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It can be a lucrative and exciting business opportunity to build your own makeup empire in New Zealand. If you are a cosmetics whiz or passionate about makeup, it can be fantastic to grow in an industry you genuinely enjoy. However, while there are many passionate founders in the makeup industry, sometimes it can be easy to forget some of the critical legal and financial aspects when starting a business. This article will set out three mistakes to avoid when setting up your makeup business. They are:

  • forgetting to plan for GST;
  • not giving yourself enough capital for the early stages of your growth; and 
  • taking the customer experience for granted.

Forgetting to Plan for GST

In New Zealand, no matter your business structure or the nature of your business, you must register for goods and services tax (GST). You must register for GST as soon as you think you will earn more than $60,000 in a 12-month period. When your makeup business is getting off the ground, you may not think that you will earn that much. However, it is an important point to consider and check as your business grows. If you earn over $60,000 and have not registered for GST, you may be charged penalties for not doing so. 

You can also think about registering for GST even if your makeup business is not quite at the point of generating $60,000 over 12 months. There can be some benefits in doing so, such as being able to claim a GST refund. However, as soon as you have registered, there is additional administration to complete, such as regular returns. 

While you are busy getting your makeup business set up, it can be tempting to file GST returns as rarely as possible. For example, you might leave your filing requirements for GST every six months. However, this puts pressure on you as the founder (or whoever is tracking this administrative task) to keep on top of the GST paperwork. Therefore, you might want to consider filing every two months instead. Also, note that as soon as your makeup business is turning over more than $500,000, you will not be able to file every six months. 

Not Giving Yourself Enough Capital for the Early Stages

A common mistake when starting a makeup business is not allowing yourself sufficient money and capital to make it through the difficult early stages of a new business. You will be spending a considerable amount of money getting your makeup supplies and facilities set up. Likewise, you will likely be spending funds on marketing and branding your business to get sales off the ground. Unfortunately, it often takes several months or even years before your business makes enough money to cover your expenses. 

Given this context, you should make sure you have enough finance when starting a new business. This could look like using your personal savings, gifts from family or friends, or loans from banks and other financial institutions. Of course, you should be careful to take on too much liability. Still, equally, you need to give yourself enough capital to get your business off the ground. 

Taking Customer Experience for Granted

While focusing on the makeup side of your business, it is easy to let your cosmetics expertise take over your perspective on the business. You should make sure to also think about the experience of customers who may not understand makeup or the industry as well as you do. This is a very common mistake in a beauty business. Try to think about how your customers will think and feel from the moment they walk into your business. 

Additionally, try to ensure that your customer service and the atmosphere or mood created by your salon or store is inclusive and accessible to customers. Finally, if you get any constructive feedback about your business, particularly from a customer, try to take it on board. It can be hard to understand exactly how customers will feel when they engage with your beauty business for the first time, so feedback about this is invaluable. 

Key Takeaways

The makeup industry can be rewarding and lucrative. Still, like all industries, there are some common mistakes made by new founders. While the makeup side of your business is pivotal, remember the financial and legal aspects of starting a business in the industry as well. You should plan for GST and consider registering early. At the very least, register as soon as you think your turnover will be over $60,000. Financially, make sure to have access to the capital you will need for the early stages of your business. Throughout those early stages, you should keep thinking about the customer experience. 

If you want to know more about starting a new business in the makeup industry and avoiding common mistakes, contact LegalVision’s business lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

When does a makeup business need to register for GST?

As soon as you think your business will earn $60,000 in a 12-month period, although you can register as early as you would like.

Why does a business need early-stage capital?

Your business will need early-stage capital because it can take time to make enough revenue to cover its expenses. There are also extra costs at the start of the business’ journey to set up the facilities, products and marketing required.

Where can a makeup business get finance or capital in the early stages?

There are a range of ways to get finance early on in your business’ life. This can include personal savings, help from friends or family, and loans from banks and other financial institutions.

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