When my sister and I were kids, we used to have a lemonade stand at our grandmother’s house on the Boardwalk in Newport Beach. There were always lots of customers walking, riding and skating down the beach front, willing to take a break from the summer heat and enjoy a refreshing glass of lemonade.
One day when we were about 7 and 8, we excitedly ran in to inform Grandma that we had made $38, a lot of money to a 7 and 8 year old, especially in 1978.
Imagine our surprise when Grandma took $8 from us and informed us it was for overhead. Neither of us had ever heard the word, and we were not pleased. Grandma told us that overhead was the cost of doing business – the cost of the cups, the napkins, the sugar, the water, the lemons, even the cost of the signs and flyers.
Confronted with this new idea, my sister and I quickly sought to put the best face on it. We argued that water was free. She told us that she had to pay the water bill. We then argued that the lemons grew on trees in her yard and must be free. She stated that she paid the gardener and again that darn water bill. I countered that it still had to be cheaper than the lemons from the store. She agreed and gave us back a dollar.
What did Coleen and I learn from this lesson? We learned that the amount of money you keep is more important than amount of money you make. Understand that Grandma did not need the $8. She was trying to teach us a lesson; one that both of us learned well. If you keep your costs down, your profits will go up and marketing effectively is imperative.
Using that knowledge, Coleen and I went back to the drawing board to consider what we could do to lower our costs. We made sure that any signs we made were effective and drew people to us. We wanted to know how they found us, and we came up with the idea of a to go price and a to stay price. We explained to any customer who asked that we had additional costs when they took a plastic cup with them as opposed to using a glass cup that could be washed and reused.
Little did either of us realize all those years ago what important lessons we learned about business, and they are lessons that we continue to apply in our businesses to this day.
It has made us analyze our costs and our marketing dollars to the benefit of our customers as we pay attention to what marketing is effective and what accomplishes the goal.