How to Start a Yarn Shop

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Quick Reference

Knitting and crocheting have long been a popular hobby for many, and even a business for some. If you love to create things with yarn, you’ve no doubt visited yarn shops and you may have considered having one of your own. It can be a great way to share your passion and make a living.

Business Overview

A yarn shop sells yarn and other accessories related to knitting and crocheting such as needles, hooks, and patterns. Some also sell other craft materials related to other hobbies.

Industry Summary

According to Business Wire, the textile yarn industry was valued at $11.9 billion in 2019, and is expected to grow to $26 billion by 2026. Because yarn is inexpensive, it is not generally affected by economic fluctuations. In fact, in economic downturns the demand for yarn may increase as people make clothing to save money.

Industry Trends

The yarm industry has been steady and is expected to grow. Trends in types of yard used are soft yarns and thicker yarns, both for comfort and durability. Fabrics decorated with yarn are also a trend. It’s important to keep up with these trends so that your shop is always stocked with what customers are looking for.

Target Market

The target market for a yarn shop is people who love to craft, in particular knitters and crocheters. A yarn shop also often has a community feel, so customers will want to feel welcome.

Skills, Experience, and Education Useful in Running a Yarn Shop

There are several specific skills that you will need to open a yarn shop.

  • A strong knowledge of knitting. You will be a resource for your customers who will ask your advice about textures and techniques, so you need to have knowledge and skills related to knitting and crocheting.
  • Knowledge of trends. You need to keep up with what customers are looking for at any given time.
  • Business knowledge and experience. You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
  • Customer service. You’ll need to be able to build rapport with your customers so that you retain them as customers and gain repeat business and referrals.

Costs to Start a Yarn Shop

Here are the typical costs you will face when you start a yarn shop.

  • Setting up a business name and corporation costs approximately $200.
  • Business cards, brochures, postcards for marketing $200 – $300
  • Website setup $100 –$200 for a basic, do it yourself website, $1,000 – $2,000 for a professional site.
  • Inventory – $10,000 +
  • Mortgage, lease or rent of a shop $750 – $2,500 per month
  • Utilities: $150 – $300 per month
  • Shop setup $5,000 +
  • Insurance $100 – $200
  • Initial marketing such as Facebook ads or search engine optimization for your website, $500 -$1,000

Steps to Opening a Yarn Shop

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your yarn store should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, what makes you better or different from competitors, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be, and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you to think through all the aspects of the business, and then serves as a guide as you begin.

How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect yarn shop name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Related: Tips and ideas for naming a yarn shop

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a 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.

RelatedComparison of business entities

Step 4: Select your Location

The location of your yarn shop is critical. You need to be visible and have a lot of foot traffic in the area.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

You may need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located. Some common local, state and federal registrations a yarn shop may need include a sales tax permit and an Employer Identification Number if you plan to have employees.

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 from lenders or investors to start a yarn shop is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs. Some entrepreneurs use their own funds, a home equity loan, or credit cards but you are putting your funds at risk and will have payments that may or may not be more than those of a business loan.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 8: Get your Marketing Plan in Place

A yarn shop will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a yarn shop include promoting the crafts on social media platforms like Facebook, Pinterest, and Instagram. Developing a website can be a significant expense, but it can also give your yarn shop greater visibility online.

Related: Low-cost ideas to market a new business

Step 9: Get Insurance

A yarn shop needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Property and casualty insurance protects you if your equipment is damaged.

Insurance policies will vary. To get the most accurate idea of what to budget for small business insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hiring Employees

You may need employees to help run your yarn shop. You’ll need to make sure that your employees have the right skills in and knowledge of knitting.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your yarn shop is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning a Yarn Shop

On average, yarn shops make $20,000 – $30,000 per year, but there is the potential to make much more if you acquire a large customer base and have a great location.

Markup on yarn usually averages between 50%-75%, however by buying discounted fiber or special pricing from yarn suppliers, you may be able to make a better profit.

Things to Consider Before Starting a Yarn Shop

Running a yarn shop, or any business, will have its challenges. You need to be prepared, and make sure that you know what you’re getting into.

Acquiring customers and keeping those customers is key. You need to create awareness of your business by spending time and money on marketing, and make your customers feel comfortable and welcome to keep them coming back.

In addition to selling yarn and crafting supplies, successful yarn shops will conduct workshops, provide lessons, and facilitate community groups which in addition to creating a loyal following, helps in selling more yarn.

It’s not easy to make a yarn shop successful, so you will be risking the money that you put in if you’re not successful. Your market is a specific type of person, so you need to target your marketing accordingly.

Before starting your own business, be sure to talk to other business owners for tips on starting a business and do your homework to determine costs. Also, research other yarn shops (both local and outside your area) to see what they offer and incorporate their best practices.

The National Needlearts Association

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