Hand-Dyed Yarn Business Plan, With a Projection

A hand-dyed yarn business plan turns on two numbers: what the undyed base yarn costs, which is most of a skein, and how much of the selling goes to yarn shops at wholesale, which leaves little. It also has a stock problem few makers have: every pot of dye comes out a little different, so knitters buy a sweater's worth from one dye lot, and the plan has to count skeins by lot. In the example below, an indie dyer in Nevada sells skeins on its website and at fiber festivals, to yarn shops, as sweater quantities and as mini skein sets, and ends its first year about $24,700 ahead on $85,800 of sales, with its own dyeing hours paid at $20 an hour. Below is a description example, each part of the plan, dye lots, the first year month by month, the startup budget, and a free template.

The short version

• Describe the business in a paragraph: the bases, the colorways, where it sells, the goals.
• Cost a skein from the undyed base: the dye and acid, your minutes, the label, selling fees.
• Direct sales leave about $16 a skein; yarn shops at wholesale leave about $3.
• A sweater's worth from one dye lot is the best sale of the month.
• Count skeins by colorway and dye lot, so a sweater quantity isn't four skeins and a near match.
• TaroStack keeps every dye pot as a batch with its lot, and the skeins counted by lot. More below.

Part 1: the business description

Truckee Meadows Fiber Co., a made-up indie dyer in Reno, Nevada, I use in these examples, writes:

Truckee Meadows Fiber Co. dyes merino and nylon fingering and DK yarn in small batches in colorways from the high desert, sold on its website, at four fiber festivals a year, and to about eight yarn shops in the West.

Part 2: what a skein costs

The base yarn, undyed merino and nylon fingering bought in bulk, is $9.50 for each 100-gram skein. A pot dyes about 30 skeins.

The sweater quantity is five skeins from one dye lot with a project bag and a pattern the dyer wrote. A mini set costs more in minutes than a full skein: five little skeins, five colors, five labels. Pricing for shops that resell is in how to price handmade items for wholesale.

Part 3: customers and prices

A shop that sells the skein for $30 buys it for $16.50, which leaves the dyer $3.37. At full speed the shops take more skeins than the website and the festivals, 240 to 200, and about a third of the sales, but only about a sixth of the contribution. They're worth having because a dyer's name in a yarn shop sells skeins on the website, but a plan that leans on wholesale needs a cheaper base yarn or bigger pots first. The sweater quantities bring more a month than the shops do, from 12 sales; putting one together is kitting, the same job as in kitting for gift boxes.

Part 4: dye lots

Every pot comes out a little different, even from the same recipe, so each pot is a dye lot, and its skeins are labeled with the lot. A knitter making a sweater buys all the skeins from one lot; a skein from another lot can show as a stripe across the body. So a dyer counts skeins by colorway and by lot, and a pot of 30 makes at most six sweater quantities of five. Selling a sixth to someone when the lot has only four left is the order a dyer apologizes for. Keeping stock by lot is what lot tracking means. How lot numbers work, and how to make them, is in how to create lot numbers; the same scheme works for yarn as for jam.

Acid dye powders are fine dust, so dyers wear a respirator when measuring them and keep the dye pots for dyeing only, never for food.

Part 5: the first year, month by month

Fixed costs are $865 a month: a studio with a utility sink ($400), the website and shop ($40), insurance ($40), fiber festival booths averaged over the year ($200), photos and marketing ($100), shipping supplies ($50), and software and card fees ($35). Sales start at 15% of full speed and reach it in month 11:

The year's sales are $85,768 and the profit $24,733, on top of $20 an hour for every hour of dyeing and reskeining, which is in the variable costs. At full speed that's about 500 full skeins a month, 17 pots, and about 68 hours. Base yarn comes in bulk before it's dyed, so the plan keeps $3,000 of working cash for it. Festivals bring their sales in bursts; this projection grows evenly, so dye ahead for each one.

Part 6: the startup budget

At $24,700 a year, the $3,700 spent before working cash is earned back in the first months. The working cash is mostly base yarn on the shelf, undyed, waiting for a pot.

Get the template

Download the hand-dyed yarn business plan workbook. Four sheets: your skeins, sweater quantities and sets with price, variable cost and a month's volume at full speed; the first year, month by month, with sales, profit and cash; your fixed costs; and your startup budget with working cash. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Where this stops working

Forty colorways, two bases, 17 pots a month, each its own dye lot, eight shops with standing orders, a festival every quarter, and knitters who ask whether there are five skeins of one lot. A notebook can't say how many skeins of lot SAGE-2611B are left, which base yarn to reorder before the next festival, or which shops got skeins from the pot that came out too pale.

How TaroStack does it

TaroStack keeps every dye pot as a batch with its lot, and the skeins counted by lot.

Pots as batches. Each colorway is a recipe of base yarn, dye and acid; each pot is a batch that takes them off stock and makes a lot of skeins, with the good skeins, the seconds, and the minutes it took.

Skeins by lot. Stock is counted by colorway and by lot, on a phone or with a scanner, so five skeins of one lot is a number before you promise a sweater quantity. A sweater quantity is a recipe too: five skeins, a bag and a pattern card.

Shops and base yarn. Each shop's order is a sales order with a picking list, and the lots each shop got are recorded as it ships. Base yarn comes up on a reorder list in days of cover, so it's ordered before the festival needs it.

Recipes, batches, lots and sales orders are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

Is hand-dyed yarn profitable?

It can be. In the example, an indie dyer selling online, at festivals and to yarn shops ends its first year about $24,700 ahead on $85,800 of sales, after paying its own dyeing hours at $20 an hour, with most of the money made on skeins sold directly.

How much does it cost to start a hand-dyed yarn business?

In the example, $6,700: dye pots and burners, scales and safety gear, a skein winder, drying racks, first dyes, a photo setup and website, a festival booth, and $3,000 of working cash, mostly for undyed base yarn.

How do you price hand-dyed yarn?

From the undyed base up: the base, the dye and acid, your minutes, the label and the selling fees, then a margin. In the example, a 100-gram skein costs $14.13 and sells for $30 directly, or $16.50 to a yarn shop.

What is a dye lot?

The skeins dyed together in one pot. Each pot comes out a little different, so a knitter buys all the skeins for one project from the same lot.