Instructions
Go to Willy's builder shop in town. When you own at least one Goobaa, you have the option to buy the Shearing Shed for 462 coins. Buy one and put it in the garden.
Click on a Goobaa in the garden. Click on the Shearing Shed to send the Goobaa inside. When the Goobaa exits, a bundle of wool appears outside.
Feed the Goobaa a watercress to make it regrow its wool, allowing you to shear it again. You can only produce more wool from the Goobaa if you do this.
Buy a bonnet at the Pinata pet shop and put it on a Goobaa. When the Goobaa wears the bonnet, it automatically goes into the Shearing Shed on its own, so you do not need to send it inside each time you want wool.