Strategies: Lessons from summer's lemonade stands

— -- Ah Summer! My favorite time of year: long days, warm nights, millions of budding entrepreneurs opening their first businesses – lemonade stands. There's a lot to learn from these first enterprises, as strategies for running a successful lemonade stand are much the same as those for any business.

If your child – or you – are planning on running a lemonade stand this summer, here are some of the necessary ingredients (in addition to lemons and water) for creating a successful business in any field:

•Core competencies. Can you make lemonade? In other words, do you have the skills necessary to run the kind of business you're planning? There are many types of businesses we'd like to run, but we need the right talents and traits. If not, who will you have to hire or partner with? If you're only five years old, you might need to 'employ' Mom.

•Sales Skills. It's not enough to make lemonade – no matter how good you are. You've got to be able to talk to customers, and collect their payment. A lot of people go into business with specific industry skills, but as soon as it comes to selling, they become tongue-tied.

•Competitive Analysis. Is your neighborhood already cluttered with lemonade stands? If so, how are you going to capture enough customers to make money? Realistically looking at your competition is a critical early step in developing a company. You'll have to find some way to be different (raspberry lemonade?).

•Competitive Advantages. For most lemonade stands, the key strategy is for the entrepreneur to be cute. Everyone's a sucker for an adorable child with a hand-painted sign. Most of us in business need other ways to compete besides just being cute. Identify your unique competitive advantage and highlight that in your marketing and everything else you do.

•Strategic Positioning. Think location, location, location. Being in a quiet residential neighborhood is going to limit lemonade sales but being in the middle of a highway will get you run over. Every business – whether retail or service – needs to target a clearly-identifiable segment of a market, one that's big enough to sustain your income, but not so large you're unable to compete.

•Seasonality. Don't forget to factor in seasonal fluctuations. If you want to start your business in Des Moines in December, you're probably better off with a hot cocoa stand.

•Marketing. That leads to the need for marketing. You can have the best lemonade at the best price, but someone's got to see you to be able to buy from you. You'll need to advertise. If you have a great location, you may need only one sign. If your location is less visible, you may want to put up a number of signs throughout the neighborhood.

•Cost Control. You can't stay in business if you don't make money, so look carefully at your expenses. Sure, Mom may pay for the first can of frozen lemonade and pack of paper cups, but you can't expect suppliers to give you free stuff forever.

•Pricing. You've got to cover your expenses and make a profit. But you don't want to charge so much you scare away customers. One way is to offer choices: different size cups of lemonade at increasingly higher prices. Because your overhead costs are already fixed (construction paper for a sign), and the cost of goods (more lemonade and a bigger cup) may only be a tiny bit higher, that's a good way to increase profit margins!

•Product Offering. Why just have lemonade? How about offering cookies too? A customer who's ready for a lemonade is probably an easy touch for a chocolate chip cookie. That way you get higher revenues per customer. In your own business, think of ways that you can make more sales to the same customers.

If you or your child would like to try your hand at lemonade stand economics, you'll find a number of online lemonade stand games. Or, you can add a "lemonade stand" to your Facebook or MySpace page, or other website – to sell all types of merchandise. Check out www.lemonade.com.

If you want to try your hand at real entrepreneurship, you'll find lots of helpful lessons by running a lemonade stand first. Happy summer!

Rhonda Abrams is president of The Planning Shop, publisher of books for entrepreneurs. Their newest is Finding an Angel Investor In A Day. Register for Rhonda's free business planning newsletter at www.PlanningShop.com. For an index of her columns, click here. Copyright Rhonda Abrams 2008.