Net Working Capital: Everything You Need to Know!


March 11, 2021

Net Working Capital: Everything You Need to Know!

Have you ever wondered why some small businesses seem to thrive, while others fail even when they have plenty of business? Net Working Capital is one of the most crucial aspects of starting and running a small business.

We’ll give you the knowledge to manage your working capital to keep your small business running smoothly.

Net working capital is the liquidity an organization has to continue operations.

Net working capital takes into consideration cash and cash equivalents, while excluding aspects of the business that cannot be easily redeemed for cash.

The benefit of knowing the net working capital is you can tell whether the company is in danger of defaulting on payments, laying off people, having to sell machinery or property it owns, or requiring more personal investment in the business.

We’re going to answer the most common questions about net working capital and provide you with resources and examples of how to manage a business using net working capital including:

  • How do you calculate net working capital?
  • How to find net working capital.
  • How to find the change in net working capital.
  • What is the difference between working capital and net working capital?
  • What is a good net working capital ratio?
  • How can a small business improve net working capital?

Keep reading for information on how to use net working capital to run or evaluate a small business.

How do you calculate net working capital?

Calculating net working capital

Net working capital is calculated using the formula:

Current Assets – Current Liabilities= Net Working Capital

Let’s dig deeper into each of these terms for what they include.

Current Assets

Current assets are assets that are expected to be used, consumed or sold in less than a year. You will find current assets in a company’s balance sheet. Typical assets that are included in current assets are:

  1. Cash on hand
  2. Accounts receivable
  3. Stocks 
  4. Treasury bonds
  5. Inventory
  6. Pre-paid expenses

Different industries will consider different materials current assets. For example, A plumbing company might consider a water pump a current asset because they are reasonably certain they will sell it in a year, while that same water pump distributing water to the sinks in a restaurant would not be because they expect to continue using the pump.

You will normally find the current assets listed on a balance sheet in order of liquidity. To calculate the current assets you would simply add them all together. 

To learn more about current assets, check out Investopedia’s page that includes examples of major companies current asset calculations.

Current Liabilities

Current Liabilities are the expected expenses the company will incur in the next 12 months. You’ll also find these on a company’s  balance sheet. 

Common expenses included in the current liabilities include:

  • Wages.
  • Payment of short term loans.
  • Current portions of work prepaid by customers that still need to be completed.
  • Payments to suppliers.
  • Current principal of long term debts 
  • Rent
  • Utilities
  • Income tax.

You can find the current liabilities on a company’s balance sheet.

For more on current liabilities check out Motley Fool’s current liability page.

How to Find Net Working Capital

List of Fortune top 500 companies

To demonstrate how to find net working capital, I’m going to use 2021’s Most Admired Company, Apple (stock ticker: APPL). To see the Fortune list of most admired companies, click .

With a publicly traded company, you’ll go to the SEC Edgar Company Filings page and search the stock ticker. For privately owned companies, you’ll have to ask the owners.

Franchisors will typically be able to give you the information for their average or median franchise financial performance.

You’ll want to find the Form 10-K. Here is Apple’s. On page 25, you’ll see a comparison of 2018-2020 working capital. See image below, Row 5. To find the breakdown, view page 33, which is the balance sheet.

As you can see, Apple had a working capital of $38.321 Billion in 2020, $57.101B in 2019, and $15.41B in 2018. Remember these, they’ll be discussed more later.

Their working capital jumped around dramatically during those three years. When you see a company’s net working capital bounce around dramatically, it is worth investigating.

In Apple’s case the drop between 2019 and 2020 would be traced to reduced cash on hand and accounts receivable, which is to be expected given the pandemic. People are less likely to upgrade a phone when finances are difficult.

How to find change in net working capital

To find change in net working capital there are two ways to calculate it:

  1. As a percent
  2. As a whole number.

Let’s look at how Apple’s working capital changed between 2018 and 2020 as both a percent and whole numbers. As mentioned above, Apple had a working capital of $38.321 Billion in 2020, $57.101B in 2019, and $15.41B in 2018.

When we use subtraction to find the change, we get the YoY Pure Change, while when we use the formula (2020/2019)-1, we get the YoY % Change.

What this tells us is that they had 33% less working capital going into 2021 than they did going into 2020, meaning they have to be more careful with their budgeting in 2021 than they were in 2020.

What is the difference between working capital and net working capital?

Working capital and net working capital are typically used interchangeably. There are other terms that are similar such as gross working capital, which is just the current assets and does not factor in liabilities.

The gross working capital is not as effective for calculating the viability of the company because it does not consider the cost of the capital. Gross working capital is simply a step in the process to finding the net working capital. 

You may also find a similar term, gross fixed capital, used in some methods of calculating the GDP. If you’d like to learn more about gross fixed capital check out the OECD explanation.

What is a good net working capital ratio?

Keyboard with the word current assets

The working capital ratio, more commonly called the current ratio, is simply:

Current Assets/ Current Liabilities.

It is a measurement of how easy it will be to pay the bills. Generally speaking a current ratio less than 1 is a business that is failing, while a business with a current ratio above 1 is at least sustaining itself.

A current ratio of 2 is preferable according to accountingtools.com.

When the working capital ratio is above 2, investigation is necessary. This could be for several reasons including:

  1. Too much inventory
  2. Difficulty collecting accounts receivable
  3. Large amounts of cash on hand
  4. Low to no debt

Depending on which of these is the cause, it could impact the valuation of the company. For instance, inventory would be included in a sale typically, while I would not expect the same for cash on hand. 

Likewise, if the company is having difficulty collecting accounts receivable, future write-offs may be coming in the future.

However, if the company has no debt and plenty of inventory, the business is in decent health assuming other aspects of the financial statements are doing well.

Quick Ratio

Another common ratio used is the quick ratio, which excludes inventory and prepaid expenses. This eliminates many of the complicating factors that are inherent in the net capital ratio.

The  quick ratio formula is:

(Cash + cash equivalents + accounts payable)/ (current liabilities)

The quick ratio should be between 1 and 2 for a company to be in good health.

Cash Ratio

A man with calculator and papers on his desk

The cash ratio is an even simpler ratio for measuring the liquidity of the business as it is the most restrictive. It only includes cash on hand and cash equivalents such as money market accounts, stocks, and treasury bills.

The equation for the cash ratio is:

(cash+cash equivalents)/ current liabilities

It specifically does not include:

  • Accounts receivable
  • Inventory
  • Prepaid Expenses
  • Anything that can’t be accessed in a matter of a couple days

Like the other ratios, a cash ratio between 1 and 2 means a company is able to meet its obligations. To learn more about the cash ratio, check out this article by the Corporate Finance Institute.

How can a small business improve net working capital?

To improve the short term financial position of a small business there are several things that can be done including:

  • Converting short term debt into long term debt.
  • Inventory management
  • Penalties for late payments.
  • Completing pre-paid work.

Let’s dig deeper to see how each improves the net working capital of a small business.

Converting short term debt into long term debt.

By converting short term debt into long term debt, you impact the working capital by spreading the payments over longer periods of time.

In the example below, we used a fictitious balance sheet to display the impact of reducing $15,000 in short term loans into $3,ooo in short term and $12,000 in long term, while keeping everything else the same.

The end result is an increase of $10,800 in net working capital and the working capital increased from 1.45 to 2.11, giving the small business plenty of room to utilize capital for growth.

It should be noted that the small business may incur more financing charges over the course of long term debt due to the interest on principal being spread out over a longer period.

It’s recommended that you consult with a financial advisor before making these decisions.

Inventory Management

Man writing the words Inventory Management on a paper

Inventory management is focused on having the proper amount of inventory at the right time. Too much inventory leaves you with less cash and cash equivalents, while too little inventory means lost sales. 

There are a variety of ways to improve inventory management including:

  1. Implement an inventory management system (IMS).
  2. Utilize dropshipping and print-on demand services for online orders.
  3. Run promotions on products that aren’t selling well to turn inventory into cash.
  4. Use analytics to forecast demand and order accordingly. IBM offers useful insights here.

The primary goal with inventory management is to keep as little of the working capital tied up in inventory because once the inventory is sold the current assets will increase due to the profit and the current liabilities will decrease because the vendor can be paid.

We have several videos on how to run a small business using LEAN principles you can find on UpFlip’s YouTube page.

Penalties for late payments.

Penalties for late payments are an option if you finance your customers. Penalizing late payments encourages people and businesses to pay on time.

If they don’t pay, it increases the accounts receivable to help increase offset the inability to use the working capital and any interest fees you occur from suppliers.

Completing pre-paid work.

Completing pre-paid work removes a current liability, but also incurs costs. If you have an outstanding liability of $1,000 worth of work and you have to pay your employee $300, it will reduce your current liabilities by $700.

If it requires other inputs the impact will be less.

Using the same balance statement as before would create a $700 increase in net working capital and increase the current ratio from 1.45 to 1.48.

Conclusion

We’ve given you the information you need to effectively use net working capital to improve the operations of a small business. During this article, we covered the definition of net working capital as well as:

  • How do you calculate net working capital?
  • How to find net working capital.
  • How to find the change in net working capital.
  • What is the difference between working capital and net working capital?
  • What is a good net working capital ratio?
  • How can a small business improve net working capital?

Whether you’re running a small business, selling a small business, or looking to buy a small business, UpFlip has the information to help you be a better business owner.

Sign up for our newsletter and follow us on YouTube to get more great information about small businesses.


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Did you know the average poultry farm provides over a million dollars of chicken for people to eat every year? John Mathia and Geoff Scott showed us how to start a poultry farm and turn it into a vertically integrated award-winning business. You can too! Geoff and John started Marion Acres in 2012 so they could eat healthier food than they could buy at the supermarket. Their first attempt at growing their own food went horribly wrong: tractors broke, rains made the land unusable, and the landowner sold the land out from under them––but they persevered. They went from 32 chickens in Geoff’s garage to a poultry farm with different animals, a grocery store, a slaughterhouse, and award-winning chickens. We’ll share how they developed one of the northwest’s most successful poultry farms! You’ll learn about government subsidies, partnerships, and building a vertically integrated business. They’ve got information any poultry business can use. Let's start by learning about the poultry industry. 

Step 1. Learn About Poultry Farming

Don’t try to just jump straight into the chicken business and expect to make a million dollars overnight. There’s a lot to learn about the chicken farming business. You will have federal, state, and local laws to follow. In addition, there are lots of capital expenditures. Plus, you’re raising animals, so without proper hygiene, your whole farm could die. Don’t be scared, though. You can start small. Geoff told us: [su_quote]I had read somewhere that you can turn around a chicken in eight weeks. So we're like, ‘Well, let's go get some chickens.’ So we went down to Wilco, bought every chicken they had, which was 32. Raised them in my garage, and processed them in early November. Then we left that farm, came across the street over here to the landowner.[/su_quote] Geoff recommended Reading Pastured Poultry Profits by Joel Salatin, plus we added some other best sellers on Amazon for avid readers. Here are some interesting reads I found while researching the topic: We’ll help you understand the poultry business so you can decide the best strategy for your chicken farm. Let’s start by looking at the poultry industry.

How much to start a chicken farm?

Group of chicken eating Geoff and John started off with:
  • 32 broiler chickens: $75
  • One chicken tractor: $220
  • 150 pounds feed: $100
  • Gravity water dispenser: $60
  • Total: Under $500
So, you don’t need a lot of money to start raising chickens. If you don’t have land, that’s another story. Let’s look at how much it costs if you need land.

How much does it cost to start a chicken farm if you don’t own land?

Poultry farming will be more expensive if you don’t already have land to use. Chickens need space and a healthy environment. Chickens require at least three square feet per chicken plus space for storage, vehicles, home, etc.  That means the first acre will hold a maximum of 4500 chickens and each additional acre can hold around 5,000 chickens. If you don’t have land, you can expect at least $100K startup costs for poultry farming. Some resources even say a poultry farmer should expect to spend $250K. The number of chickens you can hold will depend on the number of acres you buy. Check out the table below for an idea of how land will impact the costs and revenue. Buying $100k of land graph Of course you don’t have to start off with 5,000 chickens. You can start smaller and build your way up. But realistically expect to spend the cost of a down payment and the first two to six months of the mortgage right away. Then, with every 100 chickens expect to spend $1.500.

Is chicken farming profitable?

A poultry farm business can sell both chicken and eggs on the commodity markets or direct to consumers (DTC). Let’s look at each. 

Poultry companies selling DTC

Egg production and meat production can be highly profitable if you sell directly to consumers. Marion Acres sells most of its meat to people and local restaurants, which differs from many farms that sign contracts with major poultry corporations. Geoff told us: [su_quote]Chicken is about a 30% margin.[/su_quote] Check out the rest of our interview with Geoff and Josh. [su_youtube url="https://www.youtube.com/watch?v=m4qhDGG1C3k"] They sell their meat at $13.99 per pound (lb) because it is non-GMO, pasture-raised broiler farming. That means they make about $50 per chicken and $15 is margin. Unless a poultry farmer processes the meat onsite, they shouldn’t expect to get such high margins, though.

Selling as a commodity

A poultry farm business might sell on the open market as well. In this scenario, you’ll need to register with the USDA. You’ll be selling to companies that process the live chickens and turn them into breast, wings, thighs, and other meat for consumption. In this scenario, your profit would be: [su_note note_color="#dbeafc"] Broiler Companies Gross Profit = (market rate per pound x pounds of live chickens) - (costs of chicks + feed + labor caring for chickens + transportation costs). Egg Laying Companies Gross Profit = (market rate of eggs x number of eggs) - (feed + labor caring for chickens + transportation costs). [/su_note] You’ll want to compare current pricing for broilers versus eggs to decide which is more profitable. Alternatively, you could do a mix of broiler meat and egg laying. Geoff told us about how a lot of farmers operate: [su_quote]Bring on a bunch of debt, get all your equipment, and then farm for the rest of your life. You hope to pay off that debt. John and I took a little bit more measured approach.[/su_quote] During many years farmers will run at a loss and have to be subsidized by the government, so make sure you talk to a financial advisor before you jump into the poultry farm business.

Poultry Industry

According to IBISWorld, the average American eats approximately 112 pounds of chicken, eggs, turkey, and other farm fowl each year. They expect Americans to increase their consumption by about half a pound per year.  Chicken farms sell chicken and other birds based on the commodity market rates, which have ranged from 59 cents per pound at the beginning of the COVID-19 shutdowns to an all-time high of 99 cents per pound on June 17, 2022. Estimates expect that this inflation will level off and return to approximately 1% increases in the prices paid for full birds. From the poultry farm, the birds will go to: [su_note note_color="#dbeafc"]
  1. A processing plant (or slaughterhouse)
  2. A wholesale processor
  3. Supermarkets and retailers
  4. The final consumer
[/su_note] As a result, a bird that sold for 99 cents per pound, increases to about $5.99 to $7.99 for a whole chicken in the supermarket. Breasts and tenders can go for over $4 per pound according to the USDA However, Geoff and John reap most of the profits from their poultry farming because they own the processing and supermarket. Let’s look at each of the players in the poultry farm business to see how it quadruples in price from the farm to the consumer.

Farming

Chicken farm A farmer’s main costs include:
  • Land: It’s best to be near but not in big cities. Prices of land can vary dramatically. For example, you might find two to five acres ranging from $5,000 per acre to $2.5 million per acre.
  • Chicken coop: Later on, we’ll explain how to build a chicken coop, but if you’re building with three square feet per chicken, you’ll probably end up spending a ton on your chicken house.
  • Chickens: You might find day-old chickens for approximately $1 to $2.50 per chick based on the quantity, sex, and whether they are GMO-raised.
  • Feed: You’ll need to feed the chickens, and you’ll probably want to buy in bulk. Per pound, smaller bags are much more expensive than when you buy a ton of feed.
  • Transportation costs: IRS mileage deductions change each year, but have been over $.50 per mile since 2008. You can deduct actual costs instead.
  • Employees: If you have over 500 chickens per owner, plan to spend $15 per hour according to the BLS.

Processing

Poultry and other meats require processing, which is an industry worth approximately $227.6 billion with a 4.8% profit margin according to IBISWorld. Poultry processing is included in US Industry (NAICS) Report 31161. I strongly suggest you pay for the report if you’ll be involved in processing, especially if you need a loan. Using current market rates, the spending breaks down to:
  • Purchase price per pound: $.99
  • Additional expenses per pound: $.75
  • Profit per pound: $.09
  • Sell to the wholesaler by the pound: $1.83
Processing is where most of the additional costs in the industry occur, but not where most of the profits are. At the time of writing, there are 5,486 processing companies, and the major players get 57% of the revenue and 98.25% of the profits. The major players are included in the chart below: Competitors chart table That means the average company can expect to achieve a maximum of $18,000,000 revenue and up to $867,000 per year. There are a lot of industry participants operating at losses. Once the meat has been processed, it is sent to the wholesaler.

Poultry Wholesalers

These are the companies that sell to grocery stores and restaurant chains. There are between 700 and 800 businesses in this category, but the industry is dominated by Sysco and Cal-Maine foods, which get a combined 52% of the revenue.  Interestingly, smaller wholesalers seem to perform better with a higher profit margin of 3.19% on a little over $8 million revenue on average.
  • Purchase price per pound: $1.83 
  • Additional expenses per pound: $.40 per pound
  • Profit per pound: $.57
  • Sell to supermarkets by the pound: $2.80 

Supermarkets

Packed chicken on the market The supermarket industry makes $757 billion in revenue with 21.3% of that attributed to meat, poultry, cheese, and eggs. The purchase of food items accounts for almost 70%. They also average 1.8% profit, but Publix manages to hit a 27.6% profit margin.
  • Payment to wholesaler: $2.80
  • Profit: $.07
  • Other expenses: $1.13
  • Consumer price per pound: $4

Why does this matter to a poultry farm?

It means that by the time the food gets to the customer, three other companies are adding $3.01 to the price of the chicken, of which 75 cents is profit. That’s why John and Geoff’s business model is so brilliant. Instead of being a commodity that gets the short end of the stick, they’ve built their poultry farm into a slaughterhouse, packager, retailer, and online store. While this comes with additional costs, they effectively make 2.5 times the revenue while increasing the costs by approximately $2.28 per pound with potential profit margins of 10%. 

Governing Laws

There are a lot of laws covering poultry farming and egg production. You’ll want to familiarize yourself with:
  • EPA rules on animal feed operations
  • USDA policies regarding livestock
  • Farmers Service Agency (FSA, a division of the USDA specifically to help farmers succeed)
  • State agencies may have policies about farming permits, licensing, or inspection. Check the FSA map to find experts on your state regulations.
  • Many cities and counties may have regulations that apply to starting a chicken farm. I would suggest talking to your local SBA office and health district.
Don’t forget to register your farm. Marion Acres is a multi-member LLC, but it operates similarly to a partnership. Read our blog that walks you through how to register an LLC

Market Forces

Weather, unemployment, and disposable income all have an impact on farming poultry. Chickens don’t sweat, so temperatures above 90 degrees can jeopardize their health. Make sure to take that into consideration if you are considering how to start poultry farming.

Choose a Poultry Sector Next

Now that you know a little about the types of businesses involving poultry, what kind of poultry business are you going to start? [su_note note_color="#dbeafc"]
  • Sell chickens for meat
  • Sell eggs
  • Create feed to sell for poultry farmers
  • Hatchery and breeding chicks
  • Egg and meat processing
[/su_note] Whichever one you choose, your focus should be on how to maximize the output for the lowest cost. Given the primary variable cost is feed, you want to focus on the following ratios:
  • Broiler farm: meat per pound of feed 
  • Laying eggs: Eggs per pound of feed 
Let’s look at the different breeds of chickens you can choose for your own poultry business.

Type of Bird

Chicken breed Were you raised on a chicken farm? If you weren’t, I bet you’ll be surprised by the number of chicken breeds available. Fortunately, Chicken Breeds List has an extensive knowledge-base about chickens. It’s basically a one-stop-shop about poultry farming for beginners, with over 31 different breeds ranked based on:
  • Number of eggs per year
  • Growth potential
  • Aggressiveness
  • Space requirements 
  • And other considerations
They rate the Leghorn as the best egg-laying chicken and the Cornish Cross as the best for producing fast and plentiful chicken meat production. Look for their awards on sites that educate, breed, or cook chicken. If you see one of them, this means they are a poultry company focused on excellence. Oops! I spent half the blog educating us on the chicken industry. Let’s carry on with how to start a poultry farm in the USA.

Step 2. Write a Poultry Farming Business Plan

Poultry farming business plans help you keep yourself focused on your goals. Whether you just want enough to feed family and friends, you want to sell eggs or chicken meat locally, or you have dreams of becoming a major chicken farming business, a business plan will help. Check out our blog about business plan writing and write your own. If that’s not your style, we understand. Marion Acres has never had an official business plan. They told us; [su_quote]I would say we're kind of unofficial. A lot of the growth that we have had is just kind of the market driving us that way. The goals we have are probably how to become more sustainable as a farm, and how to become more self-sufficient down the road. And that could be a one to two-year venture.[/su_quote] After you have a business plan for your poultry farm, you’ll know whether you need extra funding or not. If you do, you might want to consider business loans.

Step 3. Poultry Business Loans

If you don’t already have land to start a poultry farm, you’ll need to get some. That means you probably need to buy it. Most landlords won’t love a chicken coop in their garage. Plus, there's other poultry farming equipment you’ll need. In addition to the standard loans available for most businesses, the FSA has farming loans that help people buy land, invest in equipment, and make it until the next harvest.  There’s even youth funding to help 10 to 20-year-olds do farming projects. Put your kid to work raising chicks! Teaching them young is great for when they want their own business. Next, choose a location for your poultry farm.

Step 4. Find a Location of Chicken Farm

Hands with magnifying glass looking for house Where are you going to raise chickens?  Well, that depends on how many you have. Raising chickens can be a space-consuming venture. The poultry farm business can consume three to ten square feet per chicken meaning you can fit about 33 chickens in a 10 x 10 space.  That means an acre can hold between 4k and 14k chickens, but that doesn’t leave room for much else. That would also be a massive chicken house.  Chickens also do best in 70° to 75° weather, and they can have heat strokes when temperatures get above 90°. Geoff told us: [su_quote]They've gotta have water. They'll die pretty quick if they don't. Especially in the heat.[/su_quote] You also want to create a farm where the cost of land plus transporting poultry products is balanced to minimize costs. 

Step 5. How to Make a Chicken Farm 

Poultry farm design is focused on creating effective layouts and processes to help chicken farms become more profitable and efficient. Check out the Big Book Project You’ll need to do things like: [su_note note_color="#dbeafc"]
  1. Establish how to position everything on your land.
  2. Decide how to make the most of your space.
  3. Build a chicken coop.
  4. Manage your supply chain.
  5. Purchase and care for your chickens.
  6. Process and sell your poultry products.
[/su_note] We’ll look at a few, but I strongly advise checking out the Big Book Project and talking to other poultry farming businesses to learn more about designing a small farm. Acclimating to the setting in person will give you a powerful perspective on chicken farming.

How to start a poultry farm: Build a Chicken Coop

  Chicken coop Marion Acres uses what they call a Chicken Tractor with a Gravity Water Delivery System for their broiler chickens. It’s an 8-foot by 8-foot enclosure made from: When they built it, the total cost would have been about $220 for the coop and $60 for the gravity water delivery system.  This makes it where they can easily move the chicken coop to different spots on the poultry farm. Watch the video below to view how they built the chicken tractor. [su_youtube url="https://youtu.be/m4qhDGG1C3k?t=1115"] Almanac.com has a good read on how to make a chicken house. They suggest keeping the poultry house near where people are at all times of day so that someone can hear if a fox tries to enter the chicken house. Farm innovations have created intensive poultry housing systems. With automated feeders, watering systems, and other improvements, you can more easily care for your chickens. You’ll have to establish the proper settings for your poultry house because chicken breeds vary on their needs. Learn about some of the best feeding systems.

How to start a poultry farm: Buy Feed

Every chicken will need to eat. Without poultry feed, you’ll have a hard time keeping your chickens healthy. Chicken feed is made with specific purposes in mind. You can buy poultry feed for:
  • Baby chickens: Starter food is best for ages that range from day old chicks to 20 weeks.
  • Chicken broilers: If you’re just trying to raise chicks to sell the meat, get food specifically for broilers.
  • Teenage chickens: If you want to keep your chicks properly cared for until they each become an adult chicken, you might want to change from starter food to grower food at six weeks. You’ll want to change this when they start laying eggs.
  • Egg layers: Once chickens start laying eggs, they need layer feed to help produce healthier eggs. It’s like grower feed but with more calcium and minerals.
When you’re just getting started, you can buy feed from Amazon or Walmart, but you may want to buy in bulk. When comparing a 40 to 50 lb bag to a 2,000 lb order, you can save up to $1,000 by buying in bulk based on online pricing.  Check out this blog to learn more about feeding chickens. You’ll want other equipment, too. 

How to start a poultry farm: Other Equipment

You will need equipment based on the chicken products you sell, the space you have, and your budget. Some of the items you might need before you buy your chicks include: [su_note note_color="#dbeafc"]
  • Cages
  • Feeders
  • Waterers 
  • Waste removal system(s)
  • Lighting instruments
  • Brooders (for breeding)
  • Heaters (for cold weather)
  • Crates (for collecting eggs)
  • Egg trays (for handling and selling eggs)
  • Perches (for laying hens)
  • Nests (for laying hens and breeding)
  • Incubator (for breeding)
[/su_note] Once you have all the equipment setup, it’s time to find dependable breeders.

Get Your Chickens

Little chickens in a brooder It’s time to buy some quality chicks from a reputable breeder. You can buy locally or online, but be careful when buying online. There are two ways to get new chickens and it sounds like a joke. You get to choose between the chicken or the egg. Geoff told us: [su_quote]You definitely wanna buy day-old chicks. Leave the hatching of the eggs to the hatchery.[/su_quote] Based on my research, it seems that eggs and chickens sell for about the same price, which means you are better off with the chicks. If you decide to expand your business to incubate your own eggs later, you can potentially increase your profit. You’ll need to learn poultry science first, though. Some breeders are more honest than others, so make sure they have a guarantee. You might also ask if they have an American Poultry Association flock certification. Some of the ones consistently mentioned include:
  1. Jenks: Business success is often measured by profitability, but longevity is also important. As the longest operating poultry company supplier, they know they understand the poultry farm business.
  2. Cackle Hatchery: If you are looking to buy from only one supplier, Cackle is probably the place. They sell pretty much everything you need for raising and selling chickens. Plus, they’ve been around for over 80 years.
  3. Privett Hatchery: If you are on the west coast, you might consider getting your chickens from Privett. It’s in New Mexico making it more convenient for a farmer located in the southwest United States.
You can find more breeders and fertile egg suppliers on Chickens and More.

Step 6. How to Run a Chicken Farm

Woman in poultry farm   Poultry farming is a delicate business. You have to:
  • Feed your birds the proper nutrients: We discussed this in the section on feed. This will help promote chicken health.
  • Treat against poultry diseases: If your flock catches a chicken disease, you need to separate the sick ones and care for them. You may also have to hire a vet. Learn more about diseases chickens catch.
  • Protect against predators: We discussed this during the section on design.
  • Dispose of their waste: You’ll need a waste disposal system to help keep the chicken coop clean. 
  • The deep litter system is a method of composting inside the coop. 
  • You can also use an automated system.
Geoff and John use manual processes. They told us: [su_quote]We move the chicken tractors around so their waste fertilizes the land. Every animal plays a role in the ecosystem.[/su_quote]
  • Treat against poultry diseases: If your flock catches a chicken disease, you have to separate sick ones and care for them. You may also have to hire a vet.
  • Maintain documentation of care: You'll need a great system to document your date of purchase, care, date of processing, and more. Check out USDA documentation requirements.
Author’s note: During my experience in the building automation industry, I found that automated systems make documentation of anything much easier. When you can easily check a log to see when feed was distributed, water consumed, temperatures, and other relevant data, it is much easier to comply with government regulations.

Step 7. Process the Birds

Once the birds have matured to an age you can sell them (typically six to 20 weeks), you need to turn them into meat. Most people will do this using an external processing company, which we discussed in the industry overview, but Geoff and John do it themselves. They told us: [su_quote]I wish we would've known more about how it was going to go with the county in developing the processing facility. I think we probably would've just hired a project manager and said, "Deal with the county, make sure everything is taken care of. Let us focus on the stuff we're good at.  And I don't wanna be distracted by explaining to the county about our storage tanks... In the end, I think it (hiring a land-use consultant) probably would've saved us a lot on (the) schedule.[/su_quote]

Step 8. Sell the Chickens or Eggs

Chickens and eggs There are several ways for a poultry farm business to sell their chickens and eggs. The business can sell its products to:
  • Consumers: Reach this target market through websites, social media, your own retail location, and farmers' markets.
  • Restaurants: Get in touch with restaurant owners through similar channels as consumers but also through trade organizations.
  • Poultry processors and wholesalers: Join trade associations or keep reading to find out how to farm for Perdue or Tyson.

How to start a chicken farm for Perdue

If you want to learn the benefits of poultry farming with Perdue, check out the links on their poultry initiatives. As a Perdue farmer, you get access to: [su_note note_color="#dbeafc"]
  • Some of the most advanced systems in the industry
  • A consistent supply of industry best practices
  • A regional vet dedicated to helping provide care for your poultry
  • Flock advisors to help you maximize gross income and profit
  • Technical assistance to maintain your systems
[/su_note] They'll guide you through the process of how to start a poultry farm for Perdue.

How to start a chicken farm for Tyson

If you’re wanting to contract with Tyson, check out their prospective farming partners page. They use guidelines from the University of Georgia and contract with more than 6,000 contract farmers. Contact the nearest live operations manager if you’d like to discuss how to start a poultry farm with Tyson.

How to start a chicken farm to sell eggs

Egg-selling poultry farms have many of the same requirements as broiler farms, but they are focused on getting the most eggs per unit of feed. You’ll be trying to keep your chickens healthy for a longer period of time because layers often start egg production near 20 weeks and can produce eggs daily for three to four years.

Step 9. Other Business Functions

People working together on table In addition to the basic equipment and chicken care, you’ll need to have your systems in place for standard business operations like: [su_note note_color="#dbeafc"]
  • Hiring
  • Accounting
  • Marketing
  • Bartering (unique to farming)
[/su_note] Fortunately, John and Geoff gave us a ton of information on what they use to operate their business selling broiler chickens.

How to start a poultry farm: Hiring

Marion Acres, LLC emphasizes two aspects when hiring:
  1. Skill: Do they at least somewhat understand the job?
  2. Personality: Are they fun to be around? Similar values? Work Ethic?
For processing employees, they told us: [su_quote]It's called Poached. I think that attracts more of the food service industry, people that are used to handling knives and processing things, stuff like that. So we use that for the processing facility.[/su_quote] They also explained most other positions are easily filled with walk-ins and “now hiring” signs.

How to start a poultry farm: Accounting 

Marion Acres uses a variety of tools for accounting. John told us: [su_quote]Geoff does (accounting), but we do use QuickBooks Online, a lot of spreadsheets.[/su_quote] You can connect QuickBooks to most software, so you might be able to integrate it with other software you love. Geoff and John told us: [su_quote]We use Clover for here in the store. Shopventory, which handles our inventory. And we do use Square for some of our online.[/su_quote] Make sure you understand your accounting processes because you’ll need to have sufficient funds or be well documented for the farm programs. Learn about other accounting software for farmers and have a professional accountant help you set it up properly.

How to start a poultry farm: Marketing

John discussed their marketing strategy with us: [su_quote]We have mainly my wife who oversees that team, Rachelle. There (are) about two people right now, besides her. So three total.  We use Wix, which is very user-friendly, and a very simple platform. It just uploads some pictures and types in some things and they make it look good. So kudos to Wix.   The team that manages that also manages the inventory.[/su_quote] Marion Acres uses social media because it’s so powerful. Check out their Instagram and LinkTree. Like most business owners, they have found that their search engine optimization is what truly helps drive awareness. They also mentioned that customer service is a big part of their value. They treat people like family and have a beautiful view with picnic tables. Geoff and John have created such a pleasant experience that some customers come almost daily. Helvetia produce screenshot

Go start your own business!

Chicken is a staple of most people’s diets. Now you have an idea of how to start a poultry farm, so take a training course with poultry farming for beginners, buy some baby chicks, and get farming today! Which type of farming would you rather do, broilers or egg-layers?

Did you know that you can start a candle business for less than $100 and grow it into $500K in annual revenue?

Jocelyn and Jen started RXLA as a side hustle making gifts for coworkers, then started going to farmers markets, and eventually opened a candle store and expanded their offerings on their way to bringing in a half-million dollars per year.

We’ll share strategies for how to start a candle business with just a little money, smart marketing, and responsible scaling.

Click on any of the links below to jump to the section that interests you, or just continue reading.

[su_note note_color="#dbeafc"] Click on any of the links below to jump to the section that interests you, or just continue reading.

Candle Business Case Study: RX Candles Los Angeles

Jocelyn started RX Candles in 2013 as a hobby. When the business venture received crowdfunding, she invited Jen to help create soy candles. The candle brand opened a local craft store, but the pandemic caused it to shut down.

They are still recovering from the hit they took from closing the retail store, but increasing their offerings and selling wholesale has helped them reach $500K in annual revenue with 50% gross margins.

Customers loved their homemade candles so much that they asked for other products, services, and ways of buying. As the sisters gained confidence in their products, they realized they needed to listen to their customers and provide the services they—and other potential customers—wanted.

https://www.youtube.com/watch?v=EVuJHWKpKCU

Keep reading to learn more about the candle industry.

Candle Industry Summary

According to Grandview Research, the candle industry was worth approximately $13.6B in 2023 and is expected to reach $20B by 2030.

How much does it cost to start a candle business?

RX Candle Co owner holding a lit candle in the foreground and a screenshot of a crowdspring article on how much it costs to start a candle business hovering in the background

The candle industry has a low barrier to entry. According to Crowdspring, you should expect to spend between $9.5K to $78K to start a candle business, with an average of around $44K. But we’ve interviewed two business owners who say they started candle businesses for $100

A candle maker’s startup costs will vary depending on the cost of living in their location, supply and materials costs, and other factors.

Is candle making a profitable business?

A candle making business can be highly profitable, with gross margins of 50%. Ingredients, packaging, and marketing are some of the primary costs that will impact your profitability.

Can you make money selling candles from home?

Yes, you can start a candle business from home and make decent money, but it may be more cost-effective to utilize a fulfillment center to fulfill your orders. There may be restrictions in your town or homeowners’ association that impact the ability to run a home-based candle business.

Who are the major candle makers?

It’s helpful to research the major players in the candle market because you can identify gaps in the industry and ways to market your own products. The major candle makers include:

  • Yankee Candle (Newell Brands)
  • Luminex Home Décor & Fragrance
  • Bolsius
  • MVP Group International, Inc
  • Gies
  • Talent
  • Universal Candle
  • Qingdao Kingking Applied Chemistry Co., LTD
  • Vollmar
  • Empire Candle Co., LLC
  • Hyfusin Group Holdings Limited
  • Diptyque
  • Dandong Everlight Candle Industry Co., Ltd.
  • Fushun Pingtian Wax Products Co., Ltd.

While the major players in the industry get most of the revenue, there is always room for new entrants to make a great living selling candles.

How to Start a Candle Business

Candlemaker holding a tablet in her workshop

It helps to have a path of action before you start a candle business. Follow the steps below to start a successful candle making business:

  1. Learn how to make candles.
  2. Define your brand.
  3. Plan your business.
  4. Secure funding.
  5. Get business insurance
  6. Gather supplies.
  7. Create an online store.
  8. Market your business.
  9. Fulfill orders.

Step 1: Learn How to Make Candles

Before you can start selling candles, you need to know how to make them. Jazmin, another successful candlemaker, explained how to accomplish it in our interview. Watch the interview below:

https://www.youtube.com/embed/UzZ5aTbiLh0

Let’s look at what you’ll need to get started.

Tools and Materials for Candle Making

Good tools and candle making supplies can make the job more fun and more efficient. At a minimum, you’ll need:

  • 10 pounds of wax
  • Pouring pitcher
  • Pot to put the pitcher in to create a double boiler
  • Thermometer
  • Containers to hold the candles
  • Scented fragrances
  • Wicks

Jen told us:

[su_quote]Candle brands will want to scale responsibly, which means as the business grows, you’ll want to invest in better tools for efficiency.[/su_quote]

How to Make Candles to Sell

You can start by buying a candle making kit, but as you learn, you’ll want to pick your own wax and essential oils. The candle making process normally follows the steps listed below:

  1. Fill a larger pot with water and the pouring pitcher with wax flakes.
  2. Hang the pouring pitcher on the inside of the larger pot to effectively create a double boiler.
  3. Wait for the wax to melt, which will take 45 minutes to an hour depending on the temperature.
  4. Pour the wax into candle molds.
  5. Add scents and wicks.
  6. Let them dry.
  7. Package the candles.

Jazmin told us:

[su_quote]When you make candles, only about 20% of the scent will actually be smelled, so you need to be aware of that [when adding scents], otherwise you won’t be able to smell it.[/su_quote]

Step 2: Define Your Candle Making Brand

You’ll want to create a coherent brand for your candle making business. Some of the things you’ll need to consider include:

  • Target market: Who will buy your candles? Will you be mass-producing candles or creating a luxury brand image? Identifying your target market makes marketing and branding efforts easier.
  • Brand identity: What makes your candles unique? What sets them apart from other products on the market? Your brand identity will include your business name, logo, colors, and physical and digital design. Learn more about candle business names here.
  • Brand story: What inspired your candle business and the branding for it? A good story helps you connect with customers and create a more meaningful experience.
  • Brand values: What does your candle company hold dear? Think about how you operate your brand and what you want it to tell people. Your values should guide everything you do, including your materials, packaging, and shipping methods.

Creating a brand won’t happen overnight, but after continually telling your story and showing your values.

Step 3: Create a Candle Business Plan

RX LA candle company owner showing stacks of hand poured candles on a desk with a laptop that has UpFlip’s How to write a business plan article on the screen

Every business should have a workable plan to help guide decisions. When writing a candle making business plan, you’ll want to include the following:

  • Niche: Explain what makes your small candle business different and describe the target audience that your products appeal to.
  • Validate your business idea: Explain the research you have performed to establish your candle business will appeal to your target audience. Learn how to validate an idea.
  • Business structure: New businesses normally choose a limited liability company or sole proprietorship as their business structure.
  • Budget: Estimate your costs to start a candle business and operate it for one to three years. The budget will help you understand how much funding you’ll need until the business can support itself and your lifestyle.
  • Business bank account: Open a business bank account to help separate your personal and business expenses. You can also get an Employer Identification Number (EIN) to open a business bank account and access materials at wholesale prices.
  • Marketing plan: A marketing plan spells out how your candle business will approach products, pricing, placement (where you sell the goods), and promotion of your candles.

The biggest thing to remember about writing a business plan is it should be easy to understand, well-documented, and as short as possible.

Download our free business plan template and work through it while watching the video below.

https://www.youtube.com/watch?v=Seac5PbUZXk

Step 4: Secure Funding for Your Candle Line

Jen suggests self-funding when you start a candle brand. Other small business funding options include crowdfunding, a standard business loan, a Small Business Administration loan, or an interest-free loan from friends and family.

Learn how to get business loans here.

Step 5: Get Business Insurance

You’ll want to get insurance when you create candles. Candles can start fires, and small business owners risk lawsuits from customers or employees. We suggest starting your business insurance search with Simply Business because it compares rates from the leading insurance companies.

Learn more about small business insurance here.

Step 6: Gather Supplies

New business owners will need to get the candle wax, different fragrance oil blends, packaging, and any equipment they don’t already have.

Depending on your startup capital and business needs, you may be able to buy most of the products on Amazon, or you may need to reach out to manufacturers.

Step 7: Create an Online Store

Business owner designing their candle company website on a laptop

You’ll want your own website for candle sales. That means you’ll need a domain name and a website builder. Then you’ll need to create a home page and product pages for each type of candle you sell. You might want categories like:

  • Scented candles
  • Luxury candles
  • Decorative candles
  • Fragrance oils
  • Tea light candles
  • Container candles
  • Birthday candles
  • Liquid candles
  • Insect repellant candles
  • Flameless candles
  • Pillar candles
  • Aromatherapy candles

Read more about the different types of candles on Styles at Life.

Step 8: Market Your Business

You’ll want to market your candles to your target market. Each small candle business will have a different marketing strategy depending on their target market, but most candle companies will include a combination of:

  • Social media marketing
  • Email marketing
  • Content marketing
  • Traditional marketing channels

Jen explained that their marketing strategy consists of local farmers markets, pop-up shops, social media, and email marketing. She also explained:

[su_quote]I feel like our biggest mistakes were not going digital fast enough. If we had a website and collected emails from the beginning we would have grown much faster.[/su_quote]

Step 9: Sell Candles

Fulfilling orders is another crucial part of running a candle line. When you’re selling online, this will mean packaging and shipping the candles to consumers or other small business owners.

When you sell at local markets or a local craft store, you’ll still need packaging, but it could be a decorative box and branded bags as opposed to a box that is ideal for shipping.

Things to Consider When Starting a Candle Business

When considering how to start a candle business, you’ll need to consider:

  • Where am I going to sell my candles?
  • Am I going to hire employees or do it all myself?
  • What technology do I need when starting candle business operations?
  • What will my pricing strategy be?

Let’s look at each of these.

Find a Location for Your Candle Business

RX LA owner holding a smartphone with a map app loaded to show a business location search

There are a variety of places you can sell your candles. If you are wondering how to start a candle making business at home, you can do so using this guide and sell them on your website. Other options include:

  • Retail stores
  • Gift shops
  • eCommerce platforms
  • Flea markets
  • Your local farmers market

A candle business makes different amounts of money depending on the locations they sell their products and the cost of doing business for each type of store.

Hire Employees for Your Candle Business

A dedicated candle maker may grow to the point of needing to hire employees. When you do, you’ll need to get an EIN if you haven’t already. This is how the IRS identifies employers.

You’ll also need to have payroll software and optional benefits. Many accounting software providers include payroll resources, but if you want to consider other options, check out our article where we compare the 15 best HR companies.

The Department of Labor requires employers to display poster notices for employees, either electronically or physically in the workplace. A comprehensive employer guide for how to display these posters is available on their website.

You’ll also need to follow the following requirements:

  • The Federal Unemployment Tax Act (FUTA) requires any business with employees to pay a payroll tax.
  • Employment Eligibility Verification (Form I-9) allows business owners to verify the identity and employment clearance of every person they hire.
  • Meeting Occupational Health and Safety Administration (OSHA) standards and enforcing workplace safety are necessary for any business.
  • Worker’s Compensation Insurance is required to protect your business and employees in case of injury.

Keep reading for information on the technology you’ll need.

Implement Technology to Run a Candle Making Business

When following this step-by-step candle business guide, you’ll need to implement some technology. Most of the technology that RXLA uses is for marketing purposes. They mentioned using Klaviyo for their candle brand email marketing.

Create a Pricing Strategy

Top-down shot of a candle company owner taking notes on pricing strategy with a notepad, a candle, cash, a price tag, and a calculator on a desk

One of the easiest ways to ensure you’ll make good money is to keep your candle startup costs low and charge market value for the products. You’ll want to target a gross margin of 50% for your candle business. To calculate the price easily:

  1. Add up the total costs for a batch of candles
  2. Multiply the cost by 2.
  3. Divide by the number of candles created.

That should put you right at 50% gross margins.

Your pricing strategy can be created in a few different ways. The primary ways of pricing candles are:

  1. Cost of doing business
    • Add up all your costs and divide them by the number of candles you make.
    • Add the amount you want to earn for each candle sold based on the time it takes you to make, sell, package, and ship each candle. So if you spend four hours making and shipping 200 candles and want to make $100 per hour, that’s $2 per candle you add to the costs.
  2. Competitors pricing
    • Look up comparable products and price your items based on them.
  3. Luxury candles
    • Create a brand story that makes your particular candle more valuable. This is the strategy that Jazmin used.

Whichever strategy you use, make sure you are realistic about how much time you are willing to dedicate to it. If you are only going to spend a few hours a day, you can’t make as much as if you treat it like a full-time job.

Ideas for a Candle Making Business

Candlemakers primarily target women, but according to the National Candle Association (NCA), both men and women consider candles appropriate gifts. They say the most common times people buy candles are:

  • During the holiday shopping season, which is when 35% of sales occur
  • Housewarming gifts
  • Gifts at dinner parties
  • With thank you notes
  • For adult birthdays

How to Start a Candle Business With No Money

RX LA candle company owner holding a lit candle and a stack of cash with a red X over it in her studio

To start a candle business with no personal finances, you’ll normally need to focus on selling candles using a “print”-on-demand or drop shipping strategy. Once you have built up some money from candle sales, you can start reinvesting in the supplies and equipment to start making your own homemade candles.

The good news is that it’s inexpensive to start selling candles. Both of the business owners we talked to have started with $100.

Open Your Own Candle Business

Making candles might not seem like a profitable business, but it has the potential to blossom into a high income. Jocelyn and Jen started crafting candles as gifts, sold them in farmers markets, opened and closed a brick-and-mortar store, and were late to the digital marketing game, but they still reached an impressive $500K in annual revenue.

Their story teaches us valuable lessons about resilience, adaptability, and the power of listening to customers. They found ways to overcome challenges and expand their offerings. You can use their candle business tips to succeed too.

The candle industry is ripe with opportunity. With global revenue projected to soar in the coming years, candle business owners can sell candles to make a great living. And the beauty of it all? Given Jocelyn and Jen started with $100, a candle business is one of the best businesses to start from home.

As you embark on your candle making journey, remember that success lies not just in the quality of your product but also in the strength of your brand, the efficacy of your business plan, and the dedication to continuous improvement.

Whether you dream of creating luxury candles or catering to a specific market segment, the possibilities are limited only by your imagination and determination.

So ignite that spark of creativity, pour your passion into every candle you craft, and watch as your business illuminates not just spaces but lives, one flickering flame at a time.

From grocery stores to Amazon, you see private label products all day long. But do you know how to find private label products? We’ve talked to a lot of people who make money selling private label products. Amazon FBA is one of their favorite tools to sell online, and they had some great tips about other sales outlets as well. We’ll provide you with a guide to the product development process with input from interviews we’ve done with some of the most successful independent private label sellers. [su_note note_color="#dbeafc"] You’ll learn all there is to know on topics like these: [/su_note] Click any of the links above to jump to the section that most interests you.

What are Private Label Products?

Private label products are products created by a manufacturer with the intent for an exclusive third party to sell them using a different brand name. Private labeling removes the need to invest in high-priced equipment by paying an existing manufacturer for the production of goods. Private label businesses are growing increasingly popular in the ecommerce field thanks to the reduced startup costs of a private label brand.

White Label vs Private Label

Understanding the difference between private label vs white label is important before getting started in this field. Private labeling provides exclusivity for the retailer or wholesaler. White labeling allows multiple retailers to add their branding to the product and sell it as their own.  Here’s what this confusion can cause harm to your business: If you create a private label product and sign a manufacturing agreement as a white label product, you have effectively allowed the third-party manufacturer to use and sell your intellectual property for their gains. Moral of the story? Make sure to read your contract!

How Much Do Private Label Products Make?

According to Statista, private label products accounted for $6.6 trillion of 2021 GDP and are projected to hit $7.9 trillion in 2026. This includes big brands that offer their own branded products. To draw inspiration from which products sell most, look at the major retail private labels:

Benefits of Selling Private Label Products

You might want to consider becoming a private label seller for these advantages:
  • You Control Production: Specifying quality, materials, ingredients, and production rate (as long as it is over the minimum order quantity (MOQ) provides more control than white label brands.
  • You Can Act QuickerMajor competitors have to go through a chain of command, but a private label brand can adjust to market conditions faster.
  • You Set Pricing: You get to set the pricing to get the margins you need. Using another business model might make pricing competitively difficult. (If your prices are too high, you won’t sell products, though).
  • You Control Marketing: When you sell another company’s products, you have to obey their brand communication guide. When you create your own product ideas, you can package them how you want and market them to your target audience without worrying if someone will reject your marketing ideas.

Cons of Selling Private Label Products

Selling private label products doesn’t come without challenges. Here are some to keep in mind:
  • Manufacturer Quality: Every manufacturer has their own quality control standards. If your product quality expectations are higher than those of your suppliers, you might be disappointed.
  • Consumer Perception: Private brands pop up every day with the prevalence of print-on-demand. Some are amazing, while others are cheap and poorly made. Consumers need time to trust a brand. Do everything you can to build their trust.
  • Loyalty Building: Your target audience doesn’t know you yet. Until they get to know you and love your brand, finding customers for your private label products may be difficult.

How to Private Label Products

You’ll need to perform the following tasks when you create your own brand name products: [su_note note_color="#dbeafc"]
  1. Decide what type of private brand you’ll be.
  2. Find private label manufacturers.
  3. Test their products.
  4. Negotiate a deal.
[/su_note]

What are the Best Niche Markets?

First, you’ll want to perform market research. You’ll want to establish:
  • The products you want to sell
  • The target market for the products
  • Where you will sell the products
  • How you will market the products
This will impact what private label manufacturers you want to approach. It will also impact the profit margins you earn on your private label products. Most private labels work best with products that are replenished regularly, but there are a few that don’t fall into this category.

Common Private Label Product Ideas

We pulled a list of commonly searched private label, white label, and branded products from ahrefs.com to find out what industries use the most private label-ready products. If you’re looking for a niche market, consider these private labeling ideas:
  • Private label clothing
  • Private label hair care products
  • Branded promotional products
  • White label food products
  • Private label skin care products
  • White label marketing products
  • Private label detailing products
  • Private label cleaning products
  • White label furniture
  • Private label pet products
  • Private label CBD products
This is just an overview to get the wheels turning in your brain. We’ll cover some of these categories more in-depth later in the article.

Where To Find the Best Private Label Suppliers

Next, you’ll need to choose a private label supplier. There are plenty of private label suppliers, depending on your industry. Check a supplier directory like:
  • ThomasNET: The most sophisticated database of third party manufacturers.
  • Private Label Help: 27 categories of private label manufacturers.
  • HAPPI: Find a private label manufacturer by industry or country.
  • Impressions: Find apparel private label manufacturers.
(Keep reading—there’s more info on these manufacturers later on.) Once you’ve found that a private label manufacturer creates products similar to the ones you want to sell, it’s time to ask them to send a sample.

Test Each Private Label Manufacturer

Before you get into a minimum order quantity contract and provide the third party manufacturer with your intellectual property, you want to verify they are a reliable manufacturer. That means you’ll want to ask the private label manufacturer for some samples. Pay attention to aspects like: [su_note note_color="#dbeafc"]
  • How long does it take to receive your shipment?
  • How much did the products cost before shipping?
  • Is the quality of the products consistent?
  • How much did shipping cost?
  • How long was shipping vs lead time?
[/su_note] These questions will help you set benchmarks when comparing the private label products. Once you establish which manufacturer to make part of your supply chain, it’s time to move to the next step.

Negotiate A Private Label Brand Contract

Private labeling will require a contract between your business and the third party manufacturer. The contract terms may be dictated by the private label manufacturer, the private label, or negotiated. If you are using print-on-demand, the manufacturer will almost always dictate the terms, while terms for a custom-made product will be negotiated. Even when terms are negotiated, there are some specifics that may be unchangeable, like the minimum order quantity (MOQ) or quality controls. Now that you understand the process of private labeling, let’s circle back to where to find private label products to start your business.

How to Find Private Label Products

There are a ton of ways to find private label products for small business ventures. As part of this article, I looked for the most commonly searched private and white label products on Google. Here are the high-level categories that are most searched.

Private label bath and body products

This category includes the following search terms:
  • Private label beard products
  • Private label hair products
  • Wholesale organic skin care products private label
  • Private label hair products manufacturer
  • Private label hair products for small business
  • Wholesale private label natural hair products
  • Private label body products
  • Private label soap

Best Trade Show USA to Resource Private Label Skin Products

It comes as no surprise to me that Las Vegas leads the way in trade shows to promote private label products. If you want to know how to find private label products, go check out some of these conventions.

Vegas Conventions

The following conventions will have private label wholesale beauty product suppliers:

Most Beauty Shows Change Cities Each Year

Some other tradeshows to check out include:
  • Premiere Orlando: Largest North American private labeling convention for beauty supplies.
  • The Makeup Show: Hosts three conferences across the country.
  • IndieBeauty Expo: This convention is primarily independent products, while others are more focused on the beauty aspect.
Find more conventions and trade shows that present private label products.

Private Label Hemp Products

To find hemp and CBD private label products to sell on Amazon and other sites, search terms like:
  • Private label CBD products low minimum
  • Cannabidiol private label
  • Best private label CBD companies
  • CBD white labeling companies
  • CBD private label dropship
  • private label CBD manufacturer
Joy Organics appears to be one of the better private label products examples in this industry.

Best Private Label Manufacturers

a happy woman is pointing upwards towards the logo of the best private label manufacturers

Thomasnet

Find US and Canadian manufacturers, suppliers, and buyers on this online database. Thomasnet lets you compare manufacturers by size, history, sales, standards they follow, and more. This free database is a great place to start your journey creating private label products. Learn more about Thomasnet.

AOP+

AOP+ sells print-on-demand products and connects to Etsy and Shopify to make selling in the US, UK, and EU easier. They handle order processing and fulfillment in-house, which is a rarity for print-on-demand companies. Get clothing, accessories, and other products manufactured and shipped to your customers with AOP+

Maker’s Row 

Maker’s Row was started in 2012 to connect businesses with American manufacturers. Unfortunately, this platform has a monthly or annual fee that will cost up to $1,800 per year. You can see Maker’s Row online or at many trade shows like the MAGIC fashion show.

MFG

screenshot of best manufacturers from mfg website Another popular directory is MFG.  You can search suppliers by continent. This directory is over 20 years old and allows you to find manufacturers or create a free profile to request quotes and use other features. While I haven’t dug deep into MFG’s database, they seem to be more focused on metals and plastics. 

Kompass

This free B2B connects businesses in more than  60 countries. Kompass is one of the smaller databases, but it has more countries you can work with than other directories. I also really like that Kompass makes it easy to tell what kind of suppliers they have on their website.

SaleHoo

Check out SaleHoo for tools that go beyond a suppliers’ directory. This company offers educational materials, market research tools, and a forum to get the most out of your private label products and dropshipping company. You’ll have options for monthly, annual, or lifetime plans depending on your needs, but you can get access for as low as $67.  

How to Sell Private Label Products

woman in front of a laptop holding a product boxes After you have sourced your private label products, you’ll need to set up the system to sell your private label goods. You’ll need to perform the following steps when you have private label products to sell.
  1. Register your private label business
  2. Create branded packaging
  3. Build a website (or list your products in an online marketplace)
  4. Market your product line
  5. Start selling
  6. Get reviews 
  7. Pay your taxes
Let’s go through each of the steps about selling private label products.

Step 1. Register Your Private Label Business

A private label business should form their legal business entity before they start accumulating costs. This means you’ll need to: [su_quote]
  • Get an LLC or Corporation
  • Get a Sales Tax Permit
  • Get a Business Bank Account
[/su_quote] You can learn to do all these in our learning hub, which gives step-by-step instructions for each of the steps for starting a business.

Step 2. Create Branded Packaging

Now that your private label business is legal, you’ll want to create custom packaging for your private label products. Depending on the product, the business labels might be:
  • A sticker on a plastic sleeve
  • A custom designed box with brand labels
  • Branding labels on the inside of a t-shirt
Check out PackLane’s website for examples of product packages and how quantity impacts pricing. Some of the packaging can be as high as $50 for a single box, but you can save up to 90% when you buy in bulk.

Step 3. Build a Website (or List Your Products in an Online Marketplace)

screenshot of how to create a website article from upflip website eCommerce business models make it easy for a business owner to build their own websites and ecommerce stores. This is really important when you have private label products to sell (I’ll tell you more in our cautionary tale). A private label product company will need to:
  1. Create an ecommerce market somewhere like Woocommerce or Shopify
  2. Setup a payment processor
  3. Take photos of their own branded products
  4. Write compelling product descriptions
Learn more about creating an online store.

[su_note note_color="#dbeafc"]

UpFlip cautionary tale   A consulting client of mine contracted one of the top web development companies in the area to create his online store. He wanted the first heading to be below the fold (not visible when you first open the webpage) because he spent $10K+ on photography to have beautiful pictures that conveyed the style of the brand. The website developers refused and never delivered a final product because they disagreed with his request.  Long story short, the client has spent hundreds of thousands of dollars, has huge amounts of inventory, and has pretty much written off his business because he paid for everything on the front end and never got past this hiccup with the website. [/su_note]

Step 4. Market Your Product Line

Once you have an online store, you’ll want to start marketing your products. There are a lot of ways to market private labeling companies. Some of the best ways are:
  • Keyword Research and Optimization
  • Content Creation
  • Sharing on Social Media
  • Product Giveaways 
  • Influencer Marketing
  • Listing Them in Other Marketplaces

Keyword Research and Optimization

Even the best private label products aren’t going to sell themselves. People have to know about them. You need to perform keyword research and optimize your site to meet the terms that people search for when looking for a product.  For instance, the owner of Pooch Selfie, a custom product that holds a tennis ball on top of a cell phone, gets around 50% of his ecommerce store traffic from people who find his private label products by searching for things like “dog selfie sticks” or “Shark Tank dog toys” as opposed to the branded term. Watch the video below for his tips on creating a custom product. [su_youtube url="https://www.youtube.com/watch?v=j7UzP5dVOqA"]

Content Marketing for Private Label Brands

You’ll want to use the keywords you found to drive your content by using them in product pages, URLs, blogs, pictures, and more. Content marketing lets search engines and consumers know that you are an active online business. The more useful the content you create, the more likely your online store is to rank for the subject matters you are targeting. Here at UpFlip, we use SurferSEO and Ahrefs to help our brands rank for keywords.

Social Media

smiling woman using a mobile phone with various social media icons around her After you’ve written content for your private label business, you should share it on social media. Make sure the content fits both your private label business and the social media platform you share it on. Some types of content perform better on certain social media platforms:
  • Short Form Video: TikTok, YouTube, Facebook, and Instagram
  • Long Form Video: YouTube, Facebook, TikTok, LinkedIn
  • Pictures: Instagram, Facebook, Twitter, LinkedIn
  • Blogs: Facebook, Instagram, Twitter, LinkedIn
Experiment with posting times to see what time works best for your own brand.

Everyone Loves Product Giveaways

Private label brands can do well with product giveaways. You’ll want to make the giveaway something that is inexpensive for you, but that will get your private labeling where people use it as frequently as possible. For instance, if you sell private label car care products you might want to do a giveaway for fun branded air fresheners. This gives you an easy way to collect customers’ emails and information to target them for other car cleaning products.

Try Influencer Marketing

Influencer marketing is a great way to help people find private label products. This marketing business model makes use of people who have a large following on social media who can talk about specific niches and bring awareness to their followers.  They can help boost your private label product sales by using your products in a video and sharing the brand identity with their followers. This works particularly well for private label beauty products as followers are eager to learn what an influencer does to achieve specific makeup or hairstyle.

List Your Products in Other Marketplaces

screenshot of how to start an etsy shop from upflip website Create an online store on every marketplace you can to get your private labeling in front of as many eyes as you can. According to SimilarWeb, the top places to sell private labeled products are: Hopefully, your product research and private labeling work has paid off. Next, you should start selling your private label products for small business profits.

Step 5. Start Selling Your Private Label Products

Once you’ve created your online store, there are plenty of additional ways to sell your products. You can sell:
  • Private label products wholesale
  • Private label products in retail stores
  • Amazon private label products
  • Direct to consumer
Private label companies can also upsell the private label products by suggesting an additional purchase of their own products or retail brands that work well with them. For instance, if you private label hair products, you can suggest someone buy the conditioner when they buy the shampoo and give the customer a discount for buying both together.

Step 6. Get Reviews for Your Private Label Company

No brand starts with instant name recognition. You’ll need to get reviews for your private label to help overcome poor consumer perception of private and white label products. Once people see that a company has great product reviews, they are more likely to accept that the brand identity isn’t just trying to make higher profit margins on generic products. One of the best ways to do this is to automate requests for reviews several days to a week after the consumer has received the product. (Be careful though. Amazon private label products can get in trouble if they request reviews through means other than the standard product review process.)

Step 7. Don’t Forget To Pay Your Taxes

One of the ways many business owners and self-employed people get in trouble is by forgetting to pay their taxes. Many locations require quarterly tax filings for private label business ventures. These filings may include federal income taxes, state income taxes, sales taxes, and payroll taxes. Make sure to keep track of the due dates and work with a licensed tax preparer.

How to Sell Private Label Products on Amazon

Amazon is a great place to sell a private label. Amazon offers multiple ways for merchants to sell, including Amazon FBA, Amazon Merch, and other strategies. It doesn’t matter which strategy you choose; you’ll want to:
  1. Perform market research
  2. Start an Amazon merchant account
  3. Decide how you’ll sell on Amazon
  4. Find private label products to sell on Amazon
  5. Register your products with Amazon
  6. Send them to Amazon FBA private label

Step 1. Research the Market

You’ll want to research Amazon’s seller options to decide which one you want to use. Most Amazon sellers use the FBA service, in which the manufacturer ships your bulk goods to Amazon and Amazon fulfills the order for a referral fee between 5 and 20%. Make sure to read the fees really well because they impact pricing and profitability. One particularly useful trick you can use with Amazon FBA is working with a dropshipper to produce your custom products. Place an original bulk order that is sent to the Amazon warehouse, then every time a product is ordered, have Amazon ship it, send the dropshipper money for more, and you keep the profits. Just like that, you get the benefits of Prime and dropshipping all in one. You’ll also want to research the demand for the product category. Make sure you study the number of competitors and the number of searches for similar products. Michael Jackness, the owner of treadmill.com and Amazon FBA private label stores, told us: [su_quote]Picking the right niche and market is really important. It’s gotten more expensive to get the customer, so you need to be able to sell to them more than once.[/su_quote] Hear more from Michael to learn how he created a $9 million annual ecommerce company. Learn more about market research.

Step 2. Create an Amazon Seller Account

Next, you’ll need to sign up for an Amazon seller account. Go to Seller Central. We show you how to set up an Amazon account in our blog about an Amazon FBA business.

Step 3. Test the Products

Test the products to make sure there are no quality control issues. Depending on the type of product, you’ll do this in different ways.  For example, I stress-test t-shirts by running them through a wash to test how many times you can wash and dry them before the designs wear off. With candles, you might want to test the burn time and see how long it takes to burn them down to nothing. There are plenty of ways to test any product; you should definitely know how long your product will last.

Step 4. Find Private Label Products to Sell

We’ve already provided a list of private label products and where to find them, but you should check out our best things to resell blog for more information on the best products to private label.

Step 5. Register Your Products With Amazon

Any branded products should be registered with Amazon brand services to protect them from being stolen. To do this, you’ll need a registered trademark with the appropriate government office. Check out Amazon’s Brand Services page.

Step 6. Send Your Products to Amazon

screenshot of beginners guide from amazon website To make the most of Amazon, you need to have an Amazon FBA account. Sending your products to Amazon’s warehouse means they qualify for Amazon Prime. You can also qualify for Prime with self fulfillment (but there are more stringent requirements). I strongly suggest reading Amazon’s guide before getting started as well.

People Also Ask

What is White Labeling?

The white labeled definition is to provide the exact same product to different companies with their brand logo on it. The manufacturer normally offers this service for the top products to sell online because it helps them run closer to 100% capacity. The name comes from manufacturers providing the products with a blank white label so other companies can sell the product with their branding.  Vitamins, marketing, and other industries use this strategy to help business owners make more money by filling excess capacity while the marketers can increase their offerings without the additional costs of creating a new manufacturing facility.

What is Private Label Masters?

Private Label Masters is an affiliate course that teaches people about the best thing to sell online through private labeling and white labeling.

What is the Best Product to Sell Online?

The best product to sell online is a product that has the following characteristics:
  • High search volume
  • Low competition
  • High profit margin
  • You are knowledgeable and passionate about it

Start Building a Private Label Company Today

At this point, you should be ready to start your market research and start an Amazon private label store. I strongly recommend using the links in this blog to dig deeper into the subject matters you need more information about.  What experience do you have with white label, private label, and custom-made products?

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