How to Start a Beauty Company
Beauties and beauty entrepreneurs have this in common: People will often help them for free.
Cosmetics labs, for example, may create prototypes gratis on the expectation of future orders. Interns cheerfully trade man-hours for the chance to soak up experience and residual glam. And why buy advertising when fashion magazines will often splash your product across their editorial pages?
Without such largess, Maureen Kelly might have struggled to start Tarte Cosmetics, in 1999. As it was, until the psychology grad-school dropout ("I was tired of listening to people's problems") booked her first order, all she had invested was time. Kelly researched vendors, consulting websites such as Cosmetic Executive Women and the Cosmetic Index. ("If only I'd known about the cosmetics trade fair in New York," she says regretfully.) She ultimately chose two labs that worked with large brands but had a history of taking risks on start-ups.
Kelly, who shops for makeup the way others shop for groceries, had a long list of products she had sought in vain as a consumer. Among her ideas: a push-up blush stick and a gel cheek stain that produces a healthy just-been-jogging look. Kelly worked with technicians to create a line of nine products in a variety of colors. The labs supplied her with "fills": bullets of lipstick, buttons of lip gloss, and plastic pans of eye shadow. Kelly designed her own packaging and had samples mocked up for free in China.
At first, Kelly trained her firepower on upscale boutiques. After six unreturned phone calls from her favorite store, Henri Bendel, she got a buyer's attention by suggesting she was preparing to launch in Bergdorf Goodman. Bendel ordered $15,700 worth of Tarte products.
The lab required a minimum order of 5,000 makeup fills. She also ordered 5,000 Tarte containers from the Chinese factory. Kelly placed the orders at a cost of $18,000. Having the fills snapped into containers at the factory would have cost 30 cents to 45 cents per piece, so Kelly had them shipped separately and assembled them with her family. The inventory lasted a full year.
In fall 2000, Henri Bendel hosted a press breakfast to introduce 20 new suppliers. Kelly found herself in a room buzzy with fashion magazine glitterati, many of whom subsequently wrote about Tarte. That exposure brought orders from national boutiques, including Bergdorf Goodman -- for real this time. After that, fashion magazines did Kelly's advertising for her. Her only promotional sally was using the website WhoRepresents.com to identify agents for celebrities and mailing them samples. Oprah Winfrey was one target; in March 2001, Tarte turned up on the influential O List.
Even as Tarte grew, Kelly clamped down on spending. She packed products out of her apartment until 2004. She made deliveries herself, with a baseball cap pulled low over her face so no one spotted the fashionable entrepreneur handing off boxes on a loading dock. She used the same tactic when leaving sample bags for beauty editors. "If the person [at reception] was like, 'You can't leave it here; you have to bring it up,' I'd say, 'Forget it. I'll put it in the mail.' "
Kelly says she has thrived by resisting growth surges. She turned down Sephora in 2002 and QVC in 2003 because she worried about the volume. (She now does business with both.) "The smartest thing I did then was say no," says Kelly. "Now I say no to people all over the world."
Company Dashboard: Tarte Cosmetics
Founder Maureen Kelly, 36
Location New York City
2008 Revenue $12 million
Employees 34 Start-up Year 1999
start-up costs $18,000 for 5,000 makeup fills and containers
Breakeven Five years out, on undisclosed sales
Biggest expense Cost of product
Qualifications The insights of a lifelong beauty-products junkie
Red Tape None