You want to start a summer business to earn money. What will you do? You have to consider how much money you can afford to invest in this business, how much it will cost you to make each item, and how much you’re going to charge for each item. Research something that would be reasonable to make and sell with the startup investment you have determined.
You are going to start a lemonade stand at your local farmers market. Answer the questions:
What is the total amount of money you are willing to invest in this business?
How much will it cost you to make one serving of lemonade?
How much will a customer pay for a glass of lemonade?
Do you think your business will be profitable? Why or why not?
1. The total amount of money I am willing to invest in this business is $100.
2. It will cost me $0.50 to make one serving of lemonade. This includes the cost of lemons, sugar, and water.
3. I will charge customers $2 for a glass of lemonade.
4. Yes, I believe my business will be profitable. The profit margin per glass of lemonade is $1.50 ($2 - $0.50). With a $100 investment, I can make 200 servings of lemonade. If all 200 servings are sold at $2 each, I will earn $400 in revenue. Deducting the cost of making the lemonade ($0.50 per serving), I will have $300 in total profit. Additionally, at a farmers market, there is typically a steady flow of customers during the summer, increasing the chances of selling all the servings.
To determine the total amount of money you are willing to invest in this business, consider how much capital you have available for startup costs. Let's say you have $500 to invest.
Next, calculate how much it will cost you to make one serving of lemonade. Estimate the cost of ingredients such as lemons, sugar, and water, as well as any additional supplies like cups and straws. Let's say the cost to make one serving of lemonade is $0.50.
Now, determine how much a customer will pay for a glass of lemonade. Research the average price of lemonade at farmers markets in your area. Let's say the average price is $2.00 per glass.
To assess profitability, compare the revenue generated from selling lemonade to the costs of making it. If you charge $2.00 per glass and it costs $0.50 to make each serving, your profit per glass would be $1.50. Multiply the profit per glass by the number of servings you anticipate selling per day to estimate daily revenue.
For example, if you sell 50 glasses of lemonade per day, your daily revenue would be $1.50 x 50 = $75. Compare this revenue to your costs, such as any additional market fees, to determine if the business will be profitable.
In this scenario, the business has the potential to be profitable as the revenue generated from selling lemonade exceeds the costs of making it. However, it's essential to consider factors such as competition, potential demand, and additional expenses to make a comprehensive assessment of profitability.
To determine the answers to these questions, you will need to do some research and calculations. Here's a step-by-step guide to help you:
1. Determine the total amount of money you are willing to invest in this business:
Consider how much money you can afford to put into your lemonade stand business. This can be your personal savings or funds you earn from doing odd jobs or chores. Let's say you have $100 to invest.
2. Calculate the cost of making one serving of lemonade:
Research the cost of the necessary ingredients and materials to make one glass of lemonade. This includes lemons, sugar, water, cups, straws, and any other supplies you'll need. Let's say it costs you $0.50 to make one serving.
3. Determine how much a customer will pay for a glass of lemonade:
Research the prices of lemonade at similar events or establishments in your area. Consider factors like location, quality, and competition. Let's say customers will pay $2 for a glass of lemonade.
4. Assess the profitability of your business:
To determine if your business will be profitable, compare your costs with your potential revenue. Calculate the profit per serving by subtracting the cost of making one serving from the selling price of one serving. In this case, it would be $2 - $0.50 = $1.50 profit per serving.
Next, calculate your total profit based on your investment. Divide your total investment by the cost of making one serving to get the number of servings you can produce. For example, if you invested $100 and it costs $0.50 per serving, you can produce 200 servings (100 / 0.50 = 200).
Multiply the profit per serving by the number of servings you can produce to get the total potential profit. In this case, it would be $1.50 x 200 = $300 potential profit.
Based on this analysis, your business has the potential to be profitable as you can make a profit of $300 with your $100 investment. However, keep in mind that there are other factors to consider, such as marketing, location, competition, and customer demand, which could affect your profitability.
Remember, this is just a hypothetical example and the actual numbers may vary based on your specific situation.