Tips & Lessons Learned from National Lemonade Day

National Lemonade Day is right coming up on May 6th.  It was launched in 2007 by Michael Holthouse in Houston and last year it was brought to Bryan/College Station for the first time thanks to some great local sponsors.  The purpose of Lemonade Day, according to their website, is to provide a free, fun, experiential, business education program that teaches youth ages 5-17 how to start, own and operate their own business using a lemonade stand. The kids set up a stand for the day and sell as much lemonade as they can. They are encouraged to make and follow a budget, find an investor, chose a good location and sell as much lemonade as they can.  When I learned of the event last year I thought to myself we just have to do this!  It was going to be a great opportunity to validate the founders concept, support the local sponsors of the event, teach my 6 yr old son Sam the key elements of running a successful business and most importantly show him a tangible difference in a job (earned income) and an asset (passive income). While we had talked about the difference several times before, this would be a way for him to live it and experience it at the ripe old age of 6.    

Suspecting this was going to be a lot of work, I got my son's absolute and enthusiastic buy-in as step number one.  He loves lemonade and loves making money.  As far as he was concerned why wouldn't you have your very own lemonade stand? So we went to work. Through the process these were our take aways and hopefully they will help you if your family embarks on a lemonade stand.     

1.  Marketing: what I like about lemonade day being done all in one day is that it magnifys the concept of competition.  Having the best lemonade recipe, the best designed stand or the cutest kid (I'm possibly biased) would all get lost in the hundreds of stands the day of the event.  We developed a three-part marketing plan to try to drive traffic to our stand.  

• First, we decided we needed something other than lemonade as a draw that we could afford. Luckily for us, a close family friend offered the use of their motorized train to give kids rides through the park which was more than we could have asked for. 
• Secondly, created a Facebook page and documented Sam's journey leading up to the day. I would read Sam the comments and he would help come up with responses, since at the time he could not read. From our Facebook page, we got a GREAT idea from out of town friends of ours who own a marketing company. They suggested we sell lemonade on our Facebook page for friends and family who wanted to support the stand but could not be present to buy lemonade. It was a hit. It was also rewarding when the page was found by a teacher that was preparing for lemonade day with her class.  She gave Sam some very positive feedback.  You can check out his page at www.facebook.com/SamLemonadeStand. 
• The third piece of our marketing plan was the most effective but by far the hardest work. Sam hired two employees(cousins)and blanketedthe neighborhood introducing himself and handing out around 150 fliers. For a 6,8 and 11 yr old this sounded much more fun than it actually was! However it paid off. Probably 80% of our customers were from the neighborhood fliers. With the purchase of a glass of lemonade you got a free train ride. This got us repeat customers and made some of our lemonade stand competitors customers!      

2.  Get creative to keep cost down because margins are THIN!  The goal of the lemonade stand was to teach Sam how to run a business, so there were no free rides. We kept every receipt and Sam paid all of his employees. Sam would only make money if there was some left. The largest expense items were the stand, ingredients and employees.

• A tight budget immediately eliminated the grandiose idea of a 3D lemonade stand in the shape of a lemon. Even if dad made it, there was not enough money for materials. The stand ended up being a borrowed pop up canvas, borrowed tables, homemade poster board signs and our patio furniture under trees for customers to hang out.  
• Sam wanted to hire everyone he knows to help with his stand!  We had to talk about what we would pay each one and how many glasses of lemonade he would have to sell just to pay for each person.  We walked through what he needed from his employees and backed into who to hire. 
• Sam went to local businesses to get sponsors for ingredients.  Because his stand was a for-profit business and not a non-profit, it eliminated several larger business right a way.  So we focused on smaller, locally owned businesses and were able to secure lemons and ice in return for advertising them at the stand.

You may be reading this saying, "He must have made hundreds...right?"  While the day was a success and we sold out of lemonade at the end of the day, selling 277 glasses of lemonade at $1 each (vs goal of 250).  His expenses totaled $131 dollars so Sam made a profit of $146 (vs goal of $101).  While $146 is nothing to sneeze at, it was a lot of work for a onetime profit of less than $150.  

The Lessons:

The greatest lessons of lemonade day came from our discussions after all the work was done.   The greatest two lessons were:

1.  Selling lemonade at a stand is a job, not an asset.  An asset puts money in your pocket even when you are not there. Assets versus jobs is a concept I have talked to my son about on several occasions, but this was an opportunity to apply it to him.  I had a conversation with him that went something like this to confirm he got the concept.

Me:    Was working your stand a lot of hard work?
Sam:  Oh yeah!
Me:    Did you make a lot of money?
Sam:  Yes ma'am
Me:    How much money will you make if you are not at your lemonade stand selling lemonade?
Sam:  None
Me:    So is it a job or an asset?
Sam:  Job
Me:    Why?
Sam:  It doesn't make money if I'm not there.

  

It was a very simple conversation, but it illustrated the difference between a job and an asset.  Be sure to take opportunities to point out "how money works".     

2.  A person does not get rich based on how much money they make but how they spend the money they make. When our kids want something we often encourage them to save up their money or do more chores to earn the money they need to buy what they want.  We are teaching them to get a job and work hard for money to give themselves the ability to buy what they want.  This is conditioning them to join the rat race.  The reality is that if a kid makes $10 a week in chores and buys a toy for $10 every week they will always be broke.  If they make $100,000/year in salary and spend $100,000 a year in expenses, mortgage, cars, boats and a lake house they will always be broke.  On the other hand, if the $10 is used to buy assets they will have ongoing income from those assets to buy toys.  That is how they make money work for them.  When your child makes money on their lemonade stand encourage them to use the largest piece of that income to buy assets (see tab "Ways Kids Make Money" for asset ideas).  This will set them on the path to financial freedom.   

If your kid has a successful lemonade stand and uses the money to buy assets, drop me an email and share their story!