Start a haberdashery by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your haberdashery. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a haberdashery?
Haberdashery businesses’ startup costs vary a lot.
For example, Prevot started Skida began by offering cross-country skiing hats that were made from lycra. The fabric cost her $12 per yard, and each yard yielded four to five hats. She used her own sewing machine and sold them in person at events to keep her startup expenses as low as possible.
A haberdashery business that has a storefront and offers custom-embroidered hats could cost much, much more to open. Hat Zone Inc. in Missouri paid under $60,000 for a 300-square-foot storefront in a mall, but the store still had to pay tens of thousands of dollars. When offering custom-embroidered hats, a hat store also needs an embroidery machine, which can run between $18,000 and $60,000.
Business owners can keep their startup expenses low by beginning their business in their home, like Prevot did. Hats can be stored at home and sold either through other retailers or an ecommerce platform. Owners who start with a storefront should look for a small retail space. Since a lot of hats can be displayed, hat shops usually don’t need a lot of square footage. Lids, for instance, started at a mall kiosk and now has 200 storefronts.
What are the ongoing expenses for a haberdashery?
A haberdashery business’ ongoing expenses include utilities and rent (for physical locations), website costs (for ecommerce stores), the cost of additional inventory and employee expenses.
Who is the target market?
A haberdashery business’ ideal customer is someone who is someone who has a strong sense of fashion and discretionary income. Such customers often purchase multiple hats, although not necessarily all at once.
How does a haberdashery make money?
A haberdasher business makes money by selling hats. Hats are sold on a per-item basis.
How much can you charge customers?
Different styles of hats command different prices. Prevot began selling her hats skiing hats for $20 but has since raised the price of many to $32. Lids prices many of its hats similarly, usually between $20 and $50. Non-sport hats often command much more. Men’s fedoras and bowlers, for instance, frequently cost between $90 and $200, and fancy women’s hats can run upwards of $400. Both Henry the Hatter and Goorin Bros., Inc. have hats in these price ranges.
How much profit can a haberdashery make?
Haberdashery businesses can bring in large revenues, and a lot of their revenue is pure profit because hats don’t cost a lot to make. While in college, Prevot grew her business until it brought in $100,000 annually, about $42,000 of which was profit. Lids had a revenue of $7.59 million in 2016, of which $2.87 million went towards inventory costs. (These figures include more than just hats, for Lids has expanded into other licensed merchandise.)
How can you make your business more profitable?
Many haberdashery businesses increase their profitability by selling other, related fashion accessories. Lids, for example, has begun selling jerseys and other sports apparel. Henry the Hatter, which specializes in very different hats, offers canes.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your haberdashery is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: You can get $300 when you open a Chase Total Business Checking® account with qualifying activities. Learn More.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a haberdashery business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Haberdashery businesses may also wish to look into applying for a resale certificate, which allows retailers to purchase goods intended for resale without paying sales tax.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources
Certificate of Occupancy
A haberdashery business is generally run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a haberdashery business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your haberdashery business will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a haberdashery
One of the most effective ways to market a haberdashery business is by offering free hats to influential figures. Prevot used this strategy to grow her business, giving up-and-coming skiers free hats to wear when they trained or competed. Hat stores that offer non-athletic hats, such as bowlers or top hats, can look for lifestyle bloggers who have a lot of followers and might be interested in a hat.
How to keep customers coming back
Many successful haberdashery businesses distinguish themselves from the competition by specializing in a particular style. For example, a hat store might carry women’s hats, hats from a particular decade or even just one kind of hat.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Haberdashery In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Anyone who has an eye for fashion and likes headwear might be well-suited for running a haberdashery business. The work requires a knowledge of different fashion trends, and business owners frequently interact directly with customers.
Business owners can start a haberdashery business while working at a full-time job. One hat store owner, Corinne Prevot even began a business while in high school, and then she grew the business while in college.
What happens during a typical day at a haberdashery?
A haberdashery business owner spends their days assisting customers who want hats, selecting new styles to carry, ordering more inventory and restocking items when shipments come in. They also schedule manage any employees, promote their business and tend to administrative tasks, such as paying bills and filing taxes.
What are some skills and experiences that will help you build a successful haberdashery?
In order to carry hats that customers are interested in buying, haberdashery business owners have to remain abreast of fashion trends. The Hat Magazine and HATalk are two industry-specific publications that business owners may benefit from subscribing to. Owners may also get insights and ideas from magazines that are written for their customer base. For instance, a business owner who primarily specialized in hats that middle-aged women wore might want to subscribe to More or O, the Oprah Magazine.
What is the growth potential for a haberdashery?
A haberdashery business can have a single storefront or website, or it may sell hats nationally and internationally through multiple outlets. Hatbox in Austin, Texas and Henry the Hatter in Detroit, Michigan are two examples of local hat stores. Goorin Bros., Inc. has hats at stores in 17 different states and Canada. An example of a large haberdashery business is Lids, which has stores throughout the United States and Canada.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a haberdashery?
Haberdashery business owners who outsource the production of hats should be aware of suppliers’ business practices. For example, many businesses in China close for the Chinese New Year, which is a 15-day festival. Hat stores that rely on Chinese manufacturers may not be able to order more stock during this time.
Business owners who plan on making their own hats ought to carefully consider all of the costs associated with doing so. Specifically, they should take into account all materials and labor required, as well as any depreciation for equipment used.
How and when to build a team
Many hat store can initially be run by one person part-time. As a business grows, however, it may become necessary to hire an employee to help with day-to-day tasks. An employee can be hired once a business generates enough revenue to pay the employee’s salary. As the business’ revenue continues to grow, more employees can be brought onboard.