In-House Manufacturing vs. Contract Manufacturing: What Founders Need to Know
If you’re building a skincare or beauty brand, one of the biggest early decisions you’ll face is how you’ll actually make your products. Do you manufacture in-house (in the early days this might mean literally, in your kitchen or repurposed garage)? Or do you partner with a contract manufacturer? If you start in-house, when (if ever) should you switch to a contract manufacturer?
I’ve done both.
I’ve formulated and produced products from scratch at home, in small studios, and in my own manufacturing warehouse. I’ve also worked with contract manufacturers.
Each path has very real trade-offs and choosing the right one often determines not just your production capacity, but your brand integrity, your margins, and your sanity as a founder.
Below is my honest comparison (equal parts practical and personal) so you can make the best choice for where you are in your business journey.
Why This Decision Matters More Than You Think
It’s easy to assume manufacturing is just “the operations part” of the business, separate from marketing, storytelling, or brand building.
However, the truth is your manufacturing model influences everything. It shapes your cost structure, your agility, your innovation cycle, your customer experience, and even your personal energy as a founder.
When I built Zoe Organics, the way we made our products was a core part of our ethos. It mattered deeply to our customers. But it also impacted our ability to scale, hire, forecast, and grow sustainably.
So let’s break it down.
Part 1: Keeping Manufacturing In-House
The Upside: Why Some Brands Thrive With In-House Production
1. Total Quality Control
You control sourcing, ingredients, mixing environments, sanitation protocols, fill levels, batch consistency—everything.
For Zoe Organics, verifying our ingredients were sourced ethically and certified organic, building direct relationships with our suppliers, and maintaining handmade integrity were core values. Keeping production in-house allowed for us to build trust and full-transparency with our customers.
Of course, the more particular you are about your ingredients, formulas, sourcing and processes, the more this will matter to you.
2. Flexibility & Speed
Want to tweak a formula? Test a new ingredient? Run a micro-batch?
When you manufacture in-house, you can innovate in hours, not months.
This is a major advantage for:
Founder-led brands
Holiday or seasonal drops
Limited editions
Early-stage testing
The ability to be nimble is a huge advantage, especially in the early years. We tested new products and packaging and if they failed, it was minimal loss because we experimented on a very small scale.
3. Stronger Brand Storytelling
Today’s customers want transparency. Everyone loves a good look behind the scenes at how products are made. Some of the most engaging content takes the customer along on the journey of who, how, where the products are made.
“Handcrafted, hand-filled, made my us in our studio” all communicate craftsmanship and trust. This can become a powerful differentiation point. Small batch production also conveys a special kind of care and quality unlike large scale production using big equipment in sterile looking environments.
4. Easier on Cash Flow and Inventory Management
Contract manufacturing typically requires MOQs that for new brands may not make sense financially and may result in excess wasted inventory.
Cash Flow: tying up all your cash in inventory that may take many months to sell through creates strain on daily operations. Careful planning, lean operations and just-in-time manufacturing really optimize cash flow and can help you survive the early years while building sales.
Excess Inventory: cosmetics are consumables and have a shelf life. High MOQs increase the chances that you won’t be able to sell through all of the product while it is fresh. While certain types of products can last unopened for up to 2 years, others have a shelf-life of only 6 months.
If your formulas are relatively simple (oils, balms, butters) and raw materials can be purchased in reasonable bulk quantities at a good price, your margins can actually be higher in-house than with contract manufacturing.
5. Protecting Your IP
When you keep your manufacturing in-house, you never have to worry about:
Labs replicating formulas
Competitors receiving similar bases
Losing leverage in negotiations
Your R&D stays yours.
The Downside: Why In-House Can Become a Bottleneck
1. Operational Complexity
One of the biggest downsides to keeping manufacturing in-house, is that you now have to become an expert in operations and running a manufacturing facility. This includes:
Leasing or purchasing a facility
GMP documentation
Supply chain management
Staffing and training
Equipment maintenance
Forecasting
You can’t just do it half-way either. Running an efficient manufacturing facility is only part of it. Paperwork, processes, compliance—they are time consuming and not for the faint of heart.
2. Capacity Limits
Your growth is limited by:
Square footage
Equipment you can afford
Labor hours
Batch size constraints
There’s only so much you can hand-pour and this is when most founders have to make the decision to either invest in their own manufacturing infrastructure, or begin outsourcing.
3. Emotional Load on the Founder
You carry the pressure. Every batch, every mistake, every backorder—it’s all on you.
This contributed significantly to my burnout in the years leading up to Zoe Organics’ closure. More of my time was spent on daily operations than on strategy and vision. The emotional burden was equal to the operational one.
4. Constraints for Scaling
Scaling an in-house facility requires:
Capital
Time
Upgrading equipment
Hiring staff
More insurance
More certifications
More documentation
More pressure and complexity
5. Regulatory Risk
If anything isn’t GMP-compliant, you are liable. That’s a lot of responsibility.
Part 2: Working With a Contract Manufacturer
The Upside: Why Contract Manufacturing Enables Growth
1. Immediate Production Capacity
They already have:
Equipment
Staff
Certifications
Quality management systems
Production lines
This lets you scale without becoming a factory yourself. Working with a contract manufacturer opens up possibilities for capabilities that you might now have. For example, tube filling and sealing equipment, shrink wrap tunnels, sample packet filler/sealers.
2. Predictable Timelines & Output
Once you’re in their system, you can better plan:
Inventory, restocks, launches, seasonal cycles, wholesale accounts.
Have a new launch scheduled for next quarter and need 10K units each of 3 of your SKUs? No problem!
3. Cost Efficiency at Scale
At higher volumes (typically 5,000+ units per SKU), lab production becomes much cheaper per unit. Once you reach a sales threshold that requires these order volumes, if can save you money to work with a contract manufacturer. Plus you don’t have the overhead of running your own manufacturing facility.
4. Less Operational Responsibility
You’re no longer mixing, filling, labeling, or troubleshooting batch failures.
You get to focus on:
Brand
Product development
Community
Retail relationships
CEO-level thinking
This can be so freeing.
5. Better for Complex Formulations
If your products require:
Emulsions
Actives
Preservatives
Stability testing
Compatibility testing
Complex filling lines
You might need a lab. The more complex your formulas, the more testing and advanced equipment may be required.
6. Access to Expertise
Good CM partners offer:
R&D
Stabilization
Testing
Compliance
Shelf-life support
They become part of your extended team. If you find the right partner whom you trust, their expertise can add credibility and set your mind at ease.
The Downside: The Realities Most Founders Don’t Talk About
1. Loss of Control
Your formula may be interpreted differently. The first time I received samples back from a contract manufacturer, they used coconut fragrance instead of coconut oil. I was horrified. Another time, I received a balm that was harder than a rock instead of soft and creamy as I made it. Small batch production to scale requires some different processes and as a founder it can be scary trusting someone to follow your formula, ingredients and sourcing requirements exactly as you specify. You may have one manufacturer who makes your product one way, and another that uses an entirely different process. These details matter and you have to find someone who is willing to take your lead and the time to get it right.
You need airtight contracts and detailed SOPs.
2. Large MOQs (Minimum Order Quantities)
Often 5,000+ per SKU.
As I mentioned before, this ties up cash and increases risk.
3. Long Lead Times
12–24 weeks is common.
Planning is critical, but even the best planning can result in OOS. If you run out of stock, you may stay out longer than you’d ever tolerate in-house.
4. Less Room for Innovation or Spontaneity
Micro-batches? Holiday whims? Rapid changes? Harder. More expensive. Sometimes impossible. These are some of the things that make small batch production special and keep customers excited about your brand. Limited editions and holiday products can still happen, but will just require a lot of planning up front.
5. Potential for Misalignment
Labs are not entrepreneurs. They’re measured on efficiency and output, not brand values.
Finding the right partner is everything and it may take many interviews and some test batches to find the right fit. Don’t get discouraged if the first one doesn’t get your vision. The first chemists I talked to told me my product ideas didn’t work.
6. Vulnerability During Market Shifts
Covid supply chain disruptions exposed how dependent brands were on their manufacturers.
If your lab shuts down, raises prices, or deprioritizes you—you’re stuck. This can be somewhat hedged by having multiple manufacturers who are set up to make your product. This way, if one closes or has a long delay, you have a back up plan.
Part 3: How to Decide What’s Right for Your Brand
This decision should be based on your business model, your products, and your personal bandwidth. You can always start small, in-house, and transition to working with a contract manufacturer when you have outgrown your capacity to scale. You can also do a hybrid of both. The purpose of this guide is to help you to decide what is right for your brand by weighing the unique benefits and drawbacks of each.
Here’s a simple framework:
Start with or Stay In-House If You:
Have simple, oil-based or anhydrous products
Value craftsmanship as part of your brand identity
Need to innovate quickly
Want to stay small + nimble
Are building a premium, founder-driven experience
Have the space + desire to run a facility
Care deeply about ingredient sourcing
Need tight control
This is exactly why Zoe Organics started this way.
Start with or Transition to Contract Manufacturing If You:
Want to scale to national or global distribution
Have formulas requiring emulsions or preservatives
Want predictable, high-volume production
Don’t want to run operations yourself
Have the cash flow for large MOQs
Want to focus primarily on brand + sales
Need compliance support for larger retailers
Part 4: My Personal Take — And What I’m Doing Differently Now
In the early days of Zoe Organics, in-house manufacturing was the right choice. It allowed us to stay true to our values—especially in the mom & baby category where purity and fresh production mattered.
But when we began to grow, in-house production became the choke point. In 2015, we had to be ready for a 1100 store Target launch with only about 4 months to have inventory shipped to the distribution centers. The only way we could pull it off was to work with a contract manufacturer. Without any experience, and no time to waste, we went with a CM who got us to the finish line, but not without some hiccups and sleepless nights.
Ultimately, I prefer a hybrid approach, which is the best of both worlds:
Develop formulas in-house
Maintain ingredient sourcing and quality standards
Partner with trusted contract manufacturers for scale
Keep some small-batch items in-house for special/limited editions
This model supports:
Growth
Margin improvement
Agility
Brand storytelling
Founder wellbeing (which is a business asset!)
If You Want Help Thinking Through This…
This is one of the biggest strategic decisions founders make and I love helping them navigate it.
If you’re in this stage and want support creating the right operations and manufacturing plan for your brand, I offer consulting for early-stage CPG founders. Schedule a complimentary call here.
At the end of the day, the best decision is the one aligned with:
your values
your brand’s identity
your long-term vision
your capacity as a founder
