With the recent pandemic, candle making has become one of the most approached home-based side hustles. Creating a beautiful candle from raw materials makes it comforting and calming, but candle making also brings profitable opportunities.
Making homemade candles can become a profitable side hustle due to its simple yet effective business model. Transforming raw natural materials into a product that will sell for a price that includes its production, shipping and marketing costs makes it a perfect candidate for a side business to generate income.
Let’s dive into the nitty-gritty of this side hustle and understand if it’s a predictable and feasible business to generate some additional money.
Candle Making as a Profitable Side Business
I was almost seven years old when my older sister bought her first candle, it was 1991, and she was 16. My parents were quite surprised and alarmed by the dangers of having a burning candle in their daughter’s room!
Lots have changed in these 30 years; candles are now a common item, a commodity that pretty much all of us burn or gift every year.
The adoption is steadily growing of around 10% each year after Gen Z (people born from 1995 to 2012) have become actual buyers, and they grew up with a way different concept of what a candle is.
For my parents, candles were only items for brightening up a dark room or commemorating their lost loved ones, but now candles have acquired a brand new meaning!
When we think about candles, we think about relaxation, me-time, self-care, about comforting moments: all adjectives and practices that 30 years ago were not mentioned/invented.
This new meaning is fueling our society’s willingness to spend money for their wellness. Candles are part of these wellness rituals, and this combination creates a massive market opportunity for candle-making businesses to succeed with their crafts.
To have a birds-eye overview of the competitive structure of the candle making market, we can use Porter’s 5 Forces Framework:
- Threat of new entrants: it’s easy to set up a shop (even in your kitchen) and enter the candle making business.
- Threat of substitutes: we can divide customers into casual and loyal when it comes to candle making – the loyal ones are very attached to a candle brand because they love that specific scent, duration or even the status of owning that candle. While the casual customers can jump from a candle to the other until they pick the one they prefer the most and become loyal to one.
- Bargaining power of customers: customers don’t have much influence over candle makers, being the target customer base so broad.
- Bargaining power of suppliers: suppliers generate raw materials (i.e. wax, essential oils, etc.) and like for the customers, suppliers are so many reducing the costs of making candles.
- Competitive rivalry: there is a lot of competition, and it’s not so easy to find a competitive advantage to win a segment of customers – it all relies on marketing and clever innovations.
From this high-level analysis of the market, candle making can become a profitable side business for the following reasons:
- Low-Cost Market Entry: businesses, due to the vast presence of suppliers, can enter the market with low costs to get the raw materials to create candles.
- Massive Customer Base: candles are easy to sell if you consider the candle’s worldwide consumptions. Starting from fairs and local events to the Web, the possibility to profit is high yet linked to effective marketing and product strategy to resonate among the competition.
- Space for Improvements: as a business, candle making has a straightforward pace and can be improved and scaled accordingly with the feedback received by the initial customers. This formula makes the overall business more robust and competitive.
Now that we have a general idea of how the candle making market works within customers, suppliers, and competitors, let’s dive into the most common business models to handle costs and revenue.
Candle Making Business Model (Costs & Revenue)
In a previous post about whether or not is it cheaper to make your own candles instead of buying them, we went through the costs involved in making a small batch of candles.
If we want to make candle making a profitable business, it’s necessary to consider our production capabilities in a slightly more productive way both for reducing the costs, and for increasing the revenue.
Before jumping into the numbers, it’s worth considering some possible business models you could apply to your business.
- Product Model: The product model is the most straightforward and the most heavily used within products such as candles. The customer buys the product (candle) locally in a fair, event, shop or online. Every batch of product is an actual investment for the business because the ROI (Return on Investment) is calculated only after the product has been made and eventually sold.
- Subscription Model: The subscription model is an interesting opportunity for a business with some active production allowing customers to monthly or quarterly subscription to receive a fixed amount of candles with diverse scents, colour or shapes. Having monthly, quarterly or yearly subscriptions gives a big help to the business financial forecasting and investment in new raw material for the production.
- Bundling Model: The bundling model is a collection of two or more products sold to a price that is perceived by the customer like a deal but guaranteeing the business a good margin profit per bundle sale.
Since we are starting our side business we are going to pick the easiest business model – Product Model – with a selling price of 20$ per 200g (7.2oz) jar candle.
The chosen price of 20$ is an average of the mid-market of candles that has a broad appeal within handmade scent candles that you can buy in fairs or even small business shops.
Other tiers of price are 3-10$ cheap mass-market paraffin wax-based candles that you can find in any store and their exact opposite, luxury candles that vary from 30-200$ and are branded status-setter creations.
Our very first ideal batch of candle will be of 500 worth 10,000$ because each candle costs to the customer 20$.
The costs associated to our first batch of 500 candles sold at 20$ are on average at the 38% of the worth, that means we are going to spend 3,800$ to make 10,000$ worth candles, leaving us with a profit of 6,200$.
The 38% is composed by 18% of production costs (materials, equipment, containers), a 10% for packaging costs and another 10% for shipping.
Many things can be done to reduce the costs and maximise the profits like buying materials and containers in bulk on Alibaba or cutting on the packaging or the shipping costs by selling candles locally in fairs, events or shops.
Selling Candles Locally vs Globally
We are so used to buying things online, and when approaching a side business, we do it with a global mindset. We do it so also because we consider the myriads of solutions that dramatically ease the route-to-market for selling candles (i.e. Amazon, eBay, Shopify, to name a few).
However, selling candles locally should be the very first channel of distribution you should seek at the very start of your side business until it has the financial breath to scale into global markets.
There are several reasons for the importance of focusing on distribution efforts locally, that I’ll soon tackle in this section. I want to focus on the most important one: product validation.
Product validation is the main phase to differentiate a successful business from a failed one, and this it’s not only affecting the candle making industry but pretty much any business that deals with customers!
An ideal scenario: we focus on local distribution in fairs, events or local shops that can host our creations (and, as incentivise, they could get a small cut).
In this scenario, we would have a connection with our customers, and we can directly ask for feedback and understand which part of the product they are most satisfied with, and which one is more disappointing to them, maybe the price? Or the packaging, the duration? The scent throw?
The very first customers are going to shape your product and the future of your side business. By customers’ interactions, you will gather insights and use them to improve the current flaws.
The product validation will assure you that your route-to-market will be as smooth as burning a candle! 🙂
Local distribution will help with getting feedback from your first customers but also will help you out to:
- Cut the shipping costs: you bring your candles where the customers are (fairs, events, or shops). This cut on costs will result in way more profit per candle sold!
- Soft-Market Entry: by selling locally you slowly and steadily spread your products in the market, gaining both a financial return both confidence in your ability as a candle maker. Competition in a local context is likely very small or even absent!
- Boost your Branding: You can build a brand around your territory by using local organic materials, as we do at Selkie Traveller. It creates a bond with your community, and customers are more likely to gift or refer your candles to others.
We can concept this side business like a startup: the local market is the go-to way for early-stage entrepreneurs and a place where you can grow your brand, network and customers. Then: there is the global market, which is always there waiting with plenty of small and big players to compete with your brand new creations.
The global market is approachable at a different stage: the business should generate enough profits to sustain new challenges, strategies and even new costs that this new channel will throw at you.
The first years in the global market will be tough because you would have to compete with plenty of players. However, if you have gone through a period of product validation and local dissemination, you will already start with an advantage that many businesses don’t have in a global market.
New costs will pop up:
- Marketing: before was just word of mouth and presence in-situ, now it will become a new percentage to keep into account when pricing your candle.
- Shipping and Distribution: before was you carrying 100 candles or so from your first batch around. Now it will be someone else doing it on your behalf (i.e. Amazon FBA, DHL, etc.)
- Customer Service: in a local scenario, you don’t really need customer service, but now people worldwide will ask for refunds and many other unimaginable things – it’s not such explicit cost, but it’s something new to consider.
I don’t want to scare you! There are plenty of successful businesses that sell and ship candles worldwide, and you will be one of them as well after you are going to serve your local market first!
The possibility to go global will also bring way more revenues to the business letting it scale dramatically and without any comparison with your local-driven business growth.
To wrap up this long post, it’s great you are looking at candle making as a potentially profitable business to start because it is, and there is evidence all over the web!
Things to keep in mind are the initial costs to produce your first batch of candles, the decision to find customers in your local area, the understanding that their feedback counts, your ability to get insights and improve your product and make a profit by selling your first creations.
You will pay back your initial investment by selling the first batch of candles, while you will allocate the excess profits to purchase new materials and equipment for the second, third and…hundredth batch of candles!