How to Start a Packaging Business

When deciding what to buy on a shopping trip, it’s packaging that often catches the eye. Unique labeling and packaging helps build brands and sell as many products as possible. 

If you’re thinking of starting your own packaging business, now is a great time – the industry is worth nearly $10 billion and poised for steady growth in the coming years. 

But before you start designing labels, you’ll need to learn what it takes to launch a business venture. Fortunately, this step-by-step guide has all the information you need to put your new packaging business on the road to success. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Before starting a packaging business, it’s important to weigh the pros and cons. 

Packaging business industry trends

Industry size and growth

• Industry size and past growth – The US packaging and labeling services market is worth $9.9 billion in 2022 after growing 3.4% annually since 2017.((https://www.ibisworld.com/industry-statistics/market-size/packaging-labeling-services-united-states/))
• Growth forecast – The US packaging industry is expected to expand 2.9% each year through 2027.((https://www.mordorintelligence.com/industry-reports/packaging-industry-in-united-states))
• Number of businesses – In 2022, 10,529 packaging and labeling services businesses are operating in the US.((https://www.ibisworld.com/industry-statistics/number-of-businesses/packaging-labeling-services-united-states/))
• Number of people employed – In 2022, US packaging and labeling services businesses employ 54,405 people.((https://www.ibisworld.com/industry-statistics/employment/packaging-labeling-services-united-states/))

Trends and challenges

Trends within the packaging industry include:

• Highly customized product labeling and packaging is becoming the norm. Companies that work closely with their clients to create unique, customized designs, inserts, and boxes are more likely to attract today’s hottest brands over companies that offer limited, “one-size-fits-all” choices. 
• Many top packaging firms focus on the design process and partner with a separate company to handle production. Overseas manufacturers are better suited for high volume orders while local businesses are better equipped to handle more personalized products.

Challenges within the packaging industry include:

• In some industries, product labeling and packaging is becoming more important than the product itself. This means packaging companies need to make significant investments in creative design talent to stand out from the competition. 
• The cost of raw materials like plastic, paper, and adhesives is on the rise. This could make procuring these items expensive and challenging for packaging businesses.

 What kind of people work in packaging?

• Gender – 39% of packaging specialists are female, while 61% are male.((https://www.zippia.com/packaging-specialist-jobs/demographics/))
• Average level of education – The average packaging specialist in the US has obtained a bachelor’s degree.
• Average age – The average packaging specialist in the US is 44 years old.

How much does it cost to start a packaging business?

If you’re looking to start a packaging business that focuses primarily on packaging design, startup costs range from $4,800 to $10,700. Main costs include website setup, design software, and marketing and advertising expenses. 

If you plan on starting a packaging business with onsite manufacturing capabilities, startup costs will be much higher and include facility rental, equipment purchase or lease, and materials. 

To brush up on your graphic design skills or learn how to create packaging mockups for clients, there are plenty of online courses available. Websites like Udemy offer several courses for under $100 that can be completed in just a few days.

You’ll need a handful of items to successfully launch your packaging business, including: 

• Website
• Computer
• Packaging design software
• Prototype materials

How much can you earn from a packaging business?

New packaging businesses that specialize in design services typically charge an hourly rate of $40. Assuming you aren’t manufacturing packaging as part of your business, aim for a profit margin of around 90%.

In your first year or two, you could work from home for 40 weekly hours at $40 an hour, bringing in $83,000 in annual revenue. This would mean $75,000 in profit, assuming that 90% margin. As your company gains recognition, you could charge $55 per hour and double your business. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 65%. With annual revenue of $229,000, you’d make a tidy profit of $149,000. 

What barriers to entry are there?

There are a few barriers to entry when it comes to starting a packaging business. Your biggest challenges will be:

• Drawing clients away from established firms
• Building a reputation for powerful designs

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a packaging business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research packaging businesses in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a packaging design business that offers in-house printing services. 

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as cosmetics or food packaging.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

Packaging companies provide design services for products in a variety of different industries. Some packaging companies also have production capabilities and create the actual boxes, mailers, and inserts in-house. Focus on a specific product niche to attract and grow a loyal customer base. 

How much should you charge for packaging services?

Packaging businesses that specialize in packaging design services typically charge an hourly rate between $40 and $100. Your rate will largely depend on your level of expertise and reputation in the industry. You may be able to charge more if you offer brand consulting services. If you produce packaging in-house, you could charge $.50 to $3.50 per package, depending on size and materials. 

If your company just provides design services, you’ll have very little recurring costs, so expect a profit margin of around 90%. If your business includes onsite production, your margin will be around 30%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be retailers looking for assistance with designing and manufacturing packaging for their products. Advertise your services on the platform LinkedIn and connect with business owners and companies who may be interested in partnering with you. 

To target small businesses and social media influencers looking to create their own products, focus your marketing efforts on platforms like Instagram, Facebook, and TikTok.

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office or a production facility. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Packaging Company Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, like “custom packaging” or “packaging solutions”, boosts SEO
• Name should allow for expansion, for ex: “PackSource Enterprises” over “TechPack Solutions”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Packaging Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: A brief summary of your business plan, highlighting key points and objectives.
• Business Overview: An overview of your packaging business, including its mission, vision, and core values.
• Product and Services: Description of the packaging products and services you offer, including their unique features and benefits.
• Market Analysis: An examination of the packaging industry, market trends, and potential customer segments.
• Competitive Analysis: Assessment of your competitors in the packaging market, their strengths, weaknesses, and market positioning.
• Sales and Marketing: Strategies for selling and promoting your packaging products and services to target customers.
• Management Team: Information about the key members of your business, their roles, and qualifications.
• Operations Plan: Details on how your packaging business will operate, including production, supply chain, and logistics.
• Financial Plan: Projections and financial data, including startup costs, revenue forecasts, and profit margins.
• Appendix: Supplementary materials such as resumes, contracts, or other relevant documents to support your packaging business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to packaging businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your packaging business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a packaging business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Packaging Business Licenses and Permits

Starting a packaging business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your packaging business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as CHILI publish, iC3D, or Box It Now to design packaging prototypes, share designs with clients, and manage inventory.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Launching a packaging business can be a lucrative venture, and success often hinges on effective marketing strategies. Beyond creating a website and networking, consider the following practical tips to establish and grow your packaging business.

1. Target Niche Markets: Tailor your packaging solutions to specific industries or products, such as eco-friendly packaging for sustainable brands or specialized packaging for fragile items, to carve out a unique selling proposition.
2. Collaborate with E-commerce Platforms: Partner with e-commerce platforms and fulfillment centers to offer integrated packaging solutions, tapping into the growing demand for streamlined packaging services in the booming online retail sector.
3. Invest in Eye-Catching Design: Showcase your design capabilities by creating visually appealing and functional packaging prototypes. Develop a portfolio that highlights your innovative designs to attract businesses seeking custom packaging solutions.
4. Implement Referral Programs: Leverage your existing network and incentivize referrals by offering discounts or additional services to clients who refer new business your way, fostering a network effect.
5. Attend Trade Shows and Exhibitions: Participate in industry-specific trade shows and exhibitions to connect with potential clients, demonstrate your packaging solutions, and stay abreast of emerging trends and competitors.
6. Social Media Presence: Utilize social media platforms to showcase your packaging projects, share industry insights, and engage with potential clients. Leverage visual content to highlight your creativity and expertise in packaging design.
7. Offer Educational Content: Create and share informative content, such as blog posts, webinars, or tutorials, that educates businesses on the importance of effective packaging and positions your company as an authority in the field.
8. Local Partnerships: Forge partnerships with local businesses, especially those in related industries like manufacturing or printing, to expand your reach within the community and generate referrals.
9. Optimize for Sustainability: Highlight your commitment to sustainability by offering eco-friendly packaging options. Emphasize the environmental benefits of your products to attract businesses with a focus on corporate social responsibility.
10. Loyalty Programs: Implement customer loyalty programs to reward repeat business. Offer discounts, exclusive packaging designs, or priority services to incentivize clients to choose your business for their ongoing packaging needs.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your packaging business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your packaging business could be: 

• Eco-friendly packaging for earth-conscious brands
• Draw customers with eye-popping package designs
• Custom labels and inserts personalize your product lines

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a packaging business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in packaging for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in packaging services. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a packaging business include:

• Packaging Designer – Design and create prototypes for clients
• Administrative Assistant – Schedule client meetings, create invoices
• Marketing Lead – Manage social media accounts, run advertising campaigns

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Packaging Business – Start Making Money!

Packaging companies all over the world work hard to make their clients’ products as attractive as possible so they fly off the shelves. The industry is seeing steady growth, which means starting and running your own packaging business could be a rewarding and lucrative venture. 

Now that you’ve done your homework on what it takes to launch a business, it’s time to get out there and start designing your vision of success.