Is a lemonade stand actually a good way to make money?
As a rookie entrepreneur I have recently been trying to think of viable business ideas, but that is easier said than done. Yesterday it was beautiful so I decided to go to Clapham Common in London to clear my head and think of new ideas. After 15 minutes or so I became thirsty, and after realising that the nearest place to buy a cold drink was a 10 minute walk, I thought to myself: Is making a homemade lemonade stand on Clapham Common a feasible business idea? It is the most stereotypical thing for a kid who wants to be an entrepreneur to do, but in terms of starting a business I have a comparable amounts of knowledge! So I thought it would be fun to do a couple of calculations and put some thought into it. Here are the results:
The first hit on google when you search ‘Homemade Lemonade’ is a nice simple recipe:
- 1 cup sugar (can reduce to 3/4 cup)
- 1 cup water (for the simple syrup)
- 1 cup lemon juice
- 3 to 4 cups cold water (to dilute)
So sugar and lemon juice are going to be the main cost when producing the lemonade. After searching for prices, I found you can buy 6 litres of lemon juice for about £15, and 5kg of sugar for £4. Assuming the cost of water is negligible I worked out the price to produce 1 litre of lemonade like so:
for 30 kg of sugar it will cost £4 x 6 (amount of bags needed) = £24
for 30 litres of lemon juice it will be £15 x 5 = £75
Total = £24 + £75 = £99
For 30 litres of lemon juice we add 120-150 litres of water, therefore (assuming that sugar takes up an insignificant amount of volume) for £99 it is possible to produce about 135 litres of homemade lemonade.
Lets say that each portion of lemonade is 250ml, and each glass gets quater a segment of lemon, this means that we needs 135 lemons for 135 litres. Tesco sells lemons 4 for £1 so that would add an extra £39.
This comes to 135 litres costing £138 not including ice, which we can nicely round to:
£1 = 1 Litre of Lemonade
How much to sell for?
Clapham is a neighborhood of London that has alot of middle class families, and the common is a lovely green area of 220 acres that people come to, especially on sunny days. Due to its size, and where the shops are located, there are many parts of it that are at least 10 minutes from anywhere to get a drink. That is unless you are willing to pay extortionate prices at the ice cream van. On sunny days like this:
you would have a huge demand and could charge a high price. I would estimate that you could sell a 250ml plastic cup of lemonade for £1.50. This makes £5 profit on every litre, or to put it another way, for every pound you invest you get £6 back. Not bad! But it’s not as simple as starting a lemonade stall on every available piece of London greenery and waiting for the millions to roll in, as we shall see…
It would be great to set up a little stand on the common, this would allow you to mix lemonade on demand and give the business a “homely” field. But I guess I was naive in thinking Clapham Common was actually common land where you could do this without anyone’s permission. It’s under a thing called the “Common Land act of 2006” which pretty much makes it a park. After talking to the ice cream lady on the common, I found that she pays £25,000 per year for a licence to park there (!) and we would have to pay a comparable amount. So that throws the idea of a stall out the window, but there is a way round this with a peddler’s licence. This costs only £17 a year and would allow me to get to those parched sunbathers, the only catch is that I have to “generally keep on the move, pausing to make sales”.
This is feasible, but the logistics have to change. First the lemonade would have to be mobile. Carrying a significant amount of liquid is not feasible (remember 1 litre = 1kg), but it is possible to roll it around. It would make sense to store it in something like this (used by campers to get water for their caravan):
If I could attach a pump to this then I could pour drinks directly from the container through a little nozzle into plastic cups, and the whole process could be done on the move.
Making homemade lemonade can have a high profit margin if it is in high demand and it is logistically possible to sell it cheaply under a peddler’s licence. However I would say that it isn’t worth my time for two reasons:
- The British Weather
The success of a lemonade business is highly dependent on the weather and unfortunately the British weather is one of the least reliable things I know. From June-September the average temperature is above 16C, but the average rainfall during those months is the same as any other month. If I were to give a high estimate, there would be maybe 50 days in the year that I could go out and work. For the other 315 I would be sitting in my flat waiting for the sun to come out. It would be an erratic business and I would not be able to plan very far in the future.
The other problem is that to make serious money from it you would need to grow the business beyond just me selling lemonade, but I wouldn’t be able to expand it without significant cost. If I wanted to sell twice as much lemonade in an afternoon I would need to hire someone else, which would cost around £35 more a day (if he worked for 5 hours at £7 per hour), and buy a new liquid container and pump for each person. This works out as each person having to sell about 30 cups to break even. Due to the nature of the business the amount I would need to invest would be proportional to the amount I want to sell, and I am not too inclined to invest much money into this!
If you want to make a few quid on a hot day then selling lemonade is a great idea. But if you want to start a business there are better options.