Business lessons from a lemonade stand

Written on August 21, 2019

Yesterday was Duke University’s move-in day. I work two blocks away from Duke University so the streets around Duke were a little backed up on the way to lunch.

While driving up a road that runs parallel to the campus, I noticed a little sign near a street that ran perpendicular to the street that I was on. It read coffee & donuts for sale. Within a few feet was a table with two kids — perhaps in elementary school — and an adult. On the table were stacks of Krispy Kreme donut boxes and pitchers of coffee. In front of the stand, an extremely long line of cars, seemingly stuck in gridlock.

I only glimpsed at this scene and took it in in a matter of minutes, but my mind started to fixate on as much of the scene it had registered. As I thought about it more, I couldn’t help but extract business lessons from this simple scene.

Lesson 1: Running a business based off an existing idea is ok

As the title of this post goes, essentially what the kids and adult were running is the classic lemonade stand. But instead of a lemonade stand, they took the idea and put a slight twist on it.

Instead of lemonade, sell Krispy Kreme donuts and coffee.

Lesson 2: Instead of charging more for the same thing, charge more on a slightly different thing

I thought it was clever that instead of lemonade, they were selling coffee. While I think the raw materials in order to make lemonade and coffee cost roughly the same, the final product I feel have a different perception or value.

After all there are coffee shops by the dozens popping up but there aren’t specialty lemonade shops popping up. Coffee instantly feels like something you can charge more, thus you get higher margins.

Thanks to the likes of Starbucks, it isn’t uncommon to pay $5-7 bucks for a coffee when it probably cost cents to make it. A squirt of hazelnut syrup and boom, add an additional $0.50.

I also thought it was quite clever that instead of lemonade they decided to sell coffee. You see I would guess based on the license plates that I saw, probably the majority of the cars stuck in gridlock were from out of state. It’s also likely that those were parents who drove their kids long distances to get there and exhausted from the long ride.

Just getting to school isn’t the final goal, it’s get to school, find the dorm then help your kid unload and get settled in their new environment. What these parents needed was a pick me up. Coffee to give them a shot of caffeine and donut to give them a quick hit of sugar. A little pick me up to carry them through the traffic, finding the dorm and getting settled in.

Lesson 3: Know who you’re selling to

Tired, famished parents. No close Starbucks in sight. Cost to attend Duke University, according to their office of financial support, $72,000 a year.

I don’t know for sure, but based on where they were and what they were selling, something tells me these kids who were running their lemonade coffee & donut stand did their homework.

They knew the location in which they set up shop was going to be a high traffic area on Duke University’s move-in day. They knew coffee and donuts would probably sell better than lemonade and that they could charge more. They knew most of the folks were out-of-towners who needed a little pick me up to get to their final destination.

Lesson 4: Go where there is traffic

This coffee stand could’ve set up shop three or four blocks down from where they are, on a street that sees pretty light traffic. But they are at the mercy of luck to see any business.

But instead they took advantage of this street that seemed to be a mainline into Duke University’s campus on move-in day. Everyone who decided to come down that street had no choice but to slow down and probably make eye contact with the kids running the coffee stand.

It’s like girl scouts during girl scout cookies season standing in front of your grocery store. You have no choice but to make eye contact with them as they flash their boxes of yummy cookies. Making you feel guilty if you don’t end up buying at least a single box of cookies, every, single, time you visit that particular store.

It’s easier to set up shop near an established, high-ish traffic location instead of an isolated or a lesser traffic area and driving traffic there yourself.

It makes me think of online shops. It is easier to get your first sale on an established market place like Etsy or Amazon because they already have the traffic. But not only that, the traffic already has a high intent to purchase. As opposed to setting up your own online shop. Where you’d have to put in the work to send traffic and then you’re not guaranteed they’ll buy what you’re selling.

Lesson 5: You either want it or you don’t

I don’t recall if the kids gave out samples, but I could guess with a high level of confidence that they didn’t. The reason being of the scenario. The folks are stuck in traffic, but the stand was at the intersection and not further down the traffic line. Which means the potential customer has to still keep most of their attention on the intersection to gauge whether it’s their turn to cross. Not only that, you don’t want to be the car holding up traffic.

Being the driver, you’d have to make a quick decision, you either want the coffee and donut or you don’t. If the kids offered samples, the customer would try it. They would decide whether they wanted one, then a kid would have to run back and grab the consumables and a transaction would occur.

Instead you can cut out the sample and help reduce strain on the customer’s decision. A kid could walk up to a car and wave a cup of coffee and donut. The customer decides they want it. If they want more, the other kid runs out with extras.

If the kids and the adult was clever, they would’ve set up some form of digital payment. Cause who carries cash these days? Digital is so much faster and less of a hassle.

If the kids did offer samples, the customer could’ve easily been satisfied with the sample, got the value that they wanted and driven away. I highly doubt they would’ve gone away done their thing and thought, oh I’ll park and come back to the stand to now grab coffee and a donut. If I was a potential customer, I would be like heck no I’m not going back to that street. I’m going to find me a nice local coffee shop with easy access and a lot more time to make my decision.

While I merely observed this interaction and some of it I imagined what it would’ve been like to be a customer of this coffee stand. I thought it was interesting the lessons that I was able to extract from this scene.

Such a simple business and yet it was able to hit on so many business lessons that I think folks — including myself — often overlook or don’t consider. It was a good reminder to think through some of these lessons the next time I have a business idea.

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