When I was growing up, there was a girl up the street who was constantly running some sort of business. She did lemonade stands in the summer, bake sales, dog walking, car washing, lawn mowing, rented books and toys to other kids (this was long before Blockbuster made the rental model profitable), and any other things she could think of. She sold insurance and practiced “law” one summer. She even designed some of her own products to sell. Some of her ideas were truly horrible and some were pretty good. Some of her businesses were successful, and some went down in flames.
This wasn’t just a fad for her. It went on for years. She started at the ripe old age of five and was still doing it when she moved away at eleven years old. Most of the kids in the neighborhood thought she was nuts. Why was she spending her whole summer working when she could be out playing with the rest of us? We always made fun of whatever crazy idea she came up with. (But we also wondered why she always had enough money to do whatever she wanted, too.) Her parents never discouraged her, no matter how zany the idea. They just let her do her thing and if she failed, they just let her move on to the next thing. (Her parents were former hippies, so that may have explained a few things, too.)
I doubt that would be the case today. Today, many parents seem bent on preventing their kid from ever failing at anything. When the kid comes up with some terrible, guaranteed to fail business idea, the parents try to talk them out of it. Either that or they do things to make it successful, like funding all of the operating costs, or conning coworkers and family into buying all the product. But this sort of coddling is a mistake. Kids can learn a lot about money and business by trying out some business ideas. If they make money so much the better, but even if they don’t they’re still learning valuable lessons that will serve them well in the work world.
Running something as simple as a lemonade stand requires money skills. You have to have enough to buy your startup lemonade mix and make a few signs. And you have to balance the urge to spend all of your earnings on video games against the need to save some for more lemonade mix and better advertising. If you take out a loan from mom and dad to get started, you have to plow some of your earnings into debt repayment.
Government Involvement (or interference) in Business
I can’t remember exactly which business it was, but one of my friend’s summer businesses got shut down by “the man” because she didn’t have the necessary permits. It was a harsh lesson in government involvement in business, but I’m sure it was a lesson she never forgot. I’ll bet you that she always got her permits thereafter and was aware, as an adult, of tax implications and licensing.
Whatever you’re making or selling requires at least some degree of skill. It’s a talent to make great lemonade or be able to wash a car without leaving water spots. If a kid is making jewelry or cookies, it takes skill to make something that people are willing to pay for. These may not seem like life changing skills to an adult, but being good enough at something so that others will pay you to do it is a confidence builder for kids.
Kids learn how to make their product attractive to others and to target the people who will buy the products. A sign on butcher paper might not cut it. They might have to take out an ad in the local paper, or refine the product to target a certain group of kids or adults. They might have to learn how to hawk the advantages of their product over others. All useful skills when it comes to marketing themselves on school applications and resumes.
Failure Isn’t the End of the World
If the business goes belly up, the kid will learn that failure isn’t the worst thing that can happen. Maybe he’ll realize there are things he could have done differently, or that this idea just wasn’t for him. Conversely, if it succeeds, the kid learns the rewards for hard work and perseverance.
While the kid probably isn’t answering a customer service phone line, he or she may have to deal with a disgruntled customer or two. At the very least, they have to learn how to treat their customers well, how not to be rude, and that a better attitude attracts more customers.
Practice Those Math Skills
Making change and tallying up purchase prices requires basic math skills. Keeping the books and estimating costs requires yet more math. It’s a great way to practice outside of school, especially if the use of calculators is limited.
Work Ethic and Self-Motivation
Running a business requires a strong work ethic, even for a kid. If he’s promised to mow a lawn on Saturday morning, he has to get up and do it even if he’d rather watch cartoons. Kids learn that strong efforts are often rewarded, while weak, sloppy efforts are not. They also learn how to motivate themselves to get things done rather than relying on prods from mom and dad.
How to Develop a Concept and See It to Completion
It takes skill to think of an idea and then turn that idea into a salable product. Even something like a lemonade stand has to first be conceived and then developed into “the” stand of the neighborhood. Kids learn how to take a product from the idea stage all the way through to the sales stage.
How to Deal with Competition
If the neighborhood competition for jobs like lawn mowing and car washing is fierce, the kid has to learn how to deal with competition. This is a chance to learn things like how to differentiate your product from others so that you stand out (do the best job, offer the best service, or do something that no one else is doing), or how to compete on price and still make a profit.
If a kid is starting businesses to save up for something specific, they learn how to set the goal (save for a cell phone, for example) and then which steps to take to reach that goal. Even if they’re not saving for something specific, just running a business requires goals (make $200 this month, or make more this summer than I did last summer for example). Setting and achieving goals not only feels good, it teaches the child how to work for bigger goals later in life.
Kids have school and other responsibilities like chores or sports teams. If they’re running a business, too, that has to be worked into the schedule. They learn how to budget their time effectively so they can get their homework done, go to sports practices, create some jewelry to sell, man the sales stand, and still have some fun.
How to Take Criticism
You may have some ideas for their product, or helpful critiques to offer about how they’re running things. Customers may criticize a job or product, too. (“You cut my lawn too short,” or “You left streaks on my car.”) Kids have to learn how to take criticism, evaluate it, and incorporate it going forward (and how to politely ignore the crazy curmudgeon who complains about everything).
If you’ve got a kid with an entrepreneurial bent, let them try it. The idea may seem silly and doomed to you, but the worst that can happen is that it doesn’t work out. The kid will survive. On the other hand, the kid could be a successful genius and end up developing a product that makes enough money so you can retire. And between these extremes is a solid middle ground of moderate success that teaches the kid about some of the harsh realities of work, money, and business while giving him a little bit of financial reward.
I lost touch with the kid from up the street years ago. I’d like to think she’s got her own mega-successful company now and is busy developing some highly sought-after widget. Whatever she ended up doing, I suspect that she ended up better off than some of us whose idea of summer fun was playing on the Atari for hours on end and then lying out by the pool. She was probably more prepared for real life than any of us.
(Photo courtesy of stevendepolo)