How to Start a Yarn Store

Are you passionate about knitting, crocheting, or fiber arts, and dreaming of transforming that passion into a thriving business?

Opening a yarn store can allow you to transform your love for fiber arts into a venture that not only inspires creativity but also serves a growing community of crafters.

In this comprehensive guide, we’ll walk you through all the essential steps you’ll need to take to start your own yarn store, from conducting market research to selecting the right suppliers, setting up operations, and attracting customers.

Ready to turn your business idea into a reality? We recommend forming an LLC as it is the most affordable way to protect your personal assets. You can do this yourself or with our trusted partner for a small fee.

Northwest ($29 + State Fees)

Industry Overview

The U.S. yarn market — which was valued at approximately $1.56 billion in 2023 — is projected to experience steady growth in the coming years with a compound annual growth rate (CAGR) of 4.0%.

This expansion is driven by a combination of factors, including the consistent demand for winter apparel like sweaters, scarves, and gloves, as well as the increasing popularity of DIY crafting.

The rise of online crafting communities has fueled interest in knitting, crocheting, and other fiber arts, making these hobbies more accessible and attractive to a wider audience.

This shift is further supported by the rising recognition of crafting as a therapeutic activity, offering mental health benefits such as stress relief and mindfulness, which has drawn even more consumers to knitting or crocheting.

Moreover, innovations in product offerings and the expansion of digital platforms have enhanced access to knitting and crocheting resources, patterns, and tutorials, helping foster a more engaged and informed community of crafters.

This evolving landscape positions the U.S. yarn market for sustained growth, with a future that is as creative and dynamic as the fiber arts themselves.

Startup Costs

If you’re considering whether a yarn store business is right for you, the first thing you’ll need to know is whether it’s a) affordable, and b) worth the investment. I mean, how much can you actually make running your own yarn store?

Well, it depends. The initial investment for a yarn store varies widely based on factors such as the store’s location, the size of the retail space, the variety and quantity of inventory, and the level of customization or services you plan to offer:

• Lease or Purchase of Retail Space ($1,500 – $5,000/month): You will need to rent or purchase a storefront, with costs depending heavily on the store’s location and square footage.
• Store Renovations and Furnishings ($5,000 – $20,000): You will need to invest in shelving, display units, and other storage solutions to effectively showcase yarn, knitting supplies, and other accessories.
• Inventory ($2,000 – $10,000): You will need to stock a variety of yarns (natural fibers, synthetic, blended, etc.), knitting needles, crochet hooks, patterns, kits, and other crafting supplies.
• Yarn Winding Machine ($250 – $2,000): You will need to purchase a professional-grade yarn winding machine, which transforms skeins or hanks into easy-to-use balls, helping to prevent tangling and offering a convenient service for customers.
• Employee Salaries ($25,000 – $45,000/employee annually): Though most yarn stores will initially be run by the owner, you will need to factor in wages and benefits if you plan to hire full-time or part-time staff.
• Business Licenses and Permits ($200 – $1,000): You may need to acquire local business licenses, permits, and cover legal setup costs, such as registering your business and setting up an LLC if needed.
• Marketing and Branding ($1,000 – $10,000): You should plan for costs associated with developing a website, business cards, signage, and initial advertising to attract customers (both online and in-person).

Note: If you plan to offer knitting or crocheting workshops, you will need to account for the additional costs that arise from hosting them, such as materials, instructor fees, and any extra space or equipment needed to accommodate attendees.

Earning Potential

The earning potential for a yarn store appears promising, with typical markups on low-cost yarns being around 50%, and significantly higher margins — sometimes reaching 300% to 400% — being available on luxury yarns such as cashmere, alpaca, and silk blends.

It’s also worth noting that the vast majority (98%) of yarn buyers are women, with an average age of 58 and a household income ranging between $72,000 and $91,500.

This is a good indication for new business owners, as your target market — which is made up of both retirees (48%) and full-time employees (31%) — will have both the time and the disposable income to invest in their crafting hobbies.

However, these numbers can be misleading, as one of the biggest challenges facing brick-and-mortar yarn stores is the growing tendency for customers to visit in person to explore or feel the yarn but ultimately make their purchases online, often from international suppliers at significantly lower prices.

As a result, you will need to keep in mind that in order to create a profitable and sustainable yarn store business, you will need both a strong online presence and meaningful customer engagement through services like workshops, classes, and/or personalized assistance.

7 Steps to Starting a Yarn Store

In order to start a yarn store business, you’ll need to complete the following steps:

1. Planning Your Yarn Store
2. Registering Your Business
3. Secure Funding (If Applicable)
4. Finding and Securing the Right Location
5. Sourcing Your Yarn
6. Getting all Applicable Licenses and Permits
7. Obtaining Business Insurance

We’ve broken each one of these down in more detail below.

Still exploring your options? Check out other small business ideas.

Step 1: Plan Your Yarn Store

Before diving into your yarn store, you’ll need to spend some time conducting thorough market research.

You will need to begin by evaluating your local market to understand what types of yarn and supplies are in demand, whether there are underserved niches, and how you can differentiate your store from competitors.

You will need to take a close look at your competition during this step. Are there other yarn stores in your area? If so, what are they doing well, and where are there gaps you can fill?

If there aren’t any, you should think about the broader crafting community and how you can serve their needs, both locally and online.

This will help you evaluate the financial viability of your project — including projected revenues and expenses — as well as determine the best location for your store.

Finding a Suitable Name

Choosing the right business name is both important and challenging.

This is because your name will need to be eye-catching, memorable, and (at least somewhat) related to your industry.

If you don’t already have a name in mind and need help, you can visit our How to Name a Business guide.

If you do have a name in mind, we recommend researching the following:

• Your state’s business records
• Federal and state trademark records
• Social media platforms

You will also need to make sure that your business’s name is available as a domain — this is your website’s URL address.

Note: If you’re planning to operate a sole proprietorship, you might want to operate under a business name other than your own name — known as a “Doing Business As” (DBA) name. Keep in mind that this is not recommended for a yarn store.

Defining Your Unique Selling Points

You’ll also need to define your store’s unique selling points, meaning the specific qualities that set your business apart from the competition.

Will you specialize in eco-friendly yarns, offer a diverse range of colors and textures, focus on high-quality, luxury fibers, or a combination of the above?

Will you offer exclusive patterns, host community-driven workshops, or provide exceptional customer service tailored to beginners and experienced crafters alike?

Defining these unique selling points will not only help you attract and retain customers but also establish your store as a go-to destination for yarn enthusiasts.

Step 2: Register Your Business

One crucial aspect that cannot be overlooked when starting your yarn store is the importance of establishing a solid business foundation. While sole proprietorships and partnerships are the most common entity types for small businesses, they’re a far less stable and advantageous option than LLCs.

This is because unincorporated business structures (i.e., sole proprietorships and partnerships) expose you as an owner to personal liability for your business’s debts and legal actions, while LLCs protect you by keeping your personal assets separate from your business’s liabilities.

In practice, this means that if your yarn store were to face a lawsuit or incur any debts, your savings, home, and other personal assets could not be used to cover these costs. On top of this, forming your business as an LLC also helps it to appear more legitimate and trustworthy.

Note: If you’re interested in more information before getting started, we recommend having a look at our state-specific How to Start an LLC guide (DIY) or our in-depth Best LLC Services review (for those opting for a professional service).

Step 3: Secure Funding (If Applicable)

Securing funding is a critical step in starting your yarn store. Financing options include bank loans, Small Business Administration (SBA) loans, private investors, and crowdfunding.

Each option has its pros and cons, and the best choice will ultimately depend on your financial situation and business plan.

Having said that, seeing as you can start your yarn store with an initial investment of under $20K, it might be wiser to avoid taking on debt, especially if you’re not aiming for aggressive growth or scaling.

The one area where financing might make sense is for marketing your online store, such as through pay-per-click advertising or other digital marketing strategies. These efforts typically require significant upfront investment but can yield a strong return, making this type of debt more justifiable.

Of course, the extent that this step will be applicable to you will depend on your individual financial situation.

Step 4: Find and Secure the Right Location

The next step you’ll want to take is to find (and secure) the right location for your yarn store.

While many factors come into play — such as foot traffic, visibility, and proximity to your target audience — the most important consideration for a yarn store’s location will be the price.

This is because your business caters to a niche market, and since your customers will likely seek you out directly, being in a high-rent location is not necessary.

Instead, you should prioritize finding a location that balances affordability with reasonable access for your target audience, allowing you to keep overhead costs low while still providing a welcoming space for customers.

This approach will help you maintain healthy profit margins and focus on building customer loyalty, ensuring the long-term growth and success of your business.

Note: You will also need to make sure that your prospective property is zoned for commercial use and complies with all applicable local and state regulations (discussed in more detail in Step 6).

Step 5: Source Your Yarn

Once you’ve secured a location, the next important step you will need to take is to find reliable suppliers for your yarn.

To do this, you will need to research potential suppliers, such as manufacturers, wholesalers, or local artisans, by exploring resources like trade shows, industry events, and online directories. Networking with other business owners or joining crafting communities can also be an effective way to gather recommendations and insights on sourcing.

When deciding on a supplier, it’s important to carefully evaluate several factors, including product quality, pricing, shipping costs, reliability, and minimum order quantities, all of which will impact your store’s profitability and operational efficiency.

Minimum order quantities, in particular, can be an obstacle when starting out, so make sure to find suppliers who offer flexibility or lower order thresholds to ensure you can manage your inventory effectively without overextending your budget.

Keep in mind that establishing strong relationships with your suppliers will allow for better negotiations and greater flexibility over time, helping you strike the right balance between cost-effectiveness and maintaining the quality of products and services your customers expect.

Step 6: Secure All Required Licenses And Permits

The applicable licenses and permits that you’ll need will largely depend on your state and local regulations.

Even so, we’ve compiled a list of some of the common licensing regulations that you’ll likely need to satisfy in order to operate legitimately.

Sales Tax Permit

If your state collects sales tax, you will need a sales tax permit to legally charge and collect sales tax on the products you sell.

You can usually obtain this permit through your state’s Department of Revenue or Taxation by submitting an online application and paying all required fees, though the exact steps and costs may vary depending on your state.

Resale Certificate

A resale certificate allows you to purchase goods, such as yarn, tools, and other inventory, without paying sales tax at the time of purchase.

This is especially useful for businesses that buy goods wholesale for resale because it helps preserve cash flow by avoiding upfront tax payments on inventory that will eventually be sold to customers.

Typically, you can obtain a resale certificate when you apply for a sales tax permit through your state’s Department of Revenue or Taxation.

Craft Instructor Permit

If you plan to offer knitting or crochet classes, certain localities may require you to obtain a craft instructor permit.

This permit is typically available through your local city or county clerk’s office, and the application process may involve providing proof of qualifications or experience in the craft.

Additionally, there may be health and safety standards to meet, particularly if you are conducting classes in a commercial space or shared venue.

Zoning and Land Use Permits

Before establishing a yarn store, you’ll need to ensure that the land is zoned appropriately for a commercial facility.

Zoning regulations vary by locality and dictate the types of activities that can be conducted on a piece of land. In some areas, you may need to obtain a special use permit or a variance if the land is not already zoned for your intended use.

We recommend consulting with your local zoning authorities in order to understand the specific requirements and restrictions that will be applicable to your yarn store. Alternatively, you can consult with a business attorney if you want someone else to take care of this for you.

ADA Compliance

The Americans with Disabilities Act (ADA) requires all public facilities, including yarn stores, to be accessible to individuals with disabilities.

This includes providing accessible routes, ensuring that slopes and landings meet specific gradient requirements, and removing any barriers that could impede access. Compliance with ADA standards is not only a legal requirement but also ensures that your facility is inclusive and welcoming to all patrons.

Step 7: Secure Business Insurance

In addition to securing the necessary permits and licenses, you will need to obtain the right business insurance.

Note

Even if you form an LLC, purchasing business insurance is still a good idea. This is because an LLC structure protects your personal assets, not your business’s.

While specific coverage needs may vary based on factors such as location, size, and unique risks, there are several key types of insurance that most yarn stores should consider.

We’ve briefly outlined these below.

General Liability Insurance

General liability insurance is a foundational coverage that’s essential for yarn stores because it protects against claims of bodily injury, property damage, and personal injury that may occur on your premises.

The average cost for general liability insurance according to recent data is $42 per month, or $504 annually, though costs can vary based on your business’s specific needs and risks.

Crafter’s Liability Insurance

Rather than opting for standard general liability coverage, yarn stores should strongly consider Crafter’s Liability Insurance, which is specifically designed for creative businesses.

This specialized policy combines elements of general liability and product liability insurance, providing tailored protection for businesses that offer workshops, sell handmade goods, or conduct classes involving sharp tools like knitting needles and crochet hooks.

Crafter’s Liability Insurance not only covers accidents during workshops and product-related claims but also protects your store from potential risks such as theft, vandalism, or damage to physical goods.

The cost for Crafter’s Liability Insurance can vary based on your business size and specific risks but typically starts at around $25 to $50 per month.

Workers’ Compensation Insurance

If your yarn store will have employees, workers’ compensation insurance is likely going to be a legal requirement depending on your state.

This insurance policy provides coverage for medical expenses and lost wages to employees who are injured during work.

The average cost of workers’ compensation insurance ranges between $45 per month, but this can vary based on factors such as payroll, location, and (once again) your business’s specific risk profile.

Ready to Get Started?

How to Start a Yarn Store FAQs

How much money do you need to start a yarn shop?

Starting a yarn shop typically requires an initial investment of around $20,000, though this can vary depending on factors such as your location, store size, and inventory.

Most yarn shops are owner-operated, so initial costs typically cover retail space, renovations, inventory, and marketing, but if you plan to hire employees, the costs would likely be significantly higher.

What is the markup on yarn?

The markup on yarn is generally high, but how much exactly generally depends on factors such as the type of yarn and your target market.

Basic, lower-cost yarns often see a markup of around 50%, while more luxurious fibers like cashmere, alpaca, or silk blends can have markups ranging from between 300% and 400% — reflecting the higher costs and demand for premium materials.

How do I start a yarn service?

To start a yarn service, you should begin by conducting market research, finding reliable suppliers, and selecting a location (or online platform).

You’ll also need to secure all necessary licenses and permits, find reliable suppliers for quality yarn, and create a strong marketing plan to attract and retain customers.

Is the yarn business profitable?

The yarn business can be profitable, but profitability can be challenging due to the growing trend of customers visiting physical stores to explore yarn and then making purchases online at lower prices.

To sustain profitability, yarn store owners need to balance the in-store experience with meaningful customer engagement, such as offering workshops, personalized assistance, and building an online presence to keep customers returning.