The 2 Secrets to a Successful Lemonade Stand
It started with a Facebook post.
“Our 5-year-old wants to do a lemonade and popcorn stand during our community yard sale this weekend. As her business consultants, we need to provide her some market research to help maximize profits. So we need your help:
- How much would you pay for a glass of fresh lemonade?
- What size cup of lemonade would you like for that price?
- Would you prefer fresh lemonade from actual lemon juice or the fake Country Time kind?
Any and all other advice is also welcome!”
I felt the need to reply because the responses suggested the flavor of lemonade, the pricing of lemonade, the brand of lemonade, the types of cups, etc. All relevant things but all were, in my opinion, missing two keys to an incredibly profitable day.
I won’t get into the details on how to execute a lemonade stand. There are plenty of helpful articles already written about – here a just a few examples:
- How to Open a Lemonade Stand (with Pictures)
- How to Run a Lemonade Stand: 15 Steps
- Lemonade Stands 101 – What Supplies Will I Need?
However, I will discuss two critical elements to your lemonade stand that most people don’t consider.
Key #1: If you are a commodity business then get out as quick as you can.
The definition of a commodity is a mass-produced unspecialized product. Lemonade is definitely a commodity.
People expect to pay a certain price because they know how much lemonade should cost. They know the cost of lemons (or Country Time) and the cost of cups. However, if she adds a bonus gift to each paying customer, she is no longer selling a commodity and, as a result, can charge much more.
One suggestion I provided in my Facebook reply for a bonus gift was a custom drawing by the 5-year-old. She could create 20 drawings leading up to the lemonade sale. This would give her limitless upside on her price point.
Key #2: Location matters. You can do the right thing at the right time but if you’re in the wrong location then it won’t work.
I came across a lemonade stand while I was on a jog. The kids had strategically placed their stand at the beginning of a dead-end road that was next to a well-traveled road that had a stop sign. It was brilliant. Potential customers had to step at the stop sign, which forced them to make eye contact with the kids who also had massive signs promoting their delicious lemonade. Don’t want to get out of the car? No problem, as the kids offered a drive-thru feature where they’d conduct the transaction at your window.
So, my advice for the 5-year-old’s lemonade stand: find an intersection where there are stop signs and a safe way for people to pull to the side to buy a cup of lemonade. And the number one priority is to stay SAFE. It won’t be successful lemonade business if hospital visits are part of the business plan. Clearly, you want to be on a street with a low speed limit and has sidewalks. The main thing to keep in mind, in addition to safety, is where do people usually stop? And be in those spots.
After my Facebook podcast, I talked about it on my podcast (click here for a clip of the part I talked about the lemonade stand). I have received a lot of feedback on this episode. One person even emailed me and said he and his son implemented by advice. Here is his unedited email:
“FYI this is Dan Nunney, the Golf Cart Guy. I’ve invested in two of your most recent DFW deals.
Thought I’d share this with you because, well, this was your idea. I heard it on one of your podcasts and thought it was perfect. We took it one step further and added mystery pokemon cards to the offering. People loved the drawings along with their names incorrectly spelled out.
This right here is an entrepreneur in the making. Like any good businessman, he immediately started counting his money at the end of the day. $18 GROSS, $4.49 COGS (extra ice), $13.51 NET. It didn’t hurt that we had a captive audience b/c the park water fountain was broken!
Thanks for the recommendation.
PS: We came out a little too strong at $2/per, and had to quickly drop to $1, and then the dollar bills started flowing. Great learning experience.”
Here are a few pictures from the stand:
How can you apply these lessons to your real estate investing business?
First, offer services that are not commodities. For example, in addition to offering our passive investor a solid return on investment for our deals, we send them monthly Best Ever reports in the mail, I send them free copies of my books, I hosted in-person happy hours across the country, and I have many other unique ideas in the works. Ask yourself, “how can I be unique, stand apart from my competitors, and not offer a commodity?”
Secondly, make sure you are investing in the best locations. I am not going to go into this point in more detail. If you want to learn how to follow this lesson, click here for my ultimate guide to selecting a target real estate market.
Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.