You can start your own business by yourself or form a Startup Squad with your friends! You could even sell T-shirts, like Resa, Harriet, Didi, and Amelia did for the Radical Skinks. The girls learned about revenue, expense, profit, negotiation, and customer service as they worked together to make money for the band. Here are some tips from the Startup Squad that will help make your own business a huge success!
Revenue is the money a customer pays you for your products. Expense is the money you spend to make your products. Profit is revenue minus expenses. It’s the money you get to keep after running your business. For example, the Startup Squad sold each T-shirt for $25—that was their revenue. It cost them $20 to make each shirt—that was their expense—so their profit on each shirt was $5 ($25 - $20 = $5).
Revenue and Profit Tips
Make sure you’re earning a profit on each item you sell. First, add up all the money you spent to make your product; that’s your total expenses. For example, to sell lemonade, you need to buy lemons, sugar, and cups. Check your recipe to see how many cups of lemonade you can make. Then do some simple math to figure out how much it costs you to make each cup:
Once you know what each item costs to make, you can set your price to make sure you earn a profit. A good guide is to set your price at twice what it costs you to make each item. (For example, charge $2 for a cup of lemonade that costs $1 to make, so you can earn $1 in profit on each cup.) But you should also do a little research about what similar products cost—and think about what you’d be willing to pay. The Startup Squad thought that $2.50 was a fair price for a button even though the buttons cost only $0.50 to make.
Avoid using round numbers in your prices. $9.99 sounds less expensive than $10.00 even though it’s only one penny less. Also, if you charge $1.75 for a cup of lemonade, your customers might give you two dollars and tell you to “keep the change.”
If you’re raising money for a charity or a good cause, consider not setting a price at all. Tell people to pay what they want as a donation. You might find that some people will give you a lot more money for your product than the price you were thinking of charging.
Negotiation is a way to reach an agreement. When your bedtime is eight o’clock, but you ask to stay up until nine o’clock, and you’re then allowed to stay up until eight thirty, that’s a negotiation! The same thing happens in business (but usually about prices, not bedtimes).
Negotiation Tips
It never hurts to politely ask someone for a lower price. The worst that can happen is the person will say no. Lucy’s T-shirts were priced too high for the Startup Squad to make enough profit. Amelia asked if there was a way to get a lower price—and Lucy agreed! If you are buying a lot of something, often you can get a discount. Just ask!
On the flip side, if someone is thinking about buying a lot of your products, you might offer them a discount to get the sale, just like the girls did for Reginald when he bought a lot of shirts. But make sure you don’t sell an item for less than it costs to make it, like Harriet did! Decide the lowest price you are willing to sell for before you start to negotiate.
You may have heard the saying, It takes money to make money. Sometimes you need money to buy the things you need to start your business. If so, you can ask your customers for money in advance as a deposit and use that money to start your business or place your first order. You can even give a discount to customers who give you a deposit, like the Startup Squad did when they offered a 15 percent discount on T-shirts if people paid in advance.
Negotiations don’t have to always be about price. You can also exchange your products for something other than money. Especially when you’re first starting out, you can save money by exchanging your product for something else you need, like supplies or advertising. Mo was willing to loan a guitar to the Radical Skinks as long as she got free publicity about her store and a guarantee for a future sale.
Customer Service is how you treat people before, during, and after they buy your products. It’s important that your customers have a good experience so they will not only come back, but tell their friends to buy from you, too!
Customer Service Tips
There’s a saying that a happy customer will tell three people about their love for your business, but an unhappy consumer will tell ten people about their bad experience. Always try to leave customers with a good impression and make them feel special, even if they don’t end up buying anything. Remember all the bad things Eleanor heard about the girls’ customer service? And she wasn’t even at the concert!
A little extra effort can create very loyal customers. Eleanor exchanged her customer’s “warm” ice cream and his family became regular customers. If a bug lands in someone’s lemonade, replace it. If someone drops their cookie or brownie, give them a new one. It will cost you a little extra money, but it will help create happy and loyal customers. And you’ll end up making more money in the end.
A smile and a positive attitude make customers feel welcome and can help your business stand out from the competition. Try to remember Val’s smile or Eleanor’s “So sorry about that” line when you’re dealing with a difficult customer. You can turn an unhappy customer into a happy one, who might even become a loyal customer for life.
Want our favorite recipe for lemonade and more tips about running your business? All that and more can be found in the first book in The Startup Squad series. You can read about how the girls first met and became friends, their misadventures running a lemonade stand, and what they learned about marketing, sales, location, and merchandising.
And you can learn more about running your own business at thestartupsquad.com and start planning your empire. Because GIRLS MEAN BUSINESS!
For help with these business tips, special thanks to Daniel R. Ames, Professor, Columbia Business School; Hafize Gaye Erkan, President, First Republic Bank; and Kathy Waller, former Chief Financial Officer, The Coca-Cola Company.