Is Selling Homemade Candles Profitable?
Introducing Homemade Candle Businesses
Homemade candles are candles that are handcrafted and manufactured by individuals in small batches, as opposed to mass-produced candles from large companies. Starting a homemade candle business involves creating candles with your own unique scent blends and creative designs, then selling them through online stores, craft fairs, farmers markets, or your own retail location.
The startup costs for a candle business typically range from a few hundred to a few thousand dollars. Initial expenses include materials like wax, wicks, fragrance oils, dyes, jars, labels and packaging. You’ll also need candle making supplies like thermometers, pour pots, and other equipment. Operating costs consist of recurring expenses like more ingredients, marketing, legal fees, and rent for a retail space.
Legally, you must follow regulations for proper labeling, safety warnings, business licensing in your state and town, sales tax collection, and adhering to the Consumer Product Safety Commission’s guidelines for candle making. Some key legal requirements include testing wicks for lead content, avoiding unapproved claims about benefits, listing complete ingredients, and more.
Overall, a homemade candle business involves developing your own signature products, managing startup and ongoing costs, pricing products profitably, finding sales channels, promoting your brand creatively, and ensuring your business follows all legal requirements. With passion and hard work, many people’s homemade candle side hustles turn into full-time businesses earning over $200,000 a year.
Profitability Factors
When considering the profitability of a homemade candle business, some key factors to look at are pricing, margins, overhead costs, and legal requirements. Finding the right price point is crucial – you need to price your candles high enough to make a profit, but not so high that they won’t sell. Industry experts recommend pricing candles at 3-4 times the cost of materials as a good rule of thumb (Source). This allows for a healthy 50-70% profit margin after accounting for labor and overhead expenses.
Overhead costs for a candle business include packaging supplies, labels, shipping materials, website hosting, marketing expenses, equipment costs, and more. These can really add up, so make sure to accurately estimate overhead in your business plan. Depending on sales volume, overhead can range from 20-40% of revenue for a small homemade candle business according to sources.
There are also legal and regulatory requirements to consider. In the United States, the Consumer Product Safety Commission requires candle manufacturers to follow flammability standards and test wicks for lead content (Source). You may need to register your business, obtain sales tax permits, and follow labeling and warning requirements. Working with a lawyer to understand all the legal obligations can help reduce compliance risks.
Startup Costs
The startup costs for a homemade candle business can range widely depending on the scale you want to start at. Some of the main startup costs include equipment, ingredients, packaging, and branding.
For equipment, at a minimum you’ll need items like candle making wax, fragrance oils, dye blocks, wicks, thermometers, pouring pots, molds, and labeling. A basic beginner kit can cost between $50-$150. More heavy duty professional equipment like industrial melting tanks, fillers, or an entire production line can cost over $10,000 (source).
Ingredients are an ongoing cost, but expect to spend at least $100-$500 on your initial inventory of wax, fragrance oils, dyes, and wicks. Quality ingredients are important for appealing products.
Packaging like jars, tins, boxes, labels, and shrink wrap can range from $100-$1000+ depending on quantities and material. Going with basic containers versus luxury packaging greatly affects costs.
Finally, branding such as your business name, logo, website, and marketing materials can cost anywhere from $0 to over $1000 if you hire professional help. However, there are budget options like creating your own simple logo and website with free templates online (source).
Ongoing Operating Costs
After covering startup costs, homemade candle businesses face ongoing expenses to operate on a daily basis. These include recurring costs for:
Ingredients: Raw materials like wax, fragrance oils, wicks, and packaging continue being an expense as you make and sell more candles. Buying in bulk can reduce costs per unit. According to SmallBizTrends, ingredients may range from $3-8 per candle depending on quality.
Labor: Unless a sole proprietorship, you’ll need employees for production, packaging, sales, marketing, and operations. Their wages and benefits are a significant recurring cost. Consider freelancers or virtual assistants to minimize overhead.
Shipping: Order fulfillment and shipping costs must be accounted for, especially if selling online. USPS, UPS, FedEx and other carrier rates can fluctuate so factor in potential increases.
Marketing: Consistently investing in marketing and advertising is key to sales. Budget for paid ads, promotional materials, trade shows, etc. The exact amount depends on channels and reach.
Overhead: Expenses like rent, utilities, subscriptions, equipment maintenance, and other operational costs also need to be paid regularly as part of running the business.
Pricing Considerations
When pricing homemade candles, it’s important to consider both covering your costs and making a profit. According to Armatage Candle Company, fragrance oils often end up being the most expensive component in homemade candles, especially when using essential oils. However, you’ll also need to account for other materials like wax, wicks, jars/containers, labels, packaging, and labor costs for production.
Some common pricing strategies for homemade candles include:
- Cost-plus pricing: Calculate your raw materials cost per candle and add a markup percentage to achieve your desired profit margin. Many small candle businesses use a 100-200% markup.
- Value-based pricing: Price your candle based on its perceived value, luxury status, or other differentiation from competitors.
- Price matching: Match the price of comparable products like equivalent sized candles from Yankee Candle and other brands.
According to https://armatagecandlecompany.com/blog/how-to-price-your-candles/, a standard price per ounce for containers candles is around $1-$2. So an 8 oz candle could be priced at $8-$16 or a 10 oz around $10-$20. However, pricing should ultimately be based on what the target customer is willing to pay.
When first starting out, aim for a reasonable minimum 40-50% profit margin on materials costs to account for other overhead expenses. As production scales up, profit margins can be increased from there.
Sales Venues
When selling homemade candles, you have several options for sales venues:
Online
Selling candles online opens up a huge potential customer base. You can sell through your own ecommerce website, third-party platforms like Shopify, Shift4Shop, Etsy, and Amazon Handmade. Building your own website gives you the most control and room for growth, while third-party sites offer built-in traffic. Make sure your online shop has high quality photos and good SEO to drive traffic.
Craft Fairs
Local craft fairs are a popular venue for selling homemade candles. They allow you to personally interact with customers. Look for well-attended fairs that align with your target audience. You’ll need an attractive booth display. Hand out business cards and coupons to drive traffic to your online shop.
Retail Shops
Approach local gift shops, boutiques, salons and spas about carrying your products. This exposes your brand to new audiences. You’ll likely need to split the profits from wholesale orders. Make sure to provide retail partners with marketing materials like signage and coupons.
Marketing
Marketing is crucial for getting the word out about your homemade candle business and driving sales. Some effective marketing strategies include:
Social media – Creating business pages on platforms like Facebook, Instagram and Pinterest provides a way to organically reach potential customers. Beautiful photos of your products, behind-the-scenes content and sales announcements can attract followers. Paid ads can further boost visibility (
SEO – Optimizing your website and content for keywords like “handmade candles” helps your business appear higher in search engines. Product descriptions, blog posts and other website copy should focus on relevant keywords (
Partnerships – Reaching out to related businesses like gift shops, boutiques, event planners and more about retailing your candles or including them in gift baskets can expand your opportunities.
Legal Regulations
When starting a homemade candle business, it’s important to understand and comply with all legal requirements. This includes obtaining proper business licenses, following product regulations, and paying taxes.
In most states, you’ll need a general business license to operate any business legally. Depending on your state and location, additional licenses may be required to produce and sell homemade candles from home. For example, in Florida a Home Occupation License is needed to run a home-based business.[1]
There are also regulations around candle production and labeling you must follow. The Consumer Product Safety Commission provides guidelines on candle fire safety that include only using approved wicks and ensuring proper burning rates. The FDA regulates cosmetic products, so if you make scented or lotion candles, you need to follow their guidelines.[2]
You are responsible for paying income tax and sales tax on homemade candle income and sales. You may need to collect sales tax depending on state laws. Selling online also involves understanding and remitting taxes for other states where you have sales.
Working with a small business attorney or accountant can help you navigate legal regulations and tax compliance for a candle business in your state.
Scaling Up
As a homemade candle business grows more successful, many owners start looking for ways to expand production and increase sales. Some key considerations for scaling up include:
Expanding production likely means moving operations out of the home kitchen. Renting dedicated production space provides more room for larger equipment like industrial wax melters. Hiring employees can increase output for pouring, wicking, labeling, and packaging candles. Consider costs for rent, insurance, inventory, and payroll when budgeting for expansion.
Hiring also requires training staff and implementing quality control procedures. Create operations manuals and invest time in 1-on-1 training to maintain consistent production standards. Perform regular product inspections and address issues quickly.
Adding wholesale distribution or consigning product to retail stores opens new sales channels beyond online, craft fairs, and markets. Research requirements from major retailers and distributors. Ensure adequate inventory, labeling, and packaging. Fulfill large orders accurately and on time.
With brick-and-mortar retail expansion, factor in the costs of leasing commercial space, store design and fixtures, staffing, POS systems, and visual merchandising. Gain visibility and walk-in traffic by locating in high-traffic areas like shopping malls.
At each stage of growth, revisit financial planning and cash flow projections. Line up financing and capital to support larger growth plans. Consider pros and cons of manufacturing partnerships versus staying independent. With careful scaling up, many homemade candle businesses successfully transition to larger operations.
Case Studies
According to research by Shopify, a growing number of homemade candle businesses have become extremely lucrative and successful. For example, Virginia Sinicki started Happy Wax by creating unique candle scents and packaging. After investing just $1,800 to launch her business, Sinicki earned over $200,000 in revenue in her first year. She was able to scale up quickly and efficiently by outsourcing production once demand exceeded her capabilities. As another example, Kelsie Hendry launched Luna + Eden with just $3,000. She focused on creating a strong brand identity and marketing creatively on social media. Within two years, Hendry was earning over $100,000 in annual revenue. These case studies demonstrate that with the right strategy, product innovation, and effective marketing, homemade candle businesses can achieve impressive success and profitability.
