My first profitable business was started when I was seven years old. Our community was faced with a heat wave and the field below my house was being made into a parking lot. The crews working on it looked thirsty so I started a lemonade stand. I hired some of the neighborhood kids to take orders so drivers didn’t even have to get out of their cars. We may not have made a fortune, but Paul Harvey did mention me on his show.
My parents didn’t talk to me about the cost of my product verses the charge for that product. They just let us have fun. I guess at seven that is okay, but now that my own kids are starting to talk about starting a business I want to break it down so they will understand a basic business plan to prepare them for future endeavors.
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1. Cost of labor. They are doing all of their own work, but I’m having them keep up with the hours. They need to know how much time and effort goes into the product so that they can better determine if it is ultimately worth the cost (to them or to their customers).
2. Cost of supplies. They are paying for their own supplies so that they can understand what the real profit is that they are making.
Learning these two factors alone won’t make them successful businessmen but it will go a long ways toward directing them down the right path.