Lessons from a lemonade stand
is name was Mike, an
eight-year-old entrepreneur determined to make the most of a
beautiful day on the Illinois Prairie Path. He had a little
folding table with a pitcher of lemonade, some plastic cups, a
bag of ice in a cooler on his wagon and an empty cigar box
strategically placed in the middle of the table to collect his
earnings.
As my dog, Mak, and I walked past, I asked
Mike how business was and he said, “Not so
good.”
It was about 10 a.m. and he had set up for
business at 8 o’clock so he’d already been at it
for two hours. As I stood over his little
stand, I glanced into his bank and saw that he had collected
almost no money for his efforts. He asked if I wanted some
lemonade. Since we had just started our walk, I declined, but
promised I’d buy on the way back.
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We walked about two miles before turning
back. It was a busy day on the trail with runners, bikers,
hikers, joggers and even a few people on horseback and I
figured with all the heavy traffic, Mike would probably be out
of lemonade. Not so.
As we approached I could tell he was
discouraged. His jug was still almost full. The ice had melted
and a squadron of flies had taken complete control of the table
and its contents. True to my word, I bought a lemonade but I
felt Mak needed it more than I did.
I felt sorry for Mike. It was probably his
first stab at business and what a disappointment! But why
couldn’t he make sales? After all, it was a beautiful
sunny day with a steady stream of prospects passing right by
his place of business. I’m almost sure he started the day
thinking that hot, sweaty joggers and bikers would be happy to
stop for refreshment, so I’ll take my lemonade stand out
there and rake in the dough!
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First of all, a large percentage of his
prospects didn’t need his service. In fact, many of them
were carrying their own water bottles and almost all the bikers
I saw had water bottles attached to their bike frames.
Second, almost everyone on the path was
wearing running apparel such as sweats and shorts that have no
pockets. Most people carry no money when they run, so how can
they buy?
Third, with the exception of a few walkers
like Mak and me, most people were out to make time. Ever tried
to stop a jogger? They don’t even stop when they come to
a railroad crossing… they just jog in place. Fat chance
you’ll ever get someone like that to check out your
lemonade stand!
Fourth, his location was not good. Sure,
he seemed to have good traffic but compared to what? A lemonade
stand on a deserted island? Often there would be two-minute
gaps between runners. That’s not good traffic. He would
have done much better if he had packed up his wagon and gone
about a hundred yards to Main Street.
Fifth, assuming some of his prospects did
have money and were able to buy, he could have used a few
signs. Nothing elaborate. Maybe some “Burma Shave”
type signs to catch people’s attention and let them know
he was up ahead.
Sixth, his product was not attractive at
all, especially as the day wore on and the flies took over.
Besides, he was charging $1 a serving for his product and the
convenience store at the corner was selling ice-cold, capped
bottles of a variety of drinks and juices for 79 cents. If
given a choice, what would you buy?
What was Mike’s biggest problem? He
was fishing in the wrong place. He was destined to catch
little, if anything. On the positive side, he had no
competition but then it really didn’t matter.
So, what’s to be learned from a
lemonade stand?
During my 13 years with the Golomb Group I
have done almost 5,000 demographic studies for drycleaners.
Believe me, one of the worst things a cleaner wants to hear is
how he or she should not start a drycleaning plant at a site
they really have their eye on. Sometimes all they want is your
approval and when it doesn’t come, they’re
extremely unhappy.
If you are looking to start a
“lemonade stand,” here are just a few things to
consider:
Do your potential prospects need and want
your service? Drive the neighborhood. If you see cars up on
blocks in the driveways, you probably don’t want to start
a drycleaning business there. (Like the joggers on the prairie
path, they have no money to spend.)
Is the area dense enough to support your
business? Little Mike had some traffic, but not enough to make
for a viable business. Generally, you want a prime market of at
least 2,000 households.
Do the residents in this area wear suits,
shirts and ties? Are they primarily professional, or are they
primarily employed in the service industries? Obviously,
you’d like to have a higher mix of professional people.
When you open, will you be convenient and
easy to get to? People don’t want to venture out of their
way. They don’t want to cross busy streets and go against
the flow of traffic. Is there any way to borrow the popularity
of another business… one that gets frequent traffic, like
a supermarket or a video store?
What’s the average age of the
prospects in your market and what percentage of your
prospective market is 65 or older? You won’t get a lot of
business from retired people.
Is there a natural or man-made boundary
such as a river, a mountain or a railroad track close to your
site? At certain times of the day a railroad track can kill
business!
What is the Purchase Potential Index (PPI)
of the residents in your target zip code? In just a few
seconds, you can get a pretty good thumbnail of what your
potential business will be like just by viewing how your future
prospects tend to spend their money.
How many cleaners are there already in
your proposed market? Why open a plant in a market that’s
already saturated with cleaners? Seems straightforward…
but it happens all the time!
These are only a few considerations. There
are many more. But a good test is to drive the area and see how
other cleaners are doing. Are their racks full? Do they seem to
have good traffic? Park out front and observe your future prime
competitor for an hour or two.
Remember, where you decide to open your
next “lemonade stand” is all-important. After
all… it’s the location that counts most.
Bill Bishop has been a consultant with the
Golomb Group for the past 12 years, designing marketing and
promotional programs for drycleaners. He can be reached at the
Golomb Group at (800) 679-5856 or by e-mail at billbishop@golombgroup.com.
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