How I Learned Everything About Business By Owning A Lemonade Stand
Long blog post title, but you get the point. Ever since I was a little child I can remember wanting to own a business. In my exit interview from Clemson University they asked me about my long-term career goals. In an almost knee-jerk reaction, I said to own my own business in the computer industry. Today I can say I fulfilled my dream and did just that. Maybe it was my own father constantly pounding into me the statement, “Don’t ever work for someone else. Start your own business!” After all his father owned a jewelry business, and I think my father regretted never following in the same footsteps. I guess from an early age, I knew that if you want to be financially successful, controlling your own destiny was the way to go.
When I was about 9 or 10 years old I probably was watching Little Rascals “Our Gang” episode in which Waldo started his own lemonade stand. A light bulb went off in my head to create my own in the front of my parent’s house. It was a hot summer day, and I was off from school. I no idea what to do, but simple things like this can have some powerful life lessons. At the time all I knew was that I needed a table, some lemonade, and a sign. I hobbled some milk crates together and a piece of plywood as a table. I had my mom whip up some lemonade from frozen concentrate (yeah I know it wasn’t homemade). I then wrote with marker a sign offering lemonade for sale. I believe I sold the drinks for $0.05 each. I was in business!
Fortunately the day was hot. Like vultures circling around the dead, there were other kids on the block and the adult neighbors were nice enough to visit my establishment. After doing this for a few hours I figured why not copy how the “big boys” did it. Being like every other kid with a sugar habit, I frequented the local pusher, er I mean deli, on my bike. I noticed they sold candy, and thought why not sell candy at my “store”. So off I went to the deli, and bought some of their candy to resell at my stand. I brought the candy back home and offered it, initially for the same price! Unfortunately my parents weren’t much help in my first venture. I questioned my mom, “How does a deli make money if they buy, and then sell it at the same price?” Unfortunately she couldn’t answer me. Keep in mind this was before the days of super bulk sized offerings from Costco, Sam’s Club and BJ’s. So I proceeded to add $0.05 to each candy bar I sold. I did earn a few dollars from the experience. I remember I had a blast and it was fun. While in the process I learned some valuable lessons that I could apply today.
Here are some of the lessons I learned from my first business:
Advertising/Marketing/Selling
I needed to make sure people were aware of my business. So I created a simple sign promoting what I was offering. I knocked on a few houses and made them aware of what I was offering. I even came up with the idea that my block didn’t have enough car traffic, and needed a better location. I got the cockamamie idea of moving it down the block to a busy road. My mom immediately rejected the idea as people drove somewhat fast on it.
Lesson Learned: Build it and people will not necessarily come. In order to be successful, you need to advertise, sell and promote your business.
Don’t Eat the Profits
Unfortunately, I literally did just that. After getting home from the deli I would eat some of the candy while waiting for others to buy my stuff. Related to this, the only way to make money is to sell something for more than what it took to acquire it. Since my neighbors didn’t have to make their own lemonade or go to the store for candy, they had the convenience of buying it right in front of my house.
Lesson Learned: Be mindful of your cash flow. Not only what comes in but also what goes out (and into your stomach!).
Upsell Other Products/Services
I didn’t know it at the time, but offering candy with my lemonade was a method of upselling other products to my customers. So while they were buying lemonade, I offered them to buy candy from me.
Lesson Learned: Upselling is an easy way to make additional money with little effort.
Your Competitors Don’t stand still
After creating my lemonade stand, a neighbor down the block liked my idea. He liked the idea so much he setup his own lemonade stand. That bastard! My first competition in business. 
I can’t say we had a price war or anything like that, but looking back now it’s interesting how it happened.
Lesson Learned: If you are in a profitable business with low barriers to entry, expect competition. You need to constantly improve your products/services, and focus on ways to differentiate yourself from other businesses.
The Purpose Of Owning Business is to make a Profit
Yeah I know another statement made here by Captain Obvious. When I bought that candy and then proceeded to sell it at the same price, I wasn’t going to make any money from the transaction. I quickly learned adding $0.05 would allow me to at least make some money on each transaction. In reality, I should have bought the candy from a wholesaler.
Lesson Learned: After taking the income and deducting the expenses you must have profit, or else your business won’t live to see another day.
How Can This Help Your Children?
Currently I have two boys (a 4 year-old and 1 year-old) and another baby on the way. I’ve made a promise to myself that I want to teach the important lessons I learned about money and business. What better way than having them create a lemonade stand or do something similar. It’s a great way to get them to at least learn how to be an entrepreneur. In the process of making it fun, they also can learn basic money skills.
Readers as a child did you do something like this? If so, what did you learn from your childhood business?
Created: Tuesday, 26 January 2010 10:00 Last Updated: Saturday, 30 January 2010 10:07 Written by: Investor Junkie
My son and daughter have put out a few lemonade stands too. We don’t get much traffic on our street, but my son does okay. It’s funny watching him ride on his bike up and down the street yelling “Lemonade for Sale”. I bet the neighbors love that, great effort on his part though!
I hope he learns the same lesson you did as a child. Both my dad and grandfather owned their own businesses (furniture store and commercial construction company), I unfortunately didn’t go down that route. I wish I had… Hopefully, my son will pick some of the drive from my dad (my grandfather is deceased).
I never did the lemonade stand thing, but I did sell wrapping paper door to door for my orchestra, collected canned foods for Scouts and learned the lessons of competition, perseverance, and getting things done in both of those organizations. Kids need to learn the value of working to get what they want and making transactions. I see too many who just sell to their families when their fund-raisers come up instead of beating the pavement and learning a lesson. I agree with you – I probably wouldn’t have my business without those experiences.
Your story makes me think about a friend’s son who recently was “caught” selling candy bars at school for $2 a piece. He was disciplined at school because you are not allowed to sell on school property (or something), but then his mom grounded him for a month and took away his video games. I was trying to explain to her that it was great he got the concept of scarcity and supply demand at such an early age. She could have praised his enterprising nature while explaining he has to follow the rules instead.
@Aaron @ Clarifinancial: The mom grounded him for a month!??! For that?? I wouldn’t do that at all, but OK maybe the mother should have done a week. That’s a sure way to put a damper on his enterprising ideas. I would say go around the neighborhood instead.
Yea also the point I’m also trying to convey is life’s lessons about money and entrepreneurship are learned at a very early age. It’s something that should be nurtured, not punished. I going to write a few blog posts about what I want to teach to my children about money. Hopefully within the next few weeks.
I can’t wait until my children go to school, and the issues I’ll have with their teachers and their ideas. School is usually about sit down, shut up and conform. Though you are correct he should follow the school’s rules and the school should have done what they did. The lesson I would teach is what’s taught in school doesn’t necessarily reflect what happens in the real world.
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Did you see Seth Godin’s post in regards to lemonade stands? http://sethgodin.typepad.com/seths_blog/2010/01/the-lesson-from-two-lemonade-stands.html
It’s amazing what people can learn from something that seems so simple?
@Evolution Of Wealth: Ha! No I didn’t see that article. I subscribe to Seth but don’t always read it. That’s some lemonade stand! Does it have running water and electricity?
That’s some great parents helping them.
It’s incredible how many entrepreneurs begin their business lives in school doing little businesses. Buffett, Branson… Monevator…
I used to sell candy which I stored in the inside of a huge padded jacket when I was ten or eleven years old, but I had to stop when the teachers thought I was selling drugs!
I used to buy those hot cinnamon toothpicks (0.25) from 7-11 and resell them to my friend for double the profits (0.50). They were always a big hit. Hopefully, that is an indication that I will be highly successful when I figure out what the heck it is I want to do in my self made business.
@Money Funk: Heh The tough part (for me also) is deciding on what specifically to do. Being a “jack of all trades” business usually doesn’t do well in this day and age. I would define what IS and what ISN’T your business.
You ever spike the lemonade to get the customers to come back for more??
Good Information.
Heh FS. No but a good idea! I'll have to tell my children to do this!
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Great post! I actually started selling candy as well. I didn't have a sweet tooth when I was small, so the day after trick oo treating, I would take all of my candy to school and sell it. No one ever said I couldn't do it. The teachers knew about it. I also remember doing "lay a away" plans..a kid promised to pay me back the next day and never did…My first "problem." I also had a sticker collection and decided to start selling my stickers in school. Soon after, another girl in the class started selling her collection, too. I remember being upset about this, but I had more customers b/c i had better stickers. I then started selling my personal things to my little sister. Whenever she would get gift money, I would show her my portfolio and try to sell her as much as i could. she was easy to sell….the ironic part is that i am now a sales person and i hate it….i am currently looking into starting my own business.