- Know the value of marketing.
Having a great business idea is one thing. Telling people about it is another. Help kids figure out ways to maximize their exposure without spending a ton of money (which they probably don’t have) or turning off potential customers with a hard sell approach. Teach them to introduce themselves and talk about their business when it’s appropriate: “I heard you mention your dog, Buster. I wanted to let you know I have a pet sitting business if you ever need that.”
Specifically, you might work with them to develop several “scripts” (elevator speeches) about their business to use in a variety of settings. Also, help them create some simple business cards to hand out.
- Sometimes you have to give something away up-front.
Explain that before people will be willing to pay for your product or service, they need a taste of how great it is just to get their attention. That might mean giving out a free sample of their homemade salsa or offering a free hour of math tutoring to new customers.
“The trick is always learning how much to give away without giving away the farm,” says Downing. “This is a balancing act that will need to be walked again and again throughout an entrepreneur’s life.”
- A big part of success is learning how to buy your own supplies and manage your own business.
When your child wants to start a lemonade stand, you will be tempted to provide the lemonade mix, the cups, and the poster board for the sign in order to give your child a leg up. You may also want to get out the calendar and figure out a schedule that works for him and takes advantage of high traffic. While you can offer helpful hints and be supportive, don’t do these thingsfor him, says Downing.
“Kids need to do the work themselves,” he insists. “Only by handling the details—buying supplies, managing inventory, setting a schedule—will they get an accurate picture of what running a business is really like.”
- Know the difference between revenue and profits.
This is a big part of the reason for the previous point. Kids need to understand that the $40 they receive from customers isn’t all free and clear profit. What about the costs of the lemonade ingredients? What about the cups? What about the marketing materials? Beyond that, what about the value of their time? Have them subtract the cost of the supplies and then divide the rest by the number of hours they spent sitting at the lemonade booth.
“When kids realize how little of the money actually is free and clear profit, and when they realize that they spent seven hours of their time to make such a small amount of money, they begin to see the value of franchising and passive income,” says Downing.
- The highest price won’t necessarily earn you the most money.
Teach kids the importance of finding the “sweet spot” on pricing. If they price too high, they may not get many customers. If they price too low, on the other hand, they may get lots of customers but make so little profit that they’ll go out of business.
“Learning to set the right price won’t just attract more customers; it will keep them coming back,” notes Downing. “It’s so much easier to make money off return customers and referrals than to constantly have to seek out new customers.”
- Don’t overcommit. Learn to manage your workload.
Sometimes kids get so excited when business starts rolling in that they take on more customers than they can handle. Then, they either have to skimp on quality or fail to meet all their commitments. Teach kids that both will hurt their reputation.
“Kids need to learn to evaluate their capabilities and be realistic,” notes Downing. “Just a few dissatisfied customers can ruin a reputation.”
- Being able to manage others will help your business grow.
This may sound a bit far-fetched, but a motivated child could make it work. For example, a lemonade stand owner could start another stand at the other end of the neighborhood and ask a friend to staff it for a cut of the profits. Or a dog walker could hire a “poop scooper” assistant to clean up the client’s yard while he is taking Rover for his daily stroll (a nice add-on!).
“All entrepreneurs need a power team to help them be successful,” reflects Downing. “The more practice kids have at managing others, the better.”
- Bite the bullet and have the tough conversations.
Whatever their age, business owners will face uncomfortable moments. Your kids may have to deal with unhappy customers or customers who don’t pay on time. Don’t step in and handle these problems for them. Instead, guide them through their fear of confrontation and provide pointers on finding win/win solutions and remaining calm and professional.
“Some people never learn to have tough conversations,” says Downing. “If you can help kids learn to have honest conversations about money—when a customer forgets to pay them for part of their time, for example—you’re giving them a valuable gift they will appreciate later.”