I’m thrilled to be joining Sun Scholars and 99 other bloggers for 100 Days of Play! Need play ideas? Please join us as we explore ideas for playful learning!
With nice weather finally arriving in New England, I’ve seen numerous lemonade stand ideas pop up in my neighborhood. It’s been fun to support the neighborhood kids and sample their wares. Some have been selling lemonade and brownies. Others have more traditional stands.
One thing that struck me is how much the pricing varies. I thought I would teach entrepreneurial finance for kids today for my 100 Days of Play contribution by looking at pricing your [successful] lemonade stand.
Pricing Lemonade for Your Stand
COGS = Cost of Good Sold
There’s nothing like an acronym to make something seem difficult. Let’s talk about how much you should charge for your lemonade stand.
Step 1: What are your ingredient costs?
We’re going to start with basic cost accounting, which is to say, “How much does it cost you (assuming you had to pay for it yourself?”
water: Let’s assume the water is free from the tap.
ice: Let’s assume you’re getting ice from your freezer and not buying it from the grocery store.
sugar: I’m going to guess that it takes just a few tablespoons of sugar to make one quart of lemonade.
GRANULATED SUGAR:
- I bought a 5-lb. bag for $1.89.
- $1.89 / 5 = $0.378 per pound of sugar
- 2.25 cups = 1 lb.
- $0.378 / 2.25 = $0.168 per cup of sugar
- 1 cup = 16 tablespoons
- $0.168 / 16 = $0.0105 per tablespoon
So … one tablespoon of sugar is basically a penny.
lemons: The price of lemons varies from 50 cents to $1 per lemon, I’m guessing. Let’s say you use two lemons and they each cost $2.
Note that lemons are your most expensive item. We call that a “cost driver” because it basically determines the cost of your final product, in this case, a glass of lemonade.
I know there are entrepreneurial kids out there thinking things like:
- I can grow my own lemons for FREE! Yes! Great idea. Then your cost is just sugar and you have a cash machine!
- I can buy lemons in bulk to save money! You are thinking like an entrepreneur! Yes!!!
- I can buy lemons on sale. That works for me!
cups: Are you going to use disposable paper or plastic cups? If so, you’ll have to add in the cost for these. Or maybe you can use non-disposable cups from your house?
A pitcher of lemonade is going to cost about $2. How many cups can you get from it? It depends on the cup size but a pitcher typically holds 4 pints or 8 cups.
$2/8 cups (or more if you use small Dixie cups) = $.25
In other words, our COGS (Cost of Goods Sold) for one cup of lemonade is a quarter.
You can see that my son is selling lemonade at cost. He is using very small cups so he might be getting 12 cups and since they are not disposable, he doesn’t have the additional cost for the cup. Still, if he had to buy his own ingredients, he would be making … NOTHING!
In the restaurant business, you typically charge a mark up the food cost by 400%. So, if the cup of lemonade costs YOU $.25, you’d charge $.25 x 4 = $1 per cup.
Does this seem like too much? Well, you don’t have the same costs that a restaurant has like paying rent or hiring staff, so you can mark up your lemonade less if you like. How about by 200%?
$.25 x 2 = $.50 per cup
Of course, pricing is also what the market can bear. When PickyKidPix and Grasshopper and Sensei ran their lemonade stand, they charged $1 per cup (with the tiniest paper Dixie cup that you use for brushing your teeth) and gave a nickel rebate. That was their promotion. They made a lot of money that day too!
Peg + Cat: The Lemonade Problem by Jennifer Oxley and Billy Aronson
It’s not easy to run a lemonade stand, especially when you are bartering for marbles. Pricing is hard to figure out. When Peg and Cat’s business picks up, they have another problem. No cups! More bartering is required in a complex transaction of cups for cookies, red peppers, and dancing. Peg and cat learn that running a business requires fast and flexible problem solving skills. Young entrepreneurs will relate the unforeseen challenges of running a lemonade stand! [picture book, ages 4 and up]
The Monster Money Book by Loreen Leedy
If your child likes money or wants to learn more, I really like The Monster Money Book that goes over basic entrepreneurial concepts just like our pricing the lemonade exercise but in a more fun way.
The Lemonade War by Jacqueline Davies
Here’s my chapter book recommendation that just happens to have a lemonade stand theme. In this case, it’s war! Two competing lemonade stands on the same street. Not only is this a great book that kids love, but it also has some marketing concepts slipped in! Play can be so educational!
Question for you: Are they pricing their lemonade correctly?!
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Mysteries Surrounding The Lemonade War Series
I need to send this post to my entrepreneur nephew!
maryanne recently posted…Gifts Kids can Make: Spin Art
Thanks MaryAnne,
I bet he is very good at pricing instinctively if he’s entrepreneurial! How old is he?
Pragmatic Mom recently posted…Lemonade Stand Ideas for Young Entrepreneurs: 100 Days of Play
I love the way you do the math for us….sounds so easy that every kid will want to become an entrepreneur!
Thanks Barbara,
I am feeling like I should have paid more for the lemonade from the local stands in my neighborhood!
Pragmatic Mom recently posted…Lemonade Stand Ideas for Young Entrepreneurs: 100 Days of Play
We priced $.50 a cup too, but ended up hitting the jackpot with construction workers who felt guilty for having to close down our street just as we were opening the stand.
Love the Lemonade War! One of our favorites.
Heather recently posted…Reasons to Send Your Children Away
Hi Heather,
How fun that your kids ended up making money from their stand! Were you able to get the neighbors too?
We’ve never experienced a Lemonade War here in our town but Jacqueline Davies lives one town over in Needham, MA. I guess the lemonade stand business there is tougher business. No, just kidding. She said she got the idea from her kids but that it wasn’t an actual war.
Thanks so much for coming by!!
Pragmatic Mom recently posted…Lemonade Stand Ideas for Young Entrepreneurs: 100 Days of Play
Mia,
This post is excellent! I can’t wait to do a lemonade stand with my boys. Such an opportunity for learning. Thanks for linking up to the Virtual Sharing Fair!
Marnie recently posted…Memorial Day Ideas for Kids
Hi Marnie,
Thanks so much! Ah, those days of Cost Accounting are coming back to me! Strangely, I liked the pickiness of accounting with getting the numbers to precisely match up!
And I’m also thinking that I was undercharged at most the lemonade stands in town! LOL!
Pragmatic Mom recently posted…Lemonade Stand Ideas for Young Entrepreneurs: 100 Days of Play
Jeanette Nyberg
I’m excited about this. Fen’s all about lemonade stands in the summer, and I am definitely going over this concept with her. I think I’ll make her BFF learn it, too, while I’m at it. But we so don’t squeeze our own lemons for lemonade, so I think .50 sounds pretty good- but we’ll be figuring it out.
Jeanette Nyberg recently posted…Office Products are Fun and You Can Win Some!
Hi Jeanette,
They will have so much fun doing a lemonade stand together! I can’t wait to hear more about how it goes!
Pragmatic Mom recently posted…Great New Chapter Books for Kids GIVEAWAY
Oh you are so smart! The other day my daughter came home and wanted to have a bake sale. She had already told her teacher and a couple friends about it. I was frantic running out to the store for supplies afraid of her teacher showing up and us not having any baked goods! We quickly whipped up some rice crispy treats. Her teacher didn’t come but the mail carrier bought one! Her price was a dollar. Next time more planning and I love the idea of adding in a little business schooling!
Ann recently posted…I Spy: 4 Bunnies
Hi Ann,
Your pricing sounds excellent!! My kids would have loved to go to your bake sale stand! They love Rice Crispy treats and I hardly ever make them. So sticky!
Pragmatic Mom recently posted…Great New Chapter Books for Kids GIVEAWAY
We recently read the Lemonade War and the kids really enjoyed it. Then we stumbled across a lemonade stand iPad app. It’s pretty cool. By varying the price and other factors kids get to see how much money they earned at the end of the day. It’s fun, but the real thing is better.
Julie recently posted…Local Homeschool Group
Hi Julie,
That app sounds fun for pricing and tracking but you are right, there is nothing like the jingle of cold, hard cash to show the kids that their hard work is worth something!
Pragmatic Mom recently posted…Great New Chapter Books for Kids GIVEAWAY
Asianmommy
We were thinking of having a lemonade stand this weekend. You’ve given us a lot to consider! 🙂
Asianmommy recently posted…What kind of Asian are you?
Hi Asian Mommy,
Hope it helps you to price your lemonade! 🙂
Pragmatic Mom recently posted…Teaching Kids Compassion for Special Needs Classmates
So many great ways to learn through play! I’ll be featuring this on The Sunday Showcase this weekend.
Allison recently posted…Birdhouse Craft
Thanks so much Allison!!!
Pragmatic Mom recently posted…K’NEX Competition with Prizes: A Fun Summer Project!
Bhumi Faldu
Hello Pragmatic Mom,
You are doing fantastic job, Ireally like your ideas.
I’m owner of India’s Largest Craft Community best out of waste.
Hope you will like our ideas.
Thank you.
Regards
Bhumi
Bhumi Faldu recently posted…Valentine’s Day DIY Gift Ideas 2014
Hi Bhumi,
Nice to meet you! What a great idea to make crafts from recyclables!
Pragmatic Mom recently posted…Rebecca Stead: From Attorney to Secret Writer to Newbery Winner!