Lessons from the Lemonade Stand

The dependable lemonade stand is not only an enduring summer icon but also a slice piece of trade rich with business lessons. This past summer I made a point of stopping at those I spotted. I learned that the exchange of flavored water for a few coins may appear simple but represents aspects critical to business. If you look closely the humble stand provides a mini-MBA covering funding, strategy, production, marketing, customer service and reinvestment. It all starts with thinking about the lemonade stand “industry” which is:

Fiercely competitive with low barriers to entry

Both seasonal and weather dependent

Reliant on a commodity, easily substituted product

Seemingly undifferentiated overall

Unattractive from a revenue and profit perspective

For each of these conditions, one has to tailor the business to succeed. As daunting an industry as it is this has not stopped thousands of young people from starting them up each and every summer. Here are five lessons for your children and your own enterprises.

Delight with a Superior Product

Of course, we will all part with our loose change to help out a tiny entrepreneur. But if the lemonade is tart, weak, overly sweet or thimble size we will force a smile, wish them luck and complain about the product back in our car or as lemonade-stand_5we cycle away. This reaction is no different from any other disappointing purchase. I have gone back to a stand twice if the lemonade is legitimately pleasing in taste.

A superior product differentiates, communicates care and quality, provides value in the exchange, engenders loyalty and prompts word-of-mouth.

Pick a Smart Spot

Location has always been critical to business. As a child, I ran a stand at my home in Winnipeg, Canada situated on a quiet street and later that day while dumping the warm, unsold liquid treat down the drain vowed to learn from the experience. The next time I loaded up my wagon, trundled half a mile, and set up outside the gates of The Tuxedo Golf Club. With that experience I learned another lesson – have adequate stock. My location was so good that the would-be Tiger Woods cleaned me out fast.

Many years later, as an adult, I witnessed several kids doing the same thing at my summer cottage community. At the annual tennis tournament there was two to three different entrepreneurs selling drinks to sweaty competitors and umbrella’d spectators. The recent explosion in food trucks and pop-up stores has taken a page from lemonade stands by going where the customers are.

A smart spot provides visibility, guarantees traffic, displaces competitors, and keeps you top-of-mind.

Pricing Sends a Signal

If you remember your business schooling you may recall that anchor pricing is the typical price we store in our heads and assign to different products to judge relative value. You may have set $1.50 for a coffee, $750 for a computer or $30,000 for a car in your brain. These are quickly accessed parameters for any transaction we make and can either stop a sale or taint a purchase.

Pricing is massively important and it is one of the most poorly executed components of business today. Most businesses have forgotten how to do it. Pricing does not exist to recover costs, it exists to capture value. In the case of the lemonade DIY-Lemonade-Stand-6-web1stand, one has to ensure you are not losing money based on ingredients, cup, labour and other costs but the final price must reflect the overall value of the exchange.

Say the base price for a glass of lemonade is 50 cents. A great product, cute stand, super polite (and clean-handed) children may be able to fetch 75 cents because of the perceived and real added value. Henry Ford said it well, “The man who will use his skill and constructive imagination to see how much he can give for a dollar, instead of how little he can give for a dollar, is bound to succeed.”

The right price captures value for all parties, is fair which is the whole purpose of exchange, and sends a signal about you and your business.

Marketing is Not a Cost

A great product, solid location and fair price are still no guarantee of success and that is the challenge and fun of running a business. It is also why marketing exists. Marketing puts out the welcome mat and is the process of predisposing a customer to your business. It is an investment in building awareness and connection, generating demand, and creating conversations and advocacy.

A great stand sends a statement. One that is clean, bright and colourful will work better than those with little effort. So does a memorable and engaging name. Fun ones I have seen are “If Life Gives You Lemons…”, “Lemony Drink-It”, and one with pseudo French flair “L’emonade”. A few descriptors and authentic claims help, such as, “freshly squeezed” and “ice cold”. Other forms of marketing can be subtle like having a prominent recycling bin for the cups, including a serviette, asking customers for their feedback, or just plain thanking them for their business.

Marketing signals to customers who you are and what to expect, it communicates what is important to you and aims to create a club of like-minded people, and ultimately it helps customers tell your story to others.

Innovate within Reason

Business is a never-ending experiment. It is not static nor can afford to be complacent. At the same time it must have a solid and recognizable base from which to operate. Staying fresh and anticipating customer needs and wants is as important to a telco as it is to a luxury clothing company and as it should be to a lemonade stand.

We may be skeptical if a lemonade stand begins selling homemade muffins or cupcakes. Or would we? It is hard to know until we learn more and see them. Perhaps muffins are too far a leap and we would be more comfortable if there was a second variety of cold drink, say, pink lemonade. It does not have to be product innovation. A stand may offer a discount on a second cup, have customers sign a guest book, or offer lemonade catering at a neighborhood pool party.

Innovating within reason shows a commitment to smartly growing the business, pleasantly surprising customers, 1-wideshot-copycreating interest, and demonstrating relevant creativity.

This summer I discovered that a lemonade stand is not a metaphor or an analogy. It is a flexible template for business lessons and is great for kids to learn basic principles. By the way, if you are going to fund such an enterprise for your children, I have two highly practical suggestions depending on their age and comprehension. First, establish that you as business funder are entitled to either a share of the profits or some repayment of costs. This will teach a real lesson as will encouraging them to run the stand on multiple days so they experience the ongoing effort and witness the effects of varying weather, traffic patterns and customer fickleness.

Lastly, do not negate what you will pick up in the process that can be applied to your work or business. You can expand the lesson plan for both you and your children by visiting local farmer’s markets. I have been astounded by what I have picked up by observing these events. The lemonade stand is a great way to coach the next generation of entrepreneurs while educating ourselves. But don’t steal my idea of setting one up at the local triathlon called “Lemon-Aid” featuring a yellow cross logo and the children dressed as doctors.

2 replies
  1. Sally Brine
    Sally Brine says:

    What a wonderful dissection of the humble lemonade stand. Is there a book in this Jeff? I could see you expanding these points into longer entertaining chapters. Just a thought. Cheers mate!

    Reply

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