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How to Start a Yarn Shop

How to Start a Yarn Shop

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How to Start a Yarn Shop

How to Start a Yarn Shop

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 yarn industry has been steady and is expected to grow. Trends in types of yarn 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.

Checklist for Starting a Yarn Shop

Starting a yarn shop can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off on the right foot.

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.

Related: How to write a business plan

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 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 yarn shop, 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 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 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!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Step 4: Select your Location

The location of your yarn shop is critical. It needs to be easy to get to and provide good parking. The retail space should be warm and inviting and optimally there should be space to hold classes.

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 bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 8: Get your Marketing Plan in Place

Once your yarn shop business opens and the name gets out in the community, knitting enthusiasts will spread the word. Common marketing techniques for a yarn shop include promoting the crafts on social media platforms like Facebook, Pinterest, and Instagram.

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 9: Get Business Insurance

There are several types of insurance for a yarn store owner to consider when opening their business. A few of these include:
– 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.

The cost to insure a yarn shop will vary on a number of factors. 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: Hire Employees

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

Although the thought of accounting can be like a foreign language, it is vital to track if your business is making a profit. Not only is it key to tracking revenue, but it is required by the IRS to prove financial records.

Related: Setting up the accounting for your business


How much does it cost to start a yarn shop?

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

– Inventory & supplies – (yarn balls, thread, patterns, knitting needles, etc) – $10,000 +
– Mortgage, lease or rent of a shop $750 – $2,500 per month
– Utilities: $150 – $300 per month
– Shop setup – (shelving, signage, furniture, register, etc) $10,000 +
– Insurance $100 – $200

How profitable is 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.

The 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.

Are there grants to start a yarn shop?

It’s extremely rare to find a grant to start a yarn shop. 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 is the NAICS code for a yarn shop?

The NAICS code for a yarn shop is 451130.

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 and how to find yours

The National Needlearts Association
Knitting Guild Association

How to Start a Yarn Shop

How to Start a Yarn Shop

Greg Bouhl

Greg Bouhl

Welcome! My name is Greg Bouhl, and I 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.

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