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Business Facts About Running a Lemonade Stand

written by: •edited by: Michele McDonough•updated: 5/14/2010

With summer around the corner, many kids and parents will set up lemonade stands as a way to pass time by, bond, and even make a little extra money for treats. What are the business facts about running a lemonade stand you should know about? Read this article and find out.

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    The Classic Kid Business: The Lemonade Stand

    picture As summer rolls out again, many children and their parents will partake in the age-old practice of running a lemonade stand. The lemonade stand gives kids a chance to learn important business skills (and practice those math skills that will lie dormant for three months) and it provides a service to the public.

    Before you set up that folding table and purchase lemons for this business venture, it is important to keep a few things in mind that are true for any business: Borrowing money comes with interest, in order to make a profit you must price your product correctly, and marketing can make or break any business venture. Learn the business facts about running a lemonade stand by reading on.

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    Planning for Sweet Success

    Take the time to teach your children that a lemonade stand can be a profitable venture, given proper planning. Before setting up shop, here are things to consider:

    • What supplies will you need?
    • What supplies can be borrowed? What will have to be purchased?
    • Where will the money for supplies come from?
    • How/when will this money be repaid?
    • What location would work best for a lemonade stand? (Note, this might not always be in front of your house - parents, look into safe venues for your children to sell lemonade).
    • What days would be best for a lemonade stand? (Hot, but not "too hot" days work best for selling lemonade.)
    • How much must you charge per glass of lemonade to break even? To make a profit? At that price, how many glasses will you need to sell?
    • How will you advertise and market your lemonade stand?
    • What will happen if the demand outweighs the supply? How will you handle it if you run out of product or supplies?
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    Lending Money to Young Entrepreneurs

    Chances are, unless your children receive a regular allowance, they will need to borrow money from you for their lemonade startup. When lending money for this cause, keep the following in mind:

    • Have children make a list of exactly what the money will be spent on.
    • Only lend as much as they need to get started.
    • Determine a schedule for repayment (and a small amount of interest).
    • Try to use supplies you may already have on hand.
    • Have children do the math - have them figure out the minimum number of cups of lemonade (and snacks, should they be selling those as well) that have to be sold in order to pay you back, with interest.
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    Pricing

    It is important to help children learn how to correctly price their products. If they price their lemonade and side items too high, then they could lose business. If they price items too low, then they may not make enough to cover their loan. Here are some tips to help children determine how much they should charge:

    • Have children determine the minimum price they can sell at to make a profit by dividing the loan amount by the number of expected sales. Likewise, have children determine the minimum number of customers they will need.
    • Help your children to learn how to save money on business expenses. Is there a sale on lemons? Do they really need artificial sweetener for a "diet" lemonade? What can they borrow?
    • Don't forget to have children take into account the time they put into their business when pricing.
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    To Market, To Market

    Finally, marketing is vital in a business. After all, if no one knows about the business, then no one can partake in the business. Have your children research free and low-cost ways to advertise their lemonade stand. Who can they call? Have children call relatives and family friends in the area to tell them about the lemonade stand (this is a great way to get them to practice "cold calling" skills for later in life). You may also want your children to create a flyer to post around your neighborhood and places you frequent. Finally, make sure you have more than enough supplies to meet the demands of the potential customers - if you choose a high-traffic destination, running out of supplies midway through the scheduled time can be a bummer - especially if you have more product.