7 Steps to Start a Hat Business (1st $1,000 in Sales)
Starting a hat business is easy to do – especially online – and it’s a market for which you’ll find consistent demand.
The easiest way to make your hat business successful is to find a gap or niche in the market, make the most of simple marketing tools and promote your hats via social media posts.
- Identify a Niche Audience
- Find a Niche Product
- Define Sales Channels
- Identify the Minimum Budget
- Form a Legal Entity
- Set Up the Shop
- Reach First $1,000 in Sales
How to Start a Hat Business?
1. Identify a Niche Audience
A niche is a small group or audience that fits certain demographics or has an interest in a subset of a wider interest.
For example, movie lovers are not a niche audience. Female 90’s horror movie fans are a niche audience. The more specific the interest, the smaller the niche.
The more niche of an audience you opt to appeal to with your products, the less competition you’ll have and the more likely you are to provide a product that fits precisely the needs of the group.
To start with, you’ll have to analyze and select a niche community then tailor your product to their needs.
Here are some examples of niche audiences:
Example niche audience: Millenial women who use organic cosmetics as a means of relaxation and are Instagram influencers.
Example niche audience: Health-conscious small dog owners whose dogs are picky eaters.
1.1 Analyze Hat Niche Communities
Look for a handful of niche communities online so you can learn from their problems and ideas. By doing this analysis, you’ll better understand who’s using this specific type of product and how you can not only create a product that meets their needs, but successfully market it to them, too.
This step is crucial and shouldn’t be skipped, as these useful resources can help you to attract those all-important first few sales. To find these niche hat communities, search on social media and for online forums that discuss particular styles or needs. The more specific information you can understand about your audience, the better.
Here are some examples of hat niche communities:
1.2 Find a Problem or a Market Gap
When you’re launching a hat company, you need a way to differentiate yourself from other companies offering similar products. After all, with so many different hats on the market, why would somebody looking for a new hat choose your company over others?
That’s where the problem or market gap come in. Look for a problem that either isn’t solved or isn’t solved sufficiently by other businesses or a gap in the market to fill.
For example, you might notice there are few fur hats from those in cold climates that are made from faux fur instead of real fur. In this instance, look to fill the faux fur gap.
Potential Market Gap: Environmentally conscious or vegan people looking for hats made with non-animal materials.
Potential Problem: People with larger heads can’t find hats to fit.
Potential Market Gap: Breathable hats you can wear without your head getting too hot.
Potential Problem: Hats don’t provide protection from rain.
1.3 Formulate the Niche Audience
Now you need to tie together what you’ve found. Establish which audience has what problem and why, and how bad the problem is.
If there are already solutions, find out what’s missing from the solution that could be better. For example, if people need extra-warm hats in colder climates, perhaps these hats aren’t made from sustainable products, so you could introduce that alternative. If there isn’t a solution, you can introduce one with your hat business online.
Here are some examples of niche audiences and the problem they need to solve or gap in the market:
- Affluent people who go skiing in sunny climates + they need headwear that keeps their head warm but also protects from the sun
- Vegan men looking for fur hats + they need furry headwear that isn’t made from animal fur but does the same job
- Sporty men who do sports in cooler climates and need support from headgear + the hats already on the market fall off during vigorous sports
- Women seeking smaller baseball caps to fit their heads + most of the baseball gaps already on the market and made for men’s heads.
2. Find a Niche Product
So you’ve found your target audience and established the problem you need to solve, you’ll need to look for a solution and to source hats to sell. Your hat product should appeal to the niche you’ve identified and fill a gap in the market.
Once you’ve found your niche, read related forums and social media groups to see which problems this audience is encountering so you can solve them.
Conduct competitor research to see what’s already on the market and what’s missing from the market. Brainstorm ideas for your product and discuss them with friends and family or even focus groups with a group of consumers to get their opinions.
Example niche product: Berets with prints created by famous artists for Instagram fashionistas to wear
Example niche product: Baseball caps featuring the logos of teams from movies or TV shows
Example niche product: Modernised flat caps in bright colors aimed at Gen Z and millennial women
2.1 Analyze the Competitors
It’s common to panic when you see competition in the same niche as you, but competition shows there’s a demand for the product, so it’s not all bad.
To find competitors, imagine what your target audience would be looking for and search it on Google or other search engines. For example, if you’re selling art print hats for millennial women, they might search ‘cool art hats for women’ or ‘fashion hats’ on Google, so you should do the same.
Once you’ve found competitors, analyze their marketing strategy and the products they offer to get ideas.
Here are three competitors for the cool hat niche:
2.2 Unique Selling Proposition
A USP is a ‘unique selling proposition’. The clue to what it means is in the name; it’s a unique offering that your hat brand offers to consumers. This unique offering can either be something that other brands don’t offer, or they offer with a different price point or design, for example, to yours.
To find your USP, look within your niche at what exists already and what doesn’t, then try to offer something that doesn’t and base your brand identity on it.
Here are examples of the USPs of well-known companies:
- Microsoft: this brand has tons of experience and is one of the leading technology brains in the business.
- Netflix: Netflix offers Netflix Originals that you can’t find anywhere else.
- PayPal: PayPal is one of (if not the) world’s most trusted payment platform.
- Tesla: Tesla makes cutting-edge electric cars.
- Target: Target offers clothing, homeware, and groceries at a price that’s affordable for families.
- Here are the USPs of our three chosen competitors:
- Lucy & Yak: this brand offers ethically-made, small-batch hats with a transparent supply chain.
- Tory Burch: this brand’s hats are higher-quality than most other small hat businesses, and the hats have bright, colorful patterns.
- Farfetch: this women’s hat business has designer brands and hats made with the highest-quality ingredients.
2.3 Choose a Product
Once you have identified your audience, the problem they have that you want to solve or the gap in the market you want to fill, it’s time to find a product that does just that. You’ll also need to decide how your product will be different to other hat companies before opening a hats shop.
For example, women interested in zodiac signs might be interested in hats that represent each zodiac sign, but the problem is there aren’t any currently on the market. Your plan could be to create them.
Another example is men in the US seeking cowboy hats that stay tightly on your head even when you bend to get off your horse. The problem you’re seeking to solve is hats falling off easily.
2.4 Find Suppliers
Every product requires suppliers. These are businesses that prove you with either the raw materials or labor to create your products or sells you the finished products themselves. If you want to open a hat shop you’ll need suppliers that specialize in fabrics or even in the production of the hats themselves.
If you know any other small business owners in a similar industry (such as clothing) ask them for contacts of any suppliers they’d recommend. Before settling on a supplier, check online reviews. Consider things like the time you’d have to wait for stock and where they source their materials.
Here are some suppliers to look at for your hat business:
Related: How to Start a Sunglasses Business?
3. Define Sales Channels
One of the most important parts of opening a hats small business is defining the sales channel you’ll use. The sales channel is what will get your products in front of customers and how they’ll be able to order hats from you.
There are several ways you can sell, but the easiest way to start is by selling online. While you may eventual evolve your business into a physical store, doing so requires much more money at the outset.
Speak to friends, family, and local business owners for tips on how they get sales. Look into eCommerce integrations such as Shopify to see which one best suits your needs.
Here are some examples of potential sales channels:
- Your personal: Facebook friends, Instagram followers, colleagues, schoolmates
- Paid advertising: Google ads, Facebook ads, Tiktok ads, Twitter ads, Pinterest ads
- Marketplaces: Amazon, Etsy, Ebay
- Communities: Facebook groups, Reddit, Quora, forums
- Other: Blogging, Craigslist, promoting in the real world (e.g. schools, workplaces, malls)
4. Identify the Minimum Budget
Don’t be put off following your dreams because you think it requires a ton of money – in reality, you can start a business with even less than $1000. All you need to do is work out the minimum budget you’ll need to buy and market enough hats for $1000 in sales.
Once you’ve got your first $1000 in sales, banks will take you more seriously, and you’ll have established a small market of customers for your hat online store. To identify how much you’ll need for the first $1000 in sales, find out the price per hat from your supplier and work out how many hats you’d have to sell to make $1000.
4.1 FFF and Personal Money
This financing method stands for ‘friends, family, and fools.’ The friends and family are self-explanatory, and fools means people with little investing experience who might be willing to invest in your business.
To fundraise with this method, ask friends and family for help and ask them to pass on the message to their friends, too. To find the ‘fools’, post on local social media groups, hand out flyers, and contact any acquaintances or ex-colleagues to see if they’re interested in this investment opportunity.
This method is best for starting a hat business with little previous experience or proof of ability to run a business.
4.2 Bank Loans
Getting a commercial bank loan isn’t the easiest method on this list, but it will get you larger sums of money than many other financing methods. People selling hats online who have previous experience running a successful business will have a better chance of getting a loan from the bank.
This financing method is all about trust. If the bank trusts your ability to pay back a loan, they’re more likely to give you one. Bear in mind that you’ll need to pay back not only the loan, but the interest, too. This can add up in the long term.
4.3 SBA Guaranteed Loans
An SBA loan is guaranteed by the government’s Small Business Administration, and it helps small businesses like yours to get funding in the form of a bank loan. This loan makes it easier to sell hats online by pairing you with a lender and reducing the risk that the lender tasks, making it more likely you’ll be able to borrow the money.
You can apply for an SBA loan for your hat business here. You simply find the best loan for your situation, enter your zip code to find a local lender, and apply for the loan through the selected lender.
4.4 Government Grants
Certain types of businesses are eligible for government grants, which means you’ll receive money from the government for your hat shop online that you don’t have to pay back. It’s essentially free money you get to help set up your business.
This will be suitable for your business if you intend to run it nonprofit or conduct research and development. Government grants help business owners who can’t necessarily get a bank loan or may not have sufficient funds to repay the associated interest.
If you’re unsure whether or not you’re eligible for a government grant for your online hat business, check this website.
For this financing method, you’ll need to ask friends, family, and your local (or digital) community to fund your hats business. There are multiple ways to start a crowdfunding campaign, but most people use a website such as ‘GoFundMe.’
Once you’ve set up your crowdfunding page or website, share it on social media and send it out to all your email contacts. Then, ask those social media friends and email contacts to forward it on to people you don’t know.
This method is ideal when you want to get into hats but you don’t have enough prior business experience for the bank to give you a loan.
5. Form a Legal Entity
Failing to turn your business into a legal entity that follows regulations will cause serious problems in the long term, and you could experience fines or, at worst, a prison sentence. It’s best to research as much as possible, because it’s always better to be safe than sorry when it comes to legalities.
An LLC (limited liability company) is one of the most popular types of legal entities business owners enter into. This type of business structure protects owners of businesses like your hat dealer business from company liabilities and debts, providing a safety debt for small businesses who don’t want to take many risks.
5.1 Business Name
Don’t spend too long worrying about finding the right hat business names because you can change the name of your hat store later down the line if it doesn’t work.
Try to keep your business name short and snappy and make sure it accurately conveys what you offer. For inspiration, look online at hat shop names. Take a look at which features these business names have in common, e.g., whether they’re verbs or nouns, how long the titles are. That will give you ideas for a suitable name for your business.
Discuss name ideas with a focus group made up of your target audience for useful feedback.
5.2 Choose a Business Structure
There are various business structures available for your hat store, depending on how you’re selling hats.
Here’s what all the business structures involve:
- LLC: A limited liability company is allowed by state statute, and the owners are called members. LLCs allow for flexible taxation.
- Sole proprietorship: A sole proprietor is someone who owns an unincorporated business by themselves.
- Partnership: A partnership is a relationship between two or more people who enter into business together.
- Corporation: In a corporation, prospective shareholders can exchange money or property in exchange for the corporation’s capital stock.
- S corporation: S corporations can pass corporate income, losses, credits, deductions, and losses through to their shareholders for federal tax purposes.
5.3 Register for Taxes (EIN)
Regardless of which type of business structure you choose, if you want to sell hats online, you’ll have to pay tax. You can hire an accountant to support your hat business if you’re worried about filing taxes incorrectly by accident or simply need some help setting up your tax account.
Some business structures have more flexible tax rules than others – an LLC being one of the most flexible options. Don’t ever forget to pay your tax, as this can result in legal consequences, which range from a fine to jail time. Register online to pay taxes on your business by using this link.
5.4 Bank Account & Credit Card
To keep your business earnings separate from your own personal money, look for a specialist business bank account. Many of these are offered by the biggest banks in the country, you could even ask your usual bank for their business account offers.
Some business bank accounts come with special perks such as vouchers or extra credit limits, so do your research before committing to a bank.
Having a business credit card can also be useful. You can get emergency credit when you’re low on cashcash flowd it can also make you more legitimate in the eyes of certain customers and clients.
5.5 Insurance & Accounting
The last thing any business owner wants is to be faced with a lawsuit, so make sure you have adequate insurance for your hat business before getting started. The types of insurance that businesses tend to need include a general liability policy, a business owner’s policy, a professional liability policy, and a tax liability policy.
Many of the main insurance firms (and smaller firms, too) offer business insurance to protect your online hat shop. Search for insurance firms with the best reviews and cheapest deals. Join online forums and groups for small business owners and ask other business owners for recommendations.
5.6 Permits & Licenses
Licenses and permits may be needed for a business for all types of reasons, but they’re more commonly needed for businesses creating or selling products like firearms, drugs, and food. With your hat business, there should be few specialist permits required, especially if you opt for an online store not a physical one.
For the most part, permits and licenses are issued by the local government, so check on your state’s website whether or not you’ll require a business license. Check the federal government’s site, too, for any national licenses. If you have doubts either way, get in touch with your local legislator for more information.
6. Set Up the Shop
Finally there’s the most fun step in the whole process – it’s time to set up your shop. If you’re starting your business online, you’ll need to set up your eCommerce website using whatever means available.
Join small business groups and forums and ask for tips from people who own successful businesses for the best way to set up an online business and recommendations of the eCommerce platforms they use, e.g WooCommerce or Shopify. You can even hat business on Instagram first.
Keep your budget in mind before deciding how you’ll open a hat shop as this will determine how much inventory you order, what marketing you do, and the eCommerce platform you’ll use.
6.1 Define the Pricing
Establishing your pricing is an important aspect of setting up any business, but don’t worry too much about getting it right the first time. If you realize you’ve priced your items too high and nobody will buy them, or they’re too cheap to create a significant profit margin, you can always adjust pricing a few months down the line.
To define a pricing structure that’s reasonable to sell hats online, consider how much you’ll need to sell your products to make money. If you decide to set your prices high to make a large profit margin, you’ll need to market your business as a luxury brand to justify the prices.
6.2 Create an Online Store
Even if you’re completely new to creating an online store, you won’t find it too difficult with the help of an eCommerce platform. Shopify is one of the easiest and most popular options for selling hats for a living.
There are different pricing plans available for an online store, so if you’re short on cash, start on a cheap pricing plan with basic features, then upgrade to a more expensive plan in the future. The more expensive plans tend to offer more complex functionality such as automation and segmenting.
Most platforms come with apps and integrations you can download to improve your funcionality and add extra features.
6.3 Order Inventory
Now it’s time to fill that online store with products that your customers can buy. To start with, avoid spending too much on the inventory for your hat shop. We’d recommend ordering up to $2000 of sales worth of stock. That will help you reach those all-important few thousands of dollars of sales but won’t require too much money from you to begin with.
Don’t forget to check with your supplier how long items take to order and create. Otherwise, you could launch your online store without any stock to post or customers to buy, which would be a bad first impression for your business.
7. Reach First $1,000 in Sales
If you’ve followed all the instructions up until this point, you’ll have a well-thought-out business that’s ready to launch. Now you need to focus on getting the first $1000 in sales. After this, banks will be more likely to lend you money, and you’ll have an established presence.
Hat buying is a visual endeavor since people want to know they look good in their clothing, so take photos of family members and friends in the hats to prove their appeal. Ask everybody you know to buy a hat and post your business on local social media groups and forums of people interested in your niche.
You could even send a couple of free samples to some popular content creators and ask for a shout-out on their Instagram story in return.