When I decided to write the business plan for my yarn shop, I wondered how much capital (money invested in my business) I needed. I knew that I wanted to feel comfortable for at least a year, if no one showed up at my doors. While that was highly unlikely, I wanted that psychological security because I was investing so much of my hard earned money.

I had two big advantages in determining how much money I needed. Two years prior to opening my own shop, I looked at the financial documents of two local yarn shops that were for sale. I was genuinely interested in purchasing each shop, but in the end, neither of the shops were ideal (and as I figured out later, were asking way too much money for what they were actually worth). Because I saw how much money those shops spent on the cost of their goods sold, I could roughly calculate how much inventory they had. I also saw their gross income (income before expenses) over a number of years. I saw their numbers at the height of their businesses, and I saw their declining current numbers.

The trade organization for needlework shops and related businesses is The National NeedleArts Association. They created wonderful publications that give you great information about what it takes to open up a yarn, needlepoint, or cross stitch shop. Here is a link to their publication information for businesses. Their Business Advisory Series was an invaluable resource to me when writing my business plan. For $25, you can get these publications and begin your investment calculations.

Many people have no idea how much money you need to open a yarn shop. Over the years, I've read that some people started selling yarn out of their homes with under $5,000 invested. Some start with $25,000 and a small retail space in a small community. In my market, with one other yarn shop and three craft stores nearby, I had a fair amount of competition. I decided to start with $65,000 in inventory. I was going to need more for fixtures, computers, software, and other start-up items. I took into account a full year's worth of monthly expenses to get me through the early days, while advertising and marketing my shop took effect. So, I settled on the number $150,000. It was a nice round number.

Section Two: The Statement of Purpose...

If you're looking for any financing, a short, concise Statement of Purpose is a great way to grab the attention of your potential investor. It lets them see what kind of dollars you're looking for at-a-glance. Below, I give two Statement of Purposes. One for an investor, and one without. We were fortunate and did not need an outside investor or bank loan. For the purposes of this blog, I will use "Business, LLC" to represent your business.

Statement of Purpose (To Investor)

This business plan has been developed as a planning, operating and policy guide for the Manager of Business, LLC, and as a financing proposal to submit to ______ .

Ms./Mr. _________, the Manager of Business, LLC, is investing a sum of $100,000. This sum, together with a $50,000 loan from ___________, will be sufficient to purchase capital equipment, beginning inventory, cover start-up costs and provide adequate working capital to successfully initiate this new business.

Statement of Purpose (Without An Outside Investor)

This business plan has been developed as a planning, operating and policy guide for the Manager of StitchCraft, LLC.

Nicholette Hoyer, the Manager of StitchCraft, LLC, is investing a sum of $150,000. This sum will be sufficient to purchase capital equipment, beginning inventory, cover start-up costs and provide adequate working capital to successfully initiate this new business.