How to Start a Supplement Company- Quick 10-step Guide
What Should You Know Before Starting a Successful Supplement Company?
Starting a supplement company is more work than it seems...
The reason why?
Turning a good product idea into a good business calls for a much larger set of skills. First of all, while speaking to a manufacturer, you should be crystal-clear about what you do and do not want in your product. Moreover, distribution, marketing, legal matters, customer service, financial planning and your sales process have all got to be in sync for the project to work.
Getting all of these variables to line up isn't an easy task, but it can be done. If planned and implemented strategically, smart ideas like making and selling your own supplements can help you generate hundreds of thousands of dollars every month with a small investment.
Let's walk through the process of how to go about building a dietary supplement line from the ground up:
- Step 1: Identify your audience
- Step 2: Decide on your customer acquisition model
- Step 3: Comprehensive competitor analysis
- Step 4: Making your own supplements
- Step 5: Identify the right supplement manufacturer
- Step 6: Creating your supplement label
- Step 7: Naming your dietary supplement brand
- Step 8: Finalize your supplement marketing plans
- Step 9: Finalize your fulfillment plan
- Step 10: Begin selling!
Step 1 - Identify Your Target Audience
It is a crucial step and a common oversight most new entrepreneurs tend to make:
- Not having any target customers - Who exactly are the people who would like to buy your product? Vague target customers (e.g. "health conscious woman" is not a viable target customer group)
- Establishing target customer after making the product (big mistake)
With properly defined target customers, you should be able to answer the following 5 questions:
1. Who are they?
If you answer this question correctly, 'they' should be a group of people that are either united by (at least one) common activity, profession, or health issue (athletes, sportsmen, vitamin deficiency, insomnia, etc.)
2. What are the needs waiting to be fulfilled or pain areas that you can focus on?
Working backwards from the constraints customers face when making a decision is a great way to answer this question. A great example: Are vegans lacking adequate choices of joint health products (did you know that most glucosamine is derived from crustaceans?)
3. Where do they buy their products?
Typical answers here often include specific retail outlets, healthcare practitioners, distributors, websites, catalogs, and events.
4. Where do they obtain information about their products?
This will allow you to identify where you should advertise. Answers to this question should be qualified into the devices and the specific platforms used - websites, blogs, social media platforms, phones, television, magazines, trade publications for professionals, or classes of professionals.
5. Will I be able to solve my target customer's problem?
Unfortunately, some problems exist because there is no reasonable or affordable way to solve them. Don’t put yourself or your product into that category.
A great way to find answers to these questions is by asking people you know in your market segment. You can also conduct a consumer survey using readily available tools like Survata. Spending a few months of effort and a few hundred bucks can give you right answers to these questions, saving you a lot of heartaches by helping you identify mistakes you should avoid as a supplement brand owner.
Step 2 - Decide on Your Customer Acquisition Model
When it comes to finding customers, there is no right or wrong way, but there is a golden rule for choosing the method that's best for you and your product: Pick the one you can do/work with best.
Here's a brief overview of some of the most popular options:
- Media buying
- Setting up your brick and mortar store
- Direct sales
- Starting your website
- Selling your supplements on e-commerce platforms like Amazon (Download Our Free Guide)
- Trade shows
A Zen-like approach (and some more research) works great when it comes to choosing the method that’s best for you. Analyze the required efforts vis-à-vis the cost and profitability. Do not hesitate to experiment with multiple marketing tools and compare the results. It will help you select the one that suits you the best. What instinctively feels "right" is probably your sub-conscious leading you to hone in on your comparative advantage.
Also, understand that anything new requires time to blossom. Hence, it is necessary to keep realistic expectations.
Step 3 - Comprehensive Competitor Analysis
Competitor analysis is an important piece of the puzzle. Simply put: Even the best product won't sell if doesn't stand out from the pack. Being good all by itself isn’t enough. You would need to replicate your competitors’ successes and avoid their mistakes.
It's time to open a spreadsheet in Excel and start recording the following information about your competitors and their products.
After you have filled out your spreadsheet sufficiently, here are a few ways that you can start to separate your product from the rest:
- Price - Tricky to do right, but tried and true. Large volumes often go to the lowest bidder, even if the difference is marginal. Just be prepared for paper-thin margins. (Possibly less than $1/bottle when all is said and done).
- Find a new customer segment - There might be a class of customers that overlook a particular type of product because it is never marketed to them in ways they can relate. Athletes, seniors and people with restrictive diets are all good examples of this.
- Find an ingredient to delete - Often an undesirable (or less popular) ingredient has to be used to make a particular product (usually because it has to come from a certain source). NOTE: The previous note also applies to this category.
The key here is to find a detail within the product development process that other companies decide to avoid or cut out (which they may have good reasons for doing — you'll have to research to find out). This is the opportunity, wily entrepreneur, to go all-in — demonstrating your commitment to your product and your target customer.
Step 4 - Making Your Own Supplements
After you understand what people are looking for, what they're willing to spend (market and customer analysis), and what exists already (completion analysis), you can comfortably start the formulation process.
How to Make Your Own Supplements
- Devise a health supplement business formula with accurate doses of the right raw material ingredients.
- Find out the best sources - where supplement companies get their ingredients from - it is vital for product efficacy.
- Prepare the final price quote.
- Purchase order submission.
- Source raw materials for the supplement manufacturing process.
- Quarantine and test the raw materials on arrival.
- Prepare and evaluate the R&D batch.
- Run a pilot batch on the production equipment.
- Run a production batch with additional tests.
- Issue a certificate of analysis after the finished product is evaluated.
Our blog on how to manufacture supplements will provide you with in-depth information on each of the above points.
How Much Does It Cost to Make a Supplement?
The supplement manufacturing cost is a major part of what it costs to start a supplement company, and some factors that impact it are:
- Dose forms – Different dose forms have their pros and cons, e.g., tablets are cheaper to produce than capsules.
- Raw materials – The origin of the raw materials and seasonality dictate pricing.
- Supplement packaging – Your supplements, sensitive to light, air, and temperature, need robust packaging that protects them during shipment and when they're stored.
- Testing and certifications – Third-party ingredient testing and product certifications like vegan, organic, kosher tend to drive up the product cost.
Legal Requirements of Starting a Supplement Business
The United States Food and Drug Administration (FDA) has stringent regulations for manufacturing and selling dietary supplement products under the Dietary Supplement Health and Education Act 1994. As regulations applied to nutritional supplements differ from those applicable to conventional drugs and foods products, supplement manufacturers are legally bound to meet all the rules and guidelines set up by the Dietary Supplement Health and Education Act 1994 (DSHEA) and FDA.
All new dietary ingredients coming to the market after 1994 have required a new ingredient notification to be submitted to the FDA before being used in a product. Additionally, you need to ensure the contract manufacturer you select utilizes facilities that are GMP (Good Manufacturing Practices) certified.
It's wise to check the legal aspects of starting a supplement line before starting a supplement business.
Do You Need a Dietary Supplement Manufacturing License to Sell Supplements?
With an increasing number of Americans taking dietary supplements each year, nutraceuticals are subject to comprehensive regulations to safeguard quality and safety. As a supplement brand owner, you need to acquire specific licenses for starting your own supplement line; failing to do this can result in hefty fines.
If you plan to create your nutritional formulas and manufacture your supplements on your own, you need to obtain your own certifications, additional insurance, and may want to consult a business attorney beforehand.
Alternatively, you can go through a supplement manufacturer that is already certified and has the required resources for manufacturing and labeling your line of supplements or your nutraceutical brand. This allows you to completely forego the need for licensing and logistics.
Here are some additional points to keep in mind:
- Start with the key features you want to advertise and then work backward.
- It's okay to borrow some of the best ideas from your competitors but don’t go too far. It’s always best to start with your vision first.
- After identifying your target audience see how your competition is catering to it and then go for a unique alternative that goes a step beyond while working out the formulation.
- If you just have rough ideas about or are not aware of the right ingredients or the right proportions of ingredients to create your supplements, the product development staff of a good supplement manufacturer should be able to help you fill in the blanks.
Step 5 - Identify the Right Supplement Manufacturer
Often finding the right manufacturer is a daunting task. However, developing some kind of business plan to accompany along with following the tips below should make the process of choosing the right supplement manufacturer relatively easy.
Here are 6 important tips for evaluating a manufacturer:
Tip #1: Ask the manufacturer as many questions as needed in order get the relevant information to make an informed decision
It includes their years of experience, references, certifications, specifications and how many rounds of testing are done. Check whether they supply top quality ingredients, how efficient their quality control and quality assurance departments are, what their minimum order quantities are, and do they use industry-specific graphic designers. Only two entities (NSF and NPA) offer the certificates and any certificate other than these bodies can mean the manufacturer is likely not cGMP.
Ensure that the manufacturer is willing to offer you constructive criticism or pushes back on your ideas. A manufacturer who does not object to your insistence to add misplaced ingredients and/or claims on your product label, should raise the alarm.
Additionally, carry out a background check on the manufacturer by running its name through a search engine. Dissatisfied customers complain about the companies operating below acceptable standard on websites like BBC and Ripoff Report. Besides this, check for the manufacturer’s leadership team details on their website and/or social media. These days, to promote transparency of operations, it’s a common practice for most organizations to provide this information and if a manufacturer does not make this information public, don’t hesitate to ask why.
Tip #2: Check whether the manufacturer is a turnkey manufacturer and inquire about the services they can offer
A turnkey manufacturer is a one-stop solution provider who offers a full suite of manufacturing and secondary services including testing, packaging, labeling, and distribution. This approach has its own perks like faster lead/go-to-market times, convenience, cost savings, etc.
Tip #3: Choose a U.S. based supplement manufacturer
They are well-versed with the stringent U.S. regulatory standards and are less likely to give you any last-minute surprises that can cost you more.
Tip #4: First impressions matter
Simple things like timely responses and openness from the start are usually positive indicators of what working with a manufacturer will be like.
Tip #5: Be wary of manufacturers that place an unusual amount of emphasis on the honors and awards they’ve won on their websites, social media channels & when they speak to you on the phone
While these accolades might be impressive at face value, we've found that many industry awards are “pay to play” and the honors don’t necessarily represent the quality of the company or the integrity of the people employed by it.
Tip #6: Ask your manufacturer about the regulatory environment of the dietary supplement industry
Ask your manufacturer about the regulatory environment of the dietary supplement industry. Do they exhibit knowledge, or do they struggle to answer your questions? If it’s the latter, you may want to think twice about working with them.
BONUS TIP - We asked our Senior Account Manager and 7-year nutraceutical industry veteran, Todd Boysen, for his advice for choosing a contract supplement manufacturer. According to Boysen, "One thing I tell new brand owners about this is industry is that you get what you pay for. Don't choose your supplement manufacturer based solely on price. While you might be saving in one area, the quality of your product may suffer."
Step 6 - Creating Your Supplement Label
Supplement labels represent your brand and are a critical factor for your product’s success as studies reveal that 40-70% purchase decisions are made at the point of sale. An eye-catching, quality dietary supplement label is vital in the increasing competitive nutraceutical market.
Key points to note while creating a supplement label and packaging
- Your label should be FDA compliant and follow FDA nutrition label guidelines. It should have a clear listing of active and inactive ingredients and fulfill legal requirements with any mentioned health claims.
- Your logo and label should reflect your brand and emphasize on your product’s unique features over your competitors’.
- Be innovative while designing your logo with characters, name, shapes and It should be simple yet visually distinctive. Examples include Twinlab, Ghost Lifestyle & Vital Proteins.
- Color matters! Marketing researchers confirm that 62-90% of customers base their first impression on the color of the packaging or label. For instance, blue is accepted as a universally pleasing color while purple represents quality and royalty.
- Allot sufficient time for designing, proofing and printing your dietary supplement packaging and label as any error in this process can severely impact your time to market.
- Work with a design firm with in-depth knowledge of the supplement industry while designing your dietary supplement label template.
- Consult with your contract manufacturer and legal counsel before claiming your product as “Made in America” on your supplement packaging.
You need to consider the following changes mandated by the FDA in 2020 while creating your own supplement label.
- Declaration of “Calories from fat” is no longer required.
- “Total Sugars” should be declared, including a declaration of gram amount of “added sugars” in a product serving along with a percent Daily Value (DV) declaration for added sugars. Also, maltodextrin now counts as sugar.
- Dietary fiber should be one indent under Total Carbohydrates. Dietary fibers are strictly defined as being from one of the beta-glucan, psyllium husk, cellulose, guar gum, pectin, locust bean gum, or HPMC. Prebiotics can no longer be counted as dietary fiber.
- The new regulations come complete with updated daily values (DVs) and different units of measurement for some of the nutrients. Vitamin A, D, and E are now measured in mcg RAE, mcg, and mg, respectively, instead of IUs. Choline now has a DV.
- The line item for declaration of calories in the Nutrition Facts box needs to appear two font sizes larger than the other line items. However, this does not need to be done for calories in the Supplement Facts box.
- A footnote table in the Nutrition Facts box is no longer required.
EXPERT TIP - We asked our Art Director and 12-year nutraceutical industry veteran, Christopher Bennett, for his advice. Bennett recommends that new supplement brand owners think outside the box when it comes to the supplement label design. "Don't follow what other brands are doing and take some chances when it comes to designing the label of your product. Create something that will get your product noticed on a store shelf or among the hundreds of other products on Amazon."
Step 7 - Naming Your Dietary Supplement Brand
Irrespective of whether it’s the actual product or supplement brand name, it is the first calling card and needs to be selected with due diligence.
Supplement brand name ideas that always work:
- Your health supplement business names should be short, sweet and relevant.
- Having a defined color palette can pay off in the long run - consumers will be able to recall yours faster than competing products.
- A unique and consistent voice relevant to your consumer group and the target audience will certainly add value to your brand.
What should you avoid while considering supplement names?
You should take certain precautions while finalizing your supplement company names.
- Check the potential names by running them through a search engine. Even though the name sounds unique to you, there are chances that some other businesses already exist with the same or similar name.
- Ensure that the supplement business names you have chosen are not similar to one of your competitors’. You would certainly like to have a name unique to your brand and mission.
- Make sure that the name you choose for your brand has no negative connotations attached to it.
Step 8 - Supplement Marketing Plans - How Will Your Target Audience Know Your Products?
In today's cut-throat nutraceutical ecosystem high-quality products with packaging appeal and smart supplement marketing strategies play an important role.
How to Market Your Supplements?
While marketing nutritional supplements, you should remember that your health product should meet customers’ needs. You can get to know this by encouraging, collecting and evaluating customer feedback. Be receptive to the supportive suggestions as well as critical comments. Customer loyalty is valuable and worth rewarding.
Use Attractive and Compliant Labeling and Packaging
Labeling and packaging can influence 72% of purchasing decisions. Eye-catching color theme, graphics, fonts, and easy to use, FDA-compliant labeling and packaging play a vital role in attracting customers' attention.
Market Your Dietary Supplements Online
It’s the world of the Internet, and you and your product need to have a robust online presence. Promote your supplements online through mobile and user-friendly websites, e-mails, paid marketing, affiliate marketing, and Amazon paid promotions.
Leverage Fans, Stars, and Influencers
80% of your profit comes from 20% of customers which is the loyal fan-base of your product. It is worth-while to interact with them directly and make them feel ‘special’ which will further strengthen their relationship with your brand. Choose the right influencer for your supplement marketing like an up and coming athlete or social media celebrity (rather than an established one) who has a dedicated fan-following. It can fit your budget and also be beneficial for your brand in the long run.
Versatile Advertising Can Be the Key!
Embrace multiple innovative and effective ways of advertising your product. Based on your budget, devise strategies for video marketing, magazine and radio advertising or even grassroots advertising by leaving your flyers in the receptions and waiting rooms of gyms, spas, salons and clinics. These are the places that most of your target audience might visit frequently.
Leverage Social Media
Today’s consumer highly relies on social media with around 80% of Americans having at least one social media account. Online marketing forms a crucial factor while devising your marketing strategy for supplements.
- Smart supplement hashtags aid your brand recognition and customer loyalty
- See a boost in conversion rates
- Significantly save on your advertising cost
Identify Cross-Promotional Opportunities
You can tap a vast potential market by finding and exploiting to target different customer segments for a single product line. For example, 2.5% of all U.S. citizens identify as being vegan. However, besides this group, you can also promote vegan products to vegetarian, flexitarians and traditional customers.
Offline Marketing is Equally Important
Offline marketing, especially print and broadcast media, still have a role in marketing your dietary supplement. TV and radio, and newspapers and magazines can help educate customers on dietary supplement products. While brick and mortar stores can help supplement sales, promotion, and advertising, word of mouth recommendations always create a buzz.
Step 9 - Fulfillment Plan - How Will Your Product Reach Your Customers?
It is imperative for you to reach your supplements to your target customers at the right time, especially in the era of companies like Amazon-Prime that fulfills customers’ wish lists in 2 business days. This is where efficient fulfillment planning plays a crucial role.
You can partner with a reputed order fulfillment provider to help you with supplement warehousing and drop shipping. Please ensure that the storage facility is climate-controlled and GMP certified and check their minimum order limit and ease and accuracy of managing inventory.
Most of the time, your manufacturer can help you with storage, kitting, assembly, shipping and distribution of your supplements. Take this decision based on specific manufacturer requirements like presence of cGMP storage.
Step 10 - Begin Selling!
After investing your time, money, and energy, it is finally time to start selling your product!
Here are some things you may want to keep in mind:
Create a Pricing Structure that Works
Pricing is a game-changer. Charging too much can severely limit your sales and deter some customers who genuinely want to buy your product, just because they can’t afford it. On the other hand, a lower-than-required price not only cuts your profit but also plays havoc with business sustainability.
How to Sell Nutritional Supplements
You can team up with gyms, weight-loss clinics and doctors to engage with your target audience. You can also opt for selling supplements online. One of the hassle-free ways you could consider it while planning your sales strategy is selling supplements on Amazon.
The initial strategy for convincing various sites and store owners to keep your products on their shelves is by sending them a small amount of the supplements for free. Giving them an initial 100% profit can help you reach your target customer who can purchase it again. The return sale will not only help you establish your brand in the market but will also make it obligatory for the sites and retailers to keep your supplements on their shelves because customers prefer it.
How to Sell Your Own Supplements Online
You can opt for a range of options while selling your supplements online.
- Online Store - If you plan to sell your supplement on your own website, a range of online store builders like Shopify, BigCommerce, and WordPress can help you build your website quickly.
- Other Websites - You can use auction sites to sell your dietary supplements.
- Social Media - To leverage Instagram, eBay, Facebook, and Pinterest for selling your supplements, identify your customer type and, accordingly, select the platform. Create or share engaging content that’s in line with the community's expectations and norms.
- Affiliates and Aggregators - You can sell your supplements on platforms like Amazon to increase your products’ reach. All you have to do is set up an account, know the policies, learn the basics of fulfillment, and get started.
Mistakes to Avoid When Starting a Supplement Company
Often while researching supplement ideas, you stumble upon things that are supposed to be done, but what about the mistakes supplement brand owners must avoid?
- Not Knowing Your Audience – You first need to understand your target audience – the people (for example, seniors, millennials, or adults) who would have a common desire to buy your supplements.
- Lack of knowledge about FDA policies – The FDA policies associated with the nutraceutical industry keep changing to ensure the consumer’s safety. The FDA controls everything from manufacturing to labeling – So, if you wish to have a seamless production, seek legal guidance or leverage the expertise of your contract manufacturer.
- Price Over Quality – Price cannot and should not be the only factor to consider when selecting your supplement manufacturer. Remember, you’re ultimately producing a product that will be consumed by someone.
- Only Focusing on Trying to Be Too Unique – Is there a reason why this certain “something” hasn’t been done before? Think about your idea and see how feasible it is to produce it. There are often ways in which you can be unique and still not break the traditional norms.
- What Do You NOT Want in Your Products – Yes, you indeed know your desired product, but understanding what you DON’T want will further help you gain clarity.
Mistakes to Avoid When Starting Your Own Dietary Supplement Company
- Spend time to understand and identify your target audience.
- Choose your contract manufacturer cautiously. Give more importance to quality and value than price.
- A list of qualifying questions can help you determine your best contract manufacturer. Listing the right questions is a matter of knowing your company’s and product’s needs, along with recognizing industry best practices and methods.
- It’s safe to go with your manufacturer’s in-house designer as a well-designed, FDA-compliant label will save potential cost.
EXPERT TIP - Your supplement manufacturer will be your go-to person for every question and concern you have – their expertise in the supplement business can help you avoid missteps in other business areas such as marketing and branding mistakes.
For more expert insights on how to kick start your product sales, be sure to check out our free guide - Selling Supplements In 2019.
Go Forth into the Supplement Industry!
Congratulations! If you're reading this, then you've made it to the end of the guide! Now it's time for you to get to work! Go forth and start your journey towards your very own (successful) dietary supplement line. Remember, do your homework, weigh all the options, and above all else — be prepared!
Frequently Asked Questions
Q: How much does it cost to start a supplement company?
A: The primary goal of every supplement brand owner should be to provide high-quality supplements to customers. To successfully ensure that, the owner’s costs of setting up and running a supplement company depends on various factors like dose form, raw materials, packaging, desired product testing and certifications, etc.
Q: Where do supplement companies get ingredients?
A: Acquiring ingredients/ raw materials depend on the kind of supplements being created. Examples include probiotics (from labs), adaptogens (herbs from specific regions- international or local), or minerals (mineral salts, organic acids).
Q: How can I promote my supplements?
A: Focusing on a customer-centric approach is a good place to start. Understand the consumer's needs and answer the ‘whys’ of your product in comparison to other brands. Develop a unique marketing strategy that addresses key factors. Learn about proven strategies that have helped market dietary supplements.
Supplement Industry Regulations and Agencies
While starting your supplement line, you should be aware of the certifications and regulation agencies related to the nutraceutical industry. Here is a quick list for your reference:
Third Party Organizations
- NSF (National Sanitation Foundation)
- USDA (US Department of Agriculture)
- QAI (Quality Assurance International)
- Project Non-GMO
- CRN (Council for Responsible Nutrition)
- NPA (Natural Products Association)
- AHPA (American Herbal Products Association)
- UNPA (United Natural Products Alliance)
Dietary Supplement Regulations
All the manufacturers should be aware of certain important regulations, at least on a broad level.
- Food Drug and Cosmetic Act of 1938 – It is the overarching regulation for foods, their subsets and dietary supplements that are regulated under the DSHEA amendments to the FD&CA.
- Dietary Supplement Health and Education Act of 1994 – DSHEA established the term “dietary supplement” and set up standards and definitions around product labeling besides expanding the powers of the FDA.
- FDA Guidance – The FDA offers additional industry guidance that covers Dietary Supplement Current Good Manufacturing Practices (DS cGMP).
- The FTC and Native Advertising – To address the guidelines violation, FTC has issued the guide for businesses as well as Q&A-structured endorsement guide.