Lemonade stands and small businesses (or small business dreams) have more in common than some may think. There are six important lessons to keep in mind as you work towards building a successful small business.
Lesson one: It all starts with a solid plan
No matter the industry, every business starts with a plan. For kids starting their lemonade stands, some of the questions they need to consider include the cost of materials, how much to charge per glass, which day of the week makes the most sense and if they want to include some snacks.
For a business owner, these questions may sound a little different, but include a lot of the same underlying principles that apply to any business model. For example, a business owner should consider what they want to sell, how much it costs to produce, what overhead is involved, how they will price a product or service, etc.
When you were in elementary school, you had adults to help figure out the logistics and specifics of your lemonade stand plan. Once you’ve become an adult, you still don’t have to do it alone! Choosing a team of trusted advisors is an essential step in getting yourself organized.
Your team of advisors can include business coaches, lawyers, accountants, bankers, marketing specialists, and mentors who can be a significant help in turning a dream into reality. They may be able to educate you about the parts of owning a business you don’t know or haven’t thought of, all while keeping your success in mind.
Lesson two: Every business needs starting capital
We all have to start somewhere. Once you have a plan, the next step is getting started and finding the right funding source.
As a kid, the options were simple: using your allowance or the money from your piggy bank, or asking your parents for cash upfront. For adults starting a small business, you don’t necessarily need to bankroll your business with your own money alone. There are several funding options you can turn to, such as loans, lines of credit, or finding investors.
A great option to consider a loan backed by the U.S. Small Business Administration (SBA). There are many types of SBA lending programs that service different business financing needs.
When applying for any business loan type, ensure you can answer questions like what the funds will be used for, what your short- and long-term goals are for the business, and what documentation may be needed for an application. Business owners should also consider their lender part of their team. Finding the right banking and commercial lending partner can ensure you understand all available options to make your entrepreneurial dreams come true in a manner best tailored to your unique situation.
Lesson three: Choosing the right equipment is crucial
Businesses can’t run or thrive without the right equipment. Lemonade stands require chairs, a table, a sign, and maybe protection from the sun, not to mention the ingredients to make the lemonade. As a kid, you had to root around in your garage or ask to borrow some pieces from a neighbor.
New and potential business owners have to consider what they’ll need to get off the ground, keep up the momentum, and strive for growth. As a business owner, if you don’t already have what you need to make your product or offer your services, it’s time to decide whether you have the money to buy equipment outright, or if you need to lease or take out an equipment loan.
Owners should consider timing and resources before deciding whether to lease or loan. Financing equipment is a big step in making your business a reality, but it’s also a long-term commitment. There are a number of factors that influence which option is the best for your business needs and talking to a lender can help you weigh your options.
Lesson four: Location and real estate matter
This can be more nuanced than it sounds, even for a lemonade stand! Kids have to consider if there is enough foot traffic to make their stand worth it and whether they’ll be the only stand on their street or face competition to ensure they have a steady stream of customers.
Business owners need to understand several things before committing to a location. For example, what unique needs does your business have that depend on real estate? What features do you want out of your space, and what are the constraints of your equipment? What do monthly and upfront costs look like? Environmental inspections are often a cost that many new business owners are unprepared for.
Some business owners may be able to run their businesses out of their homes or a co-working space. It may not be necessary to purchase commercial real estate early on for your business, but down the line, it may be a great option. In your plan, consider what space makes the most sense, practically and financially, to start and grow your business.
Lesson five: Stay ahead of your needs with cash flow and resource planning
While no one can predict the future, business owners should map out contingencies that include plans for resource and cash flow management that can survive challenges that may arise.
With a lemonade stand, these contingencies might include a backup date in case of rain or how to navigate running out of supplies. Emergencies are impossible to predict and often inevitable when running a business, but properly managing your cash flow can help you when they arise and ensure your business can remain afloat even through the unexpected, such as interest rate hikes. This includes researching your industry to understand daily expenses, considering the seasonality of your offerings, thinking ahead, and good planning. Business owners should self-evaluate at six-month and one-year benchmarks to ensure they’re ready to expect the unexpected.
Lesson six: Strategic diversification can take your business to new heights
In most businesses, demand isn’t consistent, even for lemonade stands. For example, on cool or rainy days, you may not have anyone coming outside for a cold drink. It may be difficult to entice people to leave their homes during extreme heat. But thinking creatively about other products or services can help ensure that a business isn’t a one-trick pony.
Diversification offers growth and long-term success, which are critical to sustaining a business. Are there opportunities to up or cross-sell when demand is particularly high to protect from any downward shifts? When demand is low, are there ways to add offerings that bolster your cash flow and profits? What can you do or offer to set yourself apart from your competition? Unique offerings can ensure your business thrives and help you grow in the long run.
What Next?
These six lessons can give your business venture what it needs to succeed long term. Whether offering lemonade or something a little more sophisticated, writing a plan is a solid first step toward making your dream happen. Check out our Abridged Guide to Writing a Business Plan to learn more.
