a search query in Google, Google, in return, wants to give the user the best, most relevant content.
Your articles aren’t going to pop up on page 1 of the search results if they’re nothing more than a polished turd on the eight best exercises to increase your arm size.
If you can, generate unique content (articles for website/videos on YouTube) on topics that aren’t often discussed or find the highest-ranking articles on the topic you are writing about, and write it better. Pretty simple.
It takes time and effort to become a good writer and figure out what Google likes and dislikes.
Once you crack the code though you’ll have more organic traffic to your site than you can shake a stick at. More traffic = more potential customers = more sales for your brand.
What if you’re a terrible penman (or penwoman)?
In that case, you might want to look at hiring writers who are considered experts in exercise physiology, nutrition, supplements, etc. to generate content for your website.
The good ones aren’t cheap. Expect to pay $250 - $500 per article or 10 to 20 cents per word. That can add up to mucho dinero for a supplement company just starting up.
If you made it this far and still want to start a supplement company, you’re either completely nuts or have a passion for the industry. But we're not done yet. Now things are going to get costly, and only the ones with nerves of steel or all the right skills will survive.
Making Your Supplements. It’s Not As Easy As You Think.
Product Development. It Can Make Or Break A Supplement Company.
Let's circle back around and talk about product development.
Earlier I said that selling pre-made products/formulas is a terrible idea for your brand. I’ll stand by this statement until the day I die.
In an industry full of crappy, ineffective, copycat products, you’re livelihood as a supplement company owner depends on developing unique formulas that work. ESPECIALLY if you’re new in the market.
You don’t just want one time buyers; you want life long customers.
I’ll let you in on a little secret. Probably 95% of the supplements on the market today don’t do jack squat. They don’t work. That’s because the people developing them have no idea what they are doing.
Ask yourself this serious question. “Can I read and interpret scientific, peer-reviewed papers on supplement research? Do I know how to decipher the data presented in these papers to see if they supplement actually worked? Do I know how to identify flaws in the study and know when a result is significant? Have other scientific papers been written on this supplement, and do I know where to find and access them?
If you answered no to any of these questions you better hand your product development off to an individual who knows what they are doing so you end up with the best product possible. But be prepared for this hit.
Any formulator worth their salt will charge $5,000 - $20,000 to develop a product for you OR they may collect a small royalty from each sale.
Either deal with it or prepare to get destroyed by the competition when you develop an under-dosed, ineffective, steaming pile of garbage.
I guarantee your company won’t last more than a year if you make something like every other supplement company or don’t have a significant amount of capital to spend on marketing.
You might be saying, “Well, I’ll offer a protein powder, BCAA, and creatine to start. Simple products that don’t require a formulator.”
Good luck with that. Your competition already has the corner on those products. They cost 50% less than what you are selling yours for and taste a whole helluva a lot better.
That’s right, besides a formulator, there are also flavorists that charge $1000 - $5000 per product.
Oh, did I also mention your competition is spending megabucks running digital ads on those categories?
Still think you don’t need a formulator who can develop unique products for you? If so I have some beachfront property in Iowa I want to sell to you
You’ll Need To Find A Manufacturer To Make Your Supplements, And All Are Not Created Equal
Considering you heeded my advice, you had a formulator develop your first product. Now it’s time to have it made.
To do that you’ll need to find a contract manufacturer.
There are a lot of them so how do you decide who to go with? Start by using Dr. Google to assist in your search. Once you find some names start calling and ask these questions:
- How long have you been in business?
- Are you cGMP certified?
- What other certifications do you have?
- What are your turnaround times?
- What are your order minimums?
- Do you offer payment terms?
- Can you refer me to any supplement companies who currently utilize your services?
- Do you procure all raw ingredients?
- Do you provide labels?
- Do you provide COAs?
- Can you develop product samples?
- Can you explain your quality assurance program?
- Who owns the formulas once the product is made?
- Do you review my labels for FDA compliance?
- What testing is done on the final product?
Sounds like fun, doesn’t it? Well, it’s not, and there are about 20-30 other questions I would probably ask before settling on a manufacturer.
Of all the questions above, the three I will focus on is the minimum order quantity (MOQ), payment terms, and turn around time.
One thousand units is pretty status quo when it comes to MOQs in the supplement industry.
Depending on your cost to make the supplement, this can add up to a significant amount of money. Money that you may not have as a start-up after the money you spent on forming your business, website, formulation costs, etc.
Take a pre-workout, for example. The average cost to make a run of the mill one is $5 - $7 per unit. A good one that is appropriately dosed and uses effective ingredients will cost on average $10 - $15 per unit.
Either way, you’re looking at spending $5,000 - $15,000 on your first production run. Plus the costs of labels (.50 - 70 cents apiece) and the cost to have the product packed and shipped to you ($600 - $1200 per pallet).
To boot, you might sit on that inventory for a while as you build your business and paying some steep interest rates on your credit card you used to purchase the product if you didn’t pay in cash. If that sounds a little scary, it’s because it is. Because other expenses don’t stop.
This brings me to payment terms.
Favorable ones can ease the blow of dropping a bunch of cash upfront. More than likely, you will have to pay 50% of the production price upfront. I don’t know any manufacturer that doesn’t do this.
It’s on the back end that can make or break your business. Shoot for net 30-45 days on the second half of payment owed after delivery. Just be aware that very few contract manufacturers will do this.
It’s common practice for them to get screwed over when failing supplement companies go up in a plume of smoke, so they want their money even before they release the final product to you.
In most cases, it’s only after you develop a long term relationship with your contract manufacturer, do a few production runs, and MOST importantly pay on time that they will offer payment terms.
Last but not least you’ll want to ask about turn around times.
The industry average is 6-12 weeks. This is important to know as it relates to forecasting future production runs.
Order too early and you’re sitting on extra inventory and tied up cash. Order too late, and you risk running out of stock and slowing any momentum you might have going at the time.
Still interested in starting a supplement company? You’re a brave one, indeed! But there’s more and guess what? It costs more money!
Quality Assurance Program? WTF Is That And Why Do I Need It For My Supplement Company?
At this point, your products are finished, and you’re foaming at the mouth to start selling them.
But patience grasshopper, there’s still more work to do.
This work requires attention to detail, proper documentation, and as you can probably guess costs money ($500 - $1000 per batch) if you don’t know how to do it yourself (which you probably don’t).
And if you mess it up there can be some severe consequences that can make your supplement company lose A LOT of money very quickly
The work I am referring to is your quality assurance (QA) program.
In the simplest sense doing proper QA ensures that:
- Your final product looks, smells, and tastes good.
- It also verifies that what is stated on the label is what’s found in the product, the scoop size, and weight is correct, and the number of servings per container is accurate.
And this is just scratching the surface of what else needs to be done.
You’ll also want to conduct testing to make sure your product doesn’t contain heavy metals, banned substances, or any other nasty stuff.
You may need to hire a 3rd party lab ($1000+ per batch) to do this unless you have the equipment and know-how to do it yourself (which you probably don’t).
Let’s Talk About Supplement Labeling
Also, don’t forget about your label compliance. The FDA is very picky about this. Yes, the FDA DOES INDEED regulate the supplement industry.
- Did you know the text on your labels has to be a specific size?
- Do you know what claims you can make (i.e., increases strength) and the ones you cannot (i.e., any medical claim...for example, decreases inflammation)?
- Do you know the proper way to list certain ingredients like herbs and botanicals?
- Do you know what Prop 65 is and when it’s required on your label?
You better know all this stuff forward and backward.
If not the FDA might come knocking, make you recall any product sold, and you can kiss your dreams of becoming a supplement mogul bye-bye.
Even worse, if you do mess up with FDA compliance or a banned substance is found in your product, there are a pack of money-hungry class action lawsuit lawyers getting ready to stick it to you hard!
Bottom line. You’re probably going to want to hire someone to review and edit all your labels.
That’ll cost you 1-2k per product on top of the $500 - $1,000 to have a graphic designer create the label and do multiple revisions unless you know how to do that (which you probably don’t).
If you’re not sweating yet, something may be seriously wrong with you because you’ve invested at least $100,000 in your supplement business, still haven’t sold anything yet, and bills are coming due. Lucky for you expenses are coming to an end. Ok, not really. There’s more!
The Other Costs Of Running A Supplement Company
Repeat after me. THE COSTS DON’T STOP. You’re insane in the membrane if you think they do.
What other costs am I referring to? Thanks for asking. These are:
- The cost of expanding your product line-up.
- The cost of messing up an order (i.e., shipping the wrong product).
- The cost of accepting returned products. Sorry, not everyone is going to love your supplements.
- Furnishing your office with computers, desks, shipping tables, office supplies, signage, fridge and microwave (you and your employees need to eat).
- Racks to store product on. These are surprisingly expensive.
- Will you offer sample packs for free? You’ll come to find EVERYONE, and their dog wants free samples.
- You’re going to want to offer a lot of them in the beginning, and it will seriously eat into your margins.
- Free product giveaways.
- Occasional costs to hire contractors to provide a variety of services.
- The cost of shortening your life from the sleepless nights and stress.
There are probably other costs I forget about at the moment, but the point is expenses, both expected and unexpected, will keep rolling in. Be prepared for them by building a cash moat if you can.
Running A Supplement Company Is Hard, BUT It Can Also Be A LOT Of Fun
I hope your eyes are open now on how difficult the supplement industry is.
In addition to the information above, there are so many other things to consider that go beyond the scope of this article is it relates to the costs and way to run a supplement business correctly and efficiently.
For the majority of this article I have been a Debbie downer on all the reasons you probably shouldn’t start one (did I mention you probably won’t be able to pay yourself for at least one year and you won’t be able to quit your 9-5).
I’ve never been one the blow sunshine up peoples’ asses, and truth be told I am a little irritated with some of the articles on the internet telling you how easy it is to make money running a supplement company. They’ll even try to sell you a step by step guide for $19.99.
So, if you’ve made it this far, let me give you a virtual high five. You got guts, kid!
Now for a little optimism. Running a supplement company is EXTREMELY hard, but it also can be A LOT of fun and very rewarding!
As the grand prize for sticking it out, I’m going to briefly outline in 4 easy steps (I’m sure you’re sick of reading) the best and most cost-effective way (in my humble opinion) to get your supplement company off the ground and grow the darn thing.
Best of all I won’t charge you for this advice. That way, you can sink that money into your start-up.
Step 1: Re-Read everything above over and over again. It will help you avoid some of the common pitfalls of supplement company start-ups.
Step 2: Do your research. Research the competition. Research products similar to yours. Research pricing. Research your target audience. Research trends. RESEARCH, RESEARCH, and RESEARCH EVERYTHING as it relates to the supplement industry.
Step 3: Start by offering one product and make it GREAT. Test proof of concept. You can always expand your line-up later if the brand builds momentum.
Step 3: Learn everything you can so you don’t have to pay others to do it for you.
- Learn how to create a website.
- Learn graphic design and Adobe photoshop.
- Learn how to do your books.
- Learn how to formulate and flavor.
- Learn to read scientific papers.
- Learn how to become an efficient box packing machine.
- Learn marketing.
- Learn social media.
- Learn FDA guidelines.
- Learn how to develop effective digital ads.
- Learn how to write great content.
- Learn to forecast. Learn to budget.
- Learn how to make strong connections in the industry.
- Learn how to pick up the phone and ask for help from supplement company veterans.
The point is to learn as much as you can and never stop.
In the end, this WILL save you significant money and help you build strong relationships in the industry. Both of which are important for the long term success of your brand.
See, wasn’t that pretty simple? Now go make your millions. Just know it’s not going to be easy and you'll be fighting an uphill battle the first 1-5 years. That is if you make it that far.
About The Author
Matt Mosman (MS, CISSN, CSCS) is a research scientist, endurance athlete, and the founder and Chief Endurance Officer of the supplement company EndurElite. Matt holds his B.S. in Exercise Science from Creighton University and his M.S. in Exercise Physiology from the University of California. Matt and his family reside in Spearfish South Dakota, where they enjoy running, mountain biking, camping, and all the outdoor adventures Spearfish has to offer.