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How to Start a Hat Store

How to Start a Hat Store

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How to Start a Hat Store

How to Start a Hat Store

Here’s to one of our favorite accessories – the hat!

What hat we wear is a practical decision – what it looks like is a very individual one. Whether it’s a baseball cap, a fedora, a beanie, a beret, or a cowboy hat, each one tells us a little about the person wearing it and the occasion.  

So if you decide to start your own hat store, one of the major decisions will be what kind of hats and caps you want to include in your range and what market segment you want to target.

Here, we will take you through the main points and considerations when starting your own hat business. 

Business Description

If you decide to start a hat store, yours will be one of almost 10,300 stores in the States retailing a wide range of caps and hats. This may include tailor-made headwear for special occasions, personalized or manufactured in bulk – often overseas – and retailed through your business.

This kind of operation lends itself to starting small, online. It is a business you can easily run from home until you have found your feet as a new business owner.  

Industry Summary

According to IBISWorld, the hat and cap store industry employs almost 27,000 staff and is a $3 billion industry in the US. 

Its regulatory requirements are considered light. New entrants into this industry will generally encounter low entry barriers and a medium competition level.

In 2021, men’s hats and caps were by far the largest market segment, commanding 55% of the hat market, followed by woman’s and children’s hats and caps. 

The largest company, Fanzzlids Holdings Llc, holds close to a quarter of the entire industry market share.

Industry Trends

Traditional brick-and-mortar retailers have, in the past, suffered from strong online shopping competition. If you are considering entering the market now, offering a convenient online shopping experience should be seen as an opportunity rather than a threat.

With an expected increase in disposable income and a growing number of young adults entering the workforce, this industry is forecast to expand its market size and profits by 2026. In the US, the demand for sports merchandise such as caps is expected to increase substantially.

Target Market

You have several options here, and we strongly recommend you do a thorough market analysis to find gaps in supply, identify trends in demand and find your niche.

You may want to target a specific age group, or you may simply divide your market into men’s, women’s, or children’s headwear. You may decide to offer high-end fashion or hand-made hats or go for casual caps and hats that will appeal to the streetwear and urban clothing market. You might target a specific group, such as gardeners, surfers, farmers or riders, people living in cold climates, or tourists and travelers. 

Or, you may decide to branch out into wedding hats, fascinators, fedoras, or ‘Great Gatsby’ wear.

Checklist for Starting a Hat Store

If you’re thinking of starting your own hat store, use this checklist to make sure you have everything covered. From choosing the right location to stocking your shelves with the latest styles, we’ve got you covered. So, before you take the plunge into opening your own hat store, be sure to read through this checklist!

Step 1: Write a Business Plan

Starting a business, especially in the retail industry, can be a daunting task. Without a strong plan in place, it can be easy to get lost in the day-to-day tasks and lose sight of your overall goals.

This is where a business plan comes in. It allows you to outline all aspects of your hat store, from your target market and financial projections to your long-term growth strategy. A business plan also serves as an important tool for potential investors or lenders, as it helps them understand the viability and potential success of your hat store.

Related: How to write a business plan

Step 2: Name the Business

Naming a hat store can be a fun and challenging task. When coming up with ideas, it’s important to consider your store’s unique identity and the type of hats you sell to set your store apart from the competition.

A whimsical option for a vintage store could be “The Mad Hatter’s Emporium” or “Alice’s Attic,” while a contemporary store could go for something sleek, like “Hats Off” or “Hat Trick.” Or, perhaps you have a unique selection of hats from all over the world, where you can incorporate this aspect into your name, like “The Fedora Boutique” or “World Hats.”

In addition to coming up with a great name, be sure also to check that it is available to use.

Related: Tips on naming a business

Step 3: Form a Business Entity

A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a hat store, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.

Some popular LLC formation services include:

IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 4: Select Your Location

When selecting a location for a hat store, it’s important to consider the surrounding neighborhood and potential customer base.

A busy pedestrian area or a shopping district with popular clothing stores would likely attract more foot traffic, leading to increased sales. Additionally, it may be helpful to consider the demographics of the area, as certain types of hats might appeal more to certain groups (such as a younger audience or affluent shoppers).

It’s also worth considering the competition – is there already a hat store in the area, or are other businesses offering hats as part of their product line? If so, it may be necessary to differentiate your offering in order for potential customers to choose your store over others. Ultimately, finding the right location for a hat store involves weighing these factors and determining where there is a need or desire for hats in the community.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

Opening a hat store requires planning and preparation, and obtaining the necessary licenses is an important step in that process.

Depending on the location of the store, you may need to obtain a business license or register the business with a variety of city, state, and federal agencies.

Depending on where you are located, one common license for a hat store will be a sales tax license. Other common registrations could include a city business license, occupancy permit, and Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a hat store is another.  

One option is to approach friends and family for investment. Present a solid business plan, outline how much money you need, and make a case for why they should invest in your business idea.

Another option is to apply for small business loans from banks or government agencies. Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

You may also consider reaching out to potential investors or crowdfunding websites like Kickstarter or Indiegogo, where you can offer incentives to potential donors in exchange for their financial support.

Related: Finding the money to start a business

Step 7: Get your Marketing Plan in Place

When it comes to the marketing of a hat store, the sky’s the limit for creativity. First and foremost, consider what sets your store apart from other hat retailers. Is it your specialized collection of vintage hats? Your custom embroidery options? Whatever it may be, make sure to highlight this unique aspect in all marketing materials.

Network with local fashion bloggers or influencers to showcase your hat selection on their platforms. Partner with businesses in the area for joint promotions or events.

Whether incorporated with a retail store or by itself, operating an online store is a great way to expand your reach. Knowledge of digital marketing strategies such as search engine optimization (SEO), Google Shopping, and using popular e-commerce platforms like Shopify will be handy in getting traffic to your store. Being active on social media accounts like Facebook, Instagram, and Pinterest will give your store a boost as well.

And don’t forget about the power of word-of-mouth advertising – incentivize customers to leave reviews and spread the word about your store.

By considering different marketing strategies, both online and offline, you can effectively market your hat store and attract new customers.

Related: Low-cost ideas to market a new business

Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.

Step 8: Get Business Insurance

As a hat store owner, it’s important to make sure you have the right insurance coverage to protect against unforeseen events.

This could include general liability insurance, which covers any accidents that may occur on your premises. It’s also a good idea to have property insurance in case of damage or loss to your physical location or inventory. If you sell hats online, also consider getting e-commerce insurance to protect against cyber attacks and credit card fraud.

If you have employees, you will also need workers’ compensation insurance in case of injury on the job.

Determining and securing the right insurance coverage can give you peace of mind as a business owner and help protect your livelihood.

Related: Types of insurance your business may need

Step 9: Hire Employees

When hiring employees for a hat store, it’s important to look for candidates who have not only retail experience but also a passion for hats and fashion. They should be able to speak confidently about different styles and materials, as well as provide personalized recommendations to customers.

It’s also helpful if they have previous experience in customer service, as they will need to address complaints and returns with grace and professionalism. Consider hiring individuals who are outgoing and enthusiastic, as they can help create a warm and inviting atmosphere for customers.

Finally, make sure to conduct thorough background checks and reference checks to ensure that the candidate is trustworthy and dependable. With the right team in place, your hat store will surely be a success.

Related: Hiring your first employee

Step 10: Set up an Accounting System

When it comes to running a hat store, there are a few important things to keep track of – inventory levels, sales figures, and expenses.

The right accounting software can make it easier to manage all of these elements and give you an accurate picture of your financial health. Generally, any accounting software with inventory management capabilities will work well for a hat store. If you sell hats online as well as in person, look for software that includes e-commerce integration.

Other features to consider include customizable reporting options and the ability to track purchases from suppliers. As always, make sure the software is user-friendly and offers customer support in case you have questions or run into any technical issues. By choosing the right accounting software for your hat store, you can streamline your financial processes and focus on running a successful business.

Related: Setting up the accounting for your business

How much does it cost to start a hat store?

A traditional brick-and-mortar business might make perfect sense for some customer segments and locations, especially in tourist spots, where you will get a lot of foot traffic. 

However, a cost-effective, relatively low-risk way to test the market will be to start your business online. Of course, you can always decide to set up stalls at fairs and events to test demand for your products.

Let’s assume you set up your hat store from your home with a small number of hats or caps. Consider these items and estimates:
– A range of caps and hats in various sizes and/or colors – $300
– An embroidery machine to customize your products – $500 to $15,000
– Licencing, insurance (depends on your area) – $200
– Marketing, web presence, branding $100 – 4,000 (depending on your business setup, use of existing 
platforms and level of competency in setting everything up)
– Packaging – $400

Depending on your business model, you will also need hat-making supplies. To work on your cost/price structure, check out costs at various Millinery and other hat-making suppliers. 

So, in summary, you can get started for as little as $1500 with no significant overheads. 

Having a retail store will cost more due to rent deposits or building purchase, remodeling, signage, fixtures, and more.

How profitable is a hat store?

Even though this industry is considered to have a low entry into the market, research your competition, potential customer base, local requirements, start-up, and operating costs, and develop a detailed business plan.

It will help you to develop a price structure that allows a viable profit margin whilst remaining competitive. A gross margin of 40% is standard in this industry. 

Although an average income for hat store owners has not been published, IBISWorld states that this industry enjoys a mature life cycle and classifies its revenue volatility as medium.  

Are there grants to start a hat store?

It’s extremely rare to find a grant to start a hat store. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.

What skills are needed to run a hat store?

Creativity and an entrepreneurial spirit. This is your chance to let your creativity go wild and work on your own unique headwear line. Even if you decide to simply onsell caps and hats, what range you offer, what sizes, colors, and shapes will come down to having a bit of an eye for what is on-trend. 

What will be crucial to the success of your business is finding your niche and your target market and setting up your processes and your online presence to attract and retain that customer segment.  

Excellent communication and marketing skills. How will your target market find you – how will you grow your customer base? We recommend investing in good imagery, developing a consistent, authentic communications and marketing strategy, and branding that speaks to your target market.

Make the most of social platforms. Consider getting influencers to wear your gear and promote it to their followers.  

In addition, an outstanding customer experience will ensure repeat business and help expand your brand through word of mouth. 

Business management skills. Business management skills are always valuable, even if you begin your hat store as a side gig. In addition, accounting and pricing skills will be handy, as is competency in using e-commerce platforms.

Are you going to sell your caps and hats wholesale or on demand? What will the cost structures look like for various options? You will need to be able to price your products, understand supply and demand, work out profit margins and ensure your accounting is in line with tax regulations. 

What is the NAICS code for a hat store?

The NAICS code for a hat store is 315990, which is classified under Apparel Accessories and Other Apparel Manufacturing.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Final thoughts

If you have a creative vein and entrepreneurial spirit, starting a hat shop is a great choice. It can be a fantastic way to find your business feet with something you love. 

So if you are ready to take the plunge from employment to being the boss and deciding how and when you want to work, then starting a hat store is an attractive option.

How to Start a Hat Store

How to Start a Hat Store

Greg Bouhl

Greg Bouhl

Welcome! My name is Greg Bouhl, and I have am a serial entrepreneur, educator, business advisor, and investor.

StartingYourBusiness.com is here because of the many clients I worked with who made decisions based on inaccurate and outdated information.

Starting a business is hard, but here you will find the practical tools, resources, and insider tips to help you successfully start a business.

If there is a question about starting a business or help finding a resource, I'm here to help!

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