The Lemonade Stand

The Lemonade StandOn the last day of 7th grade, Olivia and Jonathan came up with a brilliant idea to make
some summer cash, a lemonade stand. But, they wouldn’t sell just any old lemonade,
their lemonade would be infused with berries. They planned to call their stand, “Berry
Good Lemonade”. They thought using frozen berries would be better than fresh to
keep them from spoiling quickly. As an added benefit, they would help to keep the
lemonade cold and not water down the drink. They rushed home after school and told
their parents about their idea. Olivia’s parents agreed to invest $50 into their venture.
Jonathan’s parents agreed to match that investment.
They priced the items they would need to buy online, and Olivia’s mom took them to
the store to get their supplies. They purchased:
1- 400 pack of 12 oz. plastic cups
3- 3 lb. bags of lemons
1- 25lb. box of sugar
2- 4 lb. bags of frozen assorted berries
2- 3-gallon glass pitchers
$14.50
$4.50 each; $13.50
$13.75
$14.00 each; $ 28.00
$15.00 each; $30.00
They hoped the cups and sugar would last them a month. They expected to buy lemons
and berries each week.
Jonathan’s dad let them borrow a table he purchased the year before. It was basically
new, he paid $50 for it. When Olivia and Jonathan went to the store, they saw a similar
one on sale for $55. Jonathan’s parents also agreed to let them use their cooler and ice
from their freezer to keep the berries cold. They could also store their extra supplies at
their house.
Once they got back from the store, Olivia and Jonathan scoped out locations for their
stand. They decided on the corner almost equal distance between both of their houses.
The sidewalk in their neighborhood was wide, so they would have plenty of space to
setup. And, when cars were driving by, they would easily be seen. The next day,
Olivia and Jonathan counted the number of cars that drove by their soon to be business
location. Between 11 am and 3 pm, their hours of operation, they counted 150 cars and
over 75 pedestrians! Because it was June, and very hot, they felt confident they could
attract a lot of those people to their stand. Since their location was near both of their
houses, Olivia and Jonathan agreed to take turns going to refill the pitchers with water.
With their parents’ permission, Olivia and Jonathan setup an account for Berry Good
Lemonade Stand on Facebook, Twitter, Instagram, and TikTok. They also text all their
friends to let them know they would be open for business in three days. Now, all they
needed to do was price their product. After doing some research, they found that most
restaurants charged about $3.00 for a cup of fresh lemonade. They thought $3.50 would
be a good price for their lemonade since it had frozen berries in it. To help their
customers understand why their price was a little higher than some, they would explain
the benefits of berries and lemons to their customers while they were preparing their
drinks and on their social media pages. Jonathan’s mom helped them make a sign to go
in front of their stand and some QR codes for customers to check out their social media
sites. Olivia’s dad helped them make a logo and shirts. Olivia and Jonathan were ready
to sell some “Berry Good Lemonade”!
1. Assuming that Olivia and Jonathan had to pay for all of the supplies they
needed to start their business, what is their total startup cost?
2. For the month of June, complete a profit and loss statement for Olivia and
Jonathan’s business assuming they sold 75 cups of lemonade each week. Keep
in mind Olivia and Jonathan estimated how often they would need to restock
their supplies, assume they were correct and there are 4 weeks in the month.
3. Now, complete a financial projection of Berry Good Lemonade’s P&L for the
months of July and August. Sales are expected to increase 10% each month.
4. While Olivia and Jonathan’s concept had a twist, a lemonade stand is not a
new offering. According to McKelvey, entrepreneurs, who dare to create
something different, don’t benefit from a roadmap that gives them an idea
about how their business could be run. He goes on to say that no amount of
money, access, or experience can change that, every entrepreneur starts at zero.
Do you agree? How can money, experience, and access affect the success of an
entrepreneurial venture? If Olivia and Jonathan did not have the support of
their parents’ investments (time, money, resources), how could they have
funded the startup of their business?
5. Due to their age, Olivia and Jonathan are limited in the ways they can fund the
startup for their lemonade stand. What ways can most entrepreneurs fund the
startup or growth of a business?
6. Do you think Olivia and Jonathan are prepared to start this business? If not,
what are they missing?