Skin Care Business Plan: the FDA Line Most Founders Miss
Most skin care business plans model inventory, margin and ad spend, then skip the one number
that changes the legal cost of the business: $1,000,000 in average gross annual
US cosmetic sales over the previous three years. Below it, a brand is a small business under
federal law and is exempt from facility registration, product listing and good manufacturing
practice requirements. Above it, all three attach. The statute says that figure is “adjusted for
inflation,” and no adjusted figure has been published, so plans written today are planning
against the 2022 number.
That threshold sits in
21 U.S.C. § 364h, added by the
Modernization of Cosmetics Regulation Act of 2022. It belongs in the plan as a dated line item,
because a brand that hits it in year two inherits a compliance workload it did not budget for in
year one.
What the $1,000,000 line actually measures
The statute is narrower than most summaries suggest. It measures average gross annual
sales in the United States of cosmetic products for the previous 3-year period — not
total company revenue, not a single year, and not worldwide sales. A business with $2 million in
overall turnover but $800,000 in US cosmetic sales is still a small business under this
section.
What the exemption covers is also specific. It removes § 364b and
§ 364c — good manufacturing practice, facility registration and product listing.
It does not touch three obligations that apply from a brand’s first sale, which the
FDA’s
MoCRA page sets out: reporting serious adverse events within 15 business days, holding
records that adequately substantiate each product’s safety, and labeling the product correctly. A
plan that reads “we’re exempt” as “no compliance costs” has mispriced year one.
Four product types that void the exemption at any revenue
Revenue is only half the test. Under § 364h(b), manufacturing or processing any of
four product types removes the exemption however small the business is:
- Products that regularly contact the mucus membrane of the eye under customary use —
which is why a mascara or waterline eyeliner behaves differently in a plan than an eye-area
serum. - Products that are injected.
- Products intended for internal use.
- Products intended to alter appearance for more than 24 hours where consumer removal is not
part of customary use — the category catching lash and brow dyes and gel nails.
One such product in the range is enough. If the roadmap adds an eye product in year two, the
compliance section needs to say so, because the exemption does not survive the launch.
Why 2026 changes the manufacturing section
MoCRA requires registered facilities to renew every two years, and
FDA
states that renewal dates run from the date of initial registration, not from a shared
calendar window. FDA’s worked example: an initial registration received on February 20, 2024
renews by February 20, 2026. Because the first wave landed in 2023 and 2024, renewals now fall
due on dates that differ from one facility to the next.
That turns a vague due-diligence question into a specific one. Do not ask a prospective
manufacturer whether it is registered; ask for its renewal date and check it against your
production schedule. FDA can suspend a facility’s registration, and distributing product from a
suspended facility is a prohibited act — a risk that belongs in the operations section.
One phrasing trap is worth fixing in the document itself. Registration is not approval.
FDA does not
pre-approve cosmetic products or ingredients, with the narrow exception of certain color
additives. A plan that promises an investor the agency has approved its cosmetics is describing a
status that does not exist in this category. The accurate term for a facility on FDA’s register
is FDA registered, and registration carries no judgement about the products made there.
The numbers a factory can actually confirm
The financial model usually fails on minimum order quantity rather than formula cost, because
the minimum sets the size of the first cheque. The route decides the number. At Moe’s Group, a
ready-to-go existing formula runs from a 200-unit minimum; a custom formulation, where a lab
develops the product to a brand’s specification, starts at 1,000 units. Those are different
services with different timelines, and a plan that models one while quoting the other will not
survive its first supplier conversation.
Capacity belongs in the plan for the opposite reason — not to justify year one, but to
avoid a factory change in year three. Moe’s Group’s Chatsworth facility has manufacturing
capacity of up to 1,000,000 units per month. That is headroom, not a forecast or a delivery
commitment. The useful question for any supplier is whether your year-three volume fits inside
their stated capacity without a transfer.
Practical takeaways for the plan itself:
- State the $1,000,000 US cosmetic sales threshold as a dated trigger, with the month your
forecast crosses it. - Budget adverse event reporting, safety substantiation records and labeling review from
launch, not from the threshold. - Check whether any planned SKU falls into the four § 364h(b) categories, including
products on the year-two roadmap. - Record each supplier’s facility registration renewal date and the standards it is
certified to, such as ISO 22716 for cosmetics GMP. - Model the minimum order quantity for the route you are actually taking, per SKU.
- Write “FDA registered” where that is what you mean, and drop the word approved
entirely.
If you are drafting the manufacturing section now and need the minimums, capacity and
certification detail confirmed for a specific product, Moe’s Group answers those through its
product inquiry form.
— Moe’s Group Newsroom
