Editor's note: This tour of small businesses across the country highlights the imagination, diversity, and resilience of American enterprise.

For Karen Hostetler, wet wool smells like progress.

On washdays at Mountain Meadow Wool the air is warm, steamy, and redolent of barnyard. Employees stand before six-foot-long troughs plunging dirty fleece into soapy water. The sediment of sheep life settles into V-shaped indentations at the bottom. The fragrance is "very sheep-y. Not real awful," Hostetler says. Not like the time when, needing money, she processed buffalo hide from a slaughterhouse. Then, she says, "it smelled so bad I thought we were going to lose all the workers. We charged them double."

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Mountain Meadow Wool, in Buffalo, Wyoming, is the largest full-service spinning mill in the West. But large is relative. The company's six employees process 15,000 to 20,000 pounds of raw wool a year, producing skeins of soft, thick yarn traceable back to the ranches they roamed when on four legs. Hostetler's output is so small compared with major industrial players that she had to build her own washing equipment--called a "scouring line--to handle up to 50,000 pounds of wool a year. (Commercial machines, which process as much as a million pounds, were too big and expensive for her facility.) 

Mountain Meadow's revenue is around half a million dollars a year and growing. But Hostetler isn't in it for the money. She's in it for the ranchers.

In Wyoming, sheep farming began to decline after World War I, beset by a reduction in tariffs, the growth of homesteading, and more recently droughts, predators, and other woes. Flocks today are at about 10 percent of their 1910 level, and wool production has declined to around 4 million pounds a year from 20 million several decades ago. "When textile production left the country, wool production went with it," Hostetler says.

But sheepherding culture lives on, particularly among the Basque population that started migrating to the American West during the Gold Rush. Buffalo--where Butch and Sundance hung out and Owen Wister penned the classic Wild-West novel The Virginian--plays frequent host to the National Basque Festival, which attracts throngs of sheepherders and cattle ranchers for traditional dances and rural sports (weightlifting, wood-chopping).

"That cultural part of it was really fascinating to me, and it was starting to disappear," Hostetler says. "Families had children and they were not staying in it. Big ranches were being sold."

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Hostetler and business partner Valerie Spanos (who left the company in 2015) hoped to make the sheep business more appealing by increasing both pride and profits. Typically wool buyers acquire a rancher's fleece for prices dictated by the commodity market and ship it to big mills on the East Coast or overseas, where it is combined in drums with other wool of unknown quality. Mountain Meadow Wool, founded in 2007, buys from local ranchers at premium prices, keeps each ranch's wool separate, and spins it into yarn for sale to crafters or use in sweaters, hats, and mittens.

"When we started doing research we found out some of the finest wool in the country is raised here," Hostetler says. "It is next-to-the-skin kind of wool, the kind that is shipped to Italy to make into suits."

Each product bears a label that proclaims it Wyoming-made and identifies the ranch of origin. A Mountain Meadow hoodie, for example, will inform you that the contributing black merino grew up on the Camino "KID" Ranch, a family operation raising 3,000 breeding ewes in Johnson County. "If you buy a sweater I can take you to a bunch of sheep and say, 'that wool came off those sheep right there,'" says third-generation owner Peter John Camino. "My grandfather started this, so it feels good when I can say, 'I raised that wool.'"

Sheep but no yarn

Hostetler grew up in Colorado, the oldest of seven children of an architect and a homemaker. In high school she learned to crochet and was soon cadging wool from a sheep-raising neighbor, washing it based on instructions she found in a library book. A spinning class taught her to card wool (a technique for untangling and straightening fibers) and make yarn using a drop spindle.

After college she married, moved with her husband--a forester--to Wyoming, and raised a family. Fiber largely disappeared from her life. It would be 20 years before she bought a spinning wheel and loom and returned to crafting.

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Around 2002 Hostetler began discussing with her friend Spanos opening a store to sell yarn and knitted goods made from Wyoming wool. Trouble was, no such products existed. Wool mills had disappeared from the state. Those sheep ranchers that remained sold their fleece to corporate wool buyers. Hostetler and Spanos decided to make their own.

They found a mill in Canada that spun their wool into 50 pounds of yarn. It was not enough to stock a store but plenty for craft fairs. As their supply dwindled the idea of starting their own mill right in the ranchers' backyards coalesced.

Seven tons of wool

Hostetler and Spanos spent the next two years sitting at a kitchen table, feeding their kids pizza while they sweated over grant applications. They won two Small Business Innovation Research grants from the USDA for a total of $386,000. That paid for travel to mills and research institutions--some in New Zealand--where they learned the business and evaluated the impact of a mill and a made-in-Wyoming brand on local ranchers.

The founders calculated that to be profitable and benefit ranchers they would need to process 12,000 pounds of wool a year, which after washing yields 6,000 pounds of yarn. After they presented at wool producer groups and visited nearby ranches Camino agreed to kick things off by selling them 15,000 pounds at a 40 percent premium. "That wool lasted us a couple of years while we were creating the market," says Hostetler, who now sources from eight suppliers.

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This year Camino sold Hostetler about 14,000 pounds of wool--roughly a third of his annual ouput. He looks forward to the day when Mountain Meadow is big enough to buy all of it. "We get a way better deal from them than what we get out of selling to the big companies," he says.

To outfit the mill, Hostetler and Spanos got a $186,000 loan from the Sheep and Goat Fund, a program of the National Livestock Producers Association. and got help finding used equipment. They leased 12,000 square feet in a former T-shirt factory.

Not all of Mountain Meadow's wool comes from sheep. Some big local ranches raise buffalo for meat: Hostetler sends teams to brush wool from their shoulders as they stand in vaccination chutes. The mill then blends it with sheep's wool and alpaca. "I think people would probably pay for an experience like that," Hostetler says. "We could have a whole business hauling people out to brush the buffalo."

Farmed--and knit--in Wyoming

Today Mountain Meadow sells, about equally, into four markets. It makes custom products for other yarn companies, some of which ask it to track down specific breeds of sheep. It also processes yarn as a service. 

A quarter of the business is wholesale, mostly yarn sold to small shops. And a quarter is retail through e-commerce and the mill's on-site store. Retail includes not only yarn but also Mountain Meadow's own brand of apparel. To date Hostetler has farmed out the latter to knitting operations around the country: sweaters in New York, hats in Colorado, blankets in Massachusetts.

But by year's end Hostetler will bring knitting and custom design in-house. Making her own apparel is true to the brand, which is Wyoming proud. Mountain Meadow's yarns are named for local cities and towns: Jackson and Cody and Cheyenne. Laramie is the best seller at Cowgirl Yarn, a store trafficking in all things fiber, located in the city of that name. "It's a worsted weight yarn that dyes beautifully but is also gorgeous in its natural state," says owner Lori Kirk. "You can see the colors of the sheep come through."

Laramie is also home to University of Wyoming, and Hostetler produces special yarns in the school colors. "They make the brown and gold look great," says Kirk. "It is an honor to sell it here."