Lemonade Stand

School was delayed 2 hours this morning because of freezing rain. Somehow, that made me think about when my kids had a lemonade stand.

When someone comes to the United States for the first time, especially if they are not an American citizen, such as a German, one is immediately struck by the amount of selling taking place. There are advertisements everywhere, including in many public restrooms. Even the non-commercial public television stations have advertisements between programs. The only place in America that has fewer advertisements than in Germany is in the movie theaters. When I first came to America, I was shocked and disappointed that the only thing shown before the movies were advertisements for forthcoming films and for candy and sodas at the refreshment stand. There were none of the fantastically brilliant advertisements I was used to in Germany. Fortunately, this situation has somewhat improved and there are more advertisements for products outside of forthcoming films.

Two summers ago, my own children asked if they could have a lemonade stand. They had heard from their friends how much money could be earned with relatively little effort. While I had some experience with this type of business, I had been more of an observer than a participant. With their help, we made up a list of the supplies that we would need. I came up with a spreadsheet that would
allow them to calculate the price they needed to charge for the lemonade in order to make a profit.

Their expenses were $63.65, including a cheap folding table and folding chair, lemonade mix and plastic glasses. The water, I provided free. They wanted to have ice in the lemonade but I told them no because we didn't have any, it would water down the lemonade, and I think that cold drinks are bad for you.

Profit Calculator
Total Cost - 63.65
plastic cups - 16
Total Cost/cup -3.98
Price per Glass of Lemonade
4
Profit per Glass
0.02
Total Profit
0.32

We calculated that we would need to sell 16 glasses of lemonade at 4.00 per glass for a profit of $0.02 per glass. We also calculated that if we doubled the number of packages of lemonade mix and doubled the number of plastic glasses purchased, we could lower our unit price to $2.42, with a profit of $0.58 per $3.00 glass. If we kept the purchase price at $4.00, the per glass profit would be an astounding $1.48. With the possibility of making as much as $47.36, my children, Joachim and Renate, very eagerly withdrew $77.33. At this point, Charles was far too young take part and his siblings had no intention of sharing their profits with him.

“If he doesn’t work, he doesn’t get paid,” I can remember Joachim saying to me and his sister.

I took them to the store to purchase the supplies. In America, in most states, there is a sales tax that is added to the price of the goods. This sales tax is local, leveled at the discretion of states, districts and cities. I graciously paid the sales tax for them, for which they were very grateful. I also contributed for free the water that was added to the powdered lemonade mix and the ice cubes, to make it cold, according to American tastes. If you decided to undertake this project in Germany, which I recommend that you do, you can leave out the ice cubes since it may very well inhibit your sales.

The next sunny day, we set up the lemonade stand adjacent to the park down the street from us. It is a very popular park, especially on the weekends, and they were assured good foot and stroller traffic. Summer in Northern Virginia is quite torrid, much more so than in most of Germany. I suggested that they take their business venture seriously, so they dressed up in an approximation of business attire. Renate wanted to have a uniform, but that was out of the question for financial and lack of time reasons. Joachim wore the pants, long-sleeved white shirt and nice leather shoes that he had worn for his Spring choral concert. Renate wore a dress and we did up her hair nicely. Joachim made up the sign on his computer, adding pictures of lemons and desert cacti as suggested by Renate.

For the first half hour, many customers came past, but didn’t buy, complaining that $4.00 was too high. For the second half hour, they lowered the price to $3.00, but still were not able to sell any, except to me since I was now quite thirsty. For the third half hour, desperate for sales, they lowered the price to $2.50, $0.08 over cost, but only sold two glasses. The woman who bought the glasses for her very thirsty children loudly and rudely complained that the price was too high. Her anger caused Renate to cry.

Renate was now thirsty herself but Joachim wouldn’t allow her to have any of the lemonade so as not to eat into their profits. In the fourth half hour, tired, thirsty and under threat of rain, they lower the price to $2.00, then to $1.00 as the sky darkened in the distance. They ended up selling out their now diluted lemonade, with most of the sales going for $1.00 before we were forced to pack up and rush home.

After an early dinner, as the torrential rain poured down, I helped Joachim and Renate calculate their loss. Their total cost was $77.33. They sold one glass at 3.00, two glasses at $2.50, four at $2.00 and twenty-five at $1.00 for total receipts of $38.50 for a loss of $38.83. This money was apportioned according to how much each of them had contributed, with Joachim contributing $40.00 and Renate $37.33. Joachim received $19.91 and Renate $18.59.

Both kids complained loudly about their loss and how having a lemonade stand was a horrible idea. I told them that the lesson they had learned was priceless, or at least worth the nearly $20.00 each of them had lost. The lesson they had learned was an important one for business and one that I expect that most American child instinctively know, that business is a tough business and there’s only one sure thing in life, no sure thing. They had a good product and a good location.

“Look at it this way,” I told them, “at least you have a new folding table and two new folding chairs.”

My children learned some very important lessons from their first taste of the business world. Joachim learned has decided that he doesn’t want to go into the restaurant industry. Renate has decided to save more of her money. Charles learned that his brother and sister are not very generous. They didn’t want him to have any of the lemonade unless he paid for it. He doesn’t yet have an allowance, so he didn’t get to have any of the lemonade. All of them learned that business is business and that success doesn’t come easy.

There is nothing more iconically American as a lemonade stand. Many a famous American titan of commerce learned their first lessons in business running a lemonade stand. If you have your children start a lemonade stand business, I suggest that you try to limit their costs more than we did with our little experiment. One of the things we learned was that it is a volume business, so think about greatly increasing the amount of lemonade you produce.