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Leadership Lessons From The Lemonade Stand

Does your business stand for profit? What you can learn about business from the kids on the corner hawking lemonade.

It’s an 85-degree day, the sun is shining against a bright blue sky, there are no clouds to be found anywhere and the sweet, warm summer breeze gently stirs you as you make your way out to run your Saturday errands.

So maybe you’re “parched” as you’re driving your car down a road in your neighborhood and you see some kids who’ve launched their first startup: a lemonade stand selling that classic cool summer beverage.

I mean, who doesn’t like lemonade? If you grew up in New England, you enjoyed one of the wonders of your childhood, frozen lemonade, and if you were really lucky, it was Del’s lemonade!

Ahh, your mind snaps back to when your grandmother and mother fixed many a homemade batch with real lemons, long before “drink mix” was added to the word lemonade and powdered lemonade wasn’t real, and not a real option. (It’s been noted that lemonade mix is made from chemicals and furniture polish is made from real lemons. Go figure.)

When fate deals you a lemon, make lemonade. — Dale Carnegie

So the youngsters have their “kiosk” set up and their “point of sale” material, they have their pricing strategy, and production is ramped up such that supply and just in time inventory will enable this operation to support predictable, and excess, levels of demand.

They don’t need insurance coverage and they won’t likely need bonding or pay prevailing wages, and their factory is probably in compliance. The market research indicates their quality is high, as are market share and customer satisfaction.

Hopefully they’ve kept the bees and flies away, but you can’t blame the insects, they are after all, also attracted to the fresh lemon and real cane sugar.

No high fructose corn syrup here, just water, lemons, sugar.

Nope, no F&DA Yellow #27.

What’s most impressive of all about this team of young entrepreneurs is that they know their costs, their production capacity, and their gross and net margins on the delicious summertime, thirst-quenching, cool magic potion we know as lemonade.

Put no more than three messages on a lemonade stand. You have to describe what your product is, why it’s the best, and how much it is. Don’t be drawing turtles and flowers and footballs all over it, distracting people.

Keep it clean.

— Marcus Lemonis (he should know, the word “Lemon” is in his last name)

They’re selling a 12-ounce plastic cup of lemonade, with three ice cubes (when they get a little older their physics teachers will teach them about Archimedes’ principle and their calculus teachers will enable them to calculate the reduction in the ounces of lemonade as a result of the three rapidly melting ice cubes) “all in” with the delivered, curbside price of $1.00 per cup. Why sell for .75 or .50 when this is, after all, a premium product?

The cup is 5 cents, the water, oh, maybe 1 cent, the lemons and sugar 4 cents, and labor for production 4 cents (they are an ESOP with profit sharing), the sales and marketing expense 2 cents, and the overhead associated with the retail operation, probably another 2 cents. Ok, so 18 cents, give or take.

82 cents profit.

If they sell 100 cups that Saturday, by increasing the yelling and screaming as cars go by, they can drive gross sales, and thus, $82 net income. They can spend some additional money on banners, flyers and enlist the help of another employee or two to canvass the neighborhood and advertise. It would reduce margin, but increase total quantity sold. If they sell 150 cups at profit of .72 cents each, that’s $108 profit. $26 more.

You can see where this startup is headed. This startup is cash flowing.

Good things ahead.

So, your mind moves to the present as you drive away, lemonade in hand, sipping and contented, satisfied with the features, benefits, utility, and experience. It’s a win. They have your $1 bill, and you’re refreshed with both cold beverage and sensory connection to your childhood nostalgia. Good stuff.

They are business partners, and they have a strategy. They work together. They understand their job is to manage their lemonade stand. They understand they are not in the lemonade business, but the convenience of refreshment and exploiting the obligatory feelings of adults passing by to give us cash business.

Know the business you’re in.

Good stuff.

But first and foremost, they have done the math, they know the market, they know their costs, they’ve ensured quality, solidified distribution, they are ready to meet demand, and they are making profit.

Now why is this simple lesson lost on so many business owners and managers?