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Learnings from a Lemonade Stand: JJ Entry #20

by Nicholas Tart

For the last week or so, I have been exchanging emails with a bright young lady who wants to start a business. Initially she wanted to pursue something other than a lemonade stand. However, she weighed her options and decided to go with selling lemonade.

She spent several hours outside without selling a single cup. There are a few lessons to be learned from Chelsea’s lemonade stand.

After she held an unprofitable lemonade stand, I received an email:

“I didn’t do a tie-dye T-shirt business because I didn’t have enough money to start it. So I decided to do a lemonade stand. But there was a problem……as i went up the sidewalk in front of my house…I decided to plant my lemonade stand there…I got a chair and waited for customers…I looked on my sidewalk, and the one, on the other side….no one was there….no one….it was completely silent on my street….A moment later my dad came home from work…he saw my stand and decided to help me bring the table,the lemonade,the cups,and the chair….and he told me that no one was going to buy my lemonade because there was no one (apparently)…..well he was right because there was no one even there to even to LOOK at my stand….
Help….I live on Silent St. …….
-Chelsea”

Chelsea, there are two valuable lessons to learn from this experience that can be applied to any form of business.

Lesson 1: Location, location, location!

I’m sure you’ve heard this before, and that’s because it’s important. When you’re selling a product (i.e. lemonade) you have to set up shop where it’s easy for customers to find you. No matter what you’re selling, if your potential customers don’t know your business exists, then there is no way they can buy from you.

In your case, Chelsea, your street isn’t the best place to set up your stand. It takes a lot of planning, but next time you should set up a lemonade stand where there are already lots of people walking around. You’ll have to get your dad or someone else to help you, but it’ll be worth the extra effort.

It’s important to note that you should always have a parent or guardian with you at your lemonade stand, especially if it’s not out front of your home.

Here are a few places to consider setting up:

  • A Park – People who spend time in parks do so because they want to relax. What’s better than relaxing in the park with a tall glass of ice-cold lemonade?
  • A Grocery Store – Be careful here. Before you set anything up you will have to get permission from the store. Simply walk inside and ask one of the employees if you can talk to the manager. Once the manager comes over, introduce yourself and ask if it would be ok to set up your stand outside their store. You may consider offering a portion of your earnings to a charity in order to convince him or her to say yes.
  • A Busy Sidewalk – Your sidewalk might not be busy, but there are definitely busy sidewalks around your town. Figure out where people are walking around and set up there. Again, if you decide to set up outside a store, you’ll have to get permission from a store owner.

Lesson 2: Sometimes you have to spend money to make money.

It may not be an option for you, Chelsea, but most businesses spend a lot of money before they make anything. You’re right; making tie-dye shirts can be expensive. And if you don’t sell any, then you lose money.

However, spending a few bucks up front is often times the best way to make more money later. For example, look at every store, ever. The store owners spent thousands if not millions of dollars just to set up their store before they ever sold a single product. Yet, it’s usually worth it.

In your case, you should re-consider selling tie-dye shirts. But before you do so, you need to figure out who will buy them. If you’re planning on selling them to your friends, ask them how much they would be willing to pay.

Get a good idea of how many you think you can sell and at what price. If you figure you can make more money than your initial costs, then it’s a good business idea.

For example, let’s say it costs $20 for 10 white t-shirts and an additional $15 for a tie-dye kit. Your total expenses are $35.

Then you figure you can sell anywhere from 5 to 10 of them at $8 per shirt. If 5 is the minimum you think you can sell, then you’ll make $40 of revenue (5 shirts * $8 per shirt). This results in $5 of profit ($40 of revenue – $35 in expenses), plus you still have 5 more shirts you can sell.

If this is the case, then it’s a good business idea.

P.S. Chelsea has since informed me that she has sold framed artwork before, but wasn’t able to sell it all. Now her attic is full of unsold paintings. She said, “So i don’t want to go through an expensive product to sell and end the business leaving my attic with a bunch of framed artwork.” Chelsea is sticking with Lemonade!

By the way, offering a service instead of selling a product is a great way to combat the initial start-up costs of a new business.

Chelsea, thanks a bunch for sending me those emails and letting me use your experience to share these valuable lessons. I’ve really enjoyed talking to you! Good luck with whatever you decide and let me know how it goes!

If you have any suggestions for Chelsea, please leave them in the comments area below. Also, if you found this post helpful, you should get JuniorBiz by Email..