As an enterprising kid, when life handed you a bag of lemons, you did what came naturally: You made -- and sold -- lemonade. And you probably navigated the business world pretty well, negotiating for sugar from your mom and wheedling your notoriously snobby older sister into helping you bring up the card table from your basement (without payment, of course).
You likely didn't think much about income statements, profitability ratios, or branding in your lemonade-stand days. Still, you did your fair share of netting as much profit as possible. And if you were super-strategic, you put your little brother on commission instead of paying him a flat rate for squeezing the fruit.
Those heady days of peddling tangy drinks to thirsty passers-by may seem like ancient history. Nevertheless, the decisions you made then can provide insights into keeping your company running in the black today. In fact, many of the same strategies you used to reap a tidy profit off quarter-a-cup beverages can work on a larger, more mature scale.
Below are three key factors that made your lemonade stand the envy of the other kids on the block. You won't want to forget these when running your business.
1. You kept looking for investors.
When you were launching your lemonade stand, you needed to go to the store, stock up on ingredients, create signage, and make sure you had the goods to open shop. You probably went to a couple of sources for cash: Most lemonade stand mavens lean on parents and siblings, not to mention their own piggy banks. Even after launch, you probably used some of that dough to purchase more ice and buy extra lemons. When the opportunity to capitalize on your success the next day arose, you looked for other people to invest -- maybe asking your aunt to donate cups or your mom to let you have more sugar -- so you didn't have to limit yourself to using all your own liquid assets.
Growing companies do the same. Well past the initial seed funding stages, they continue to raise capital so they have the funds to go after big opportunities. A great example is the $32 million round of financing HubSpot raised in 2011. The marketing and sales platform giant didn't need the money to survive: It was already a market leader. However, without the influx of capital, HubSpot couldn't have taken advantage of disruptive changes happening in its industry. The bottom line is that you don't need to wait until your bank balance is getting low to seek more funding to scale. Working with investors even when you're flying high can give you the added thrust to reach an even higher altitude.
2. You scouted the best location.
Although it would have been so much simpler to remain in front of your house, you realized you weren't getting as much traffic in your residential cul-de-sac as you could if you set up shop on a street corner. So you packed up your little establishment into a wagon and tugged it to a better locale. Sure, it took time and energy to navigate the distance. It was worth it, though, because you were able to maximize your visibility and increase your hourly sales.
The lesson you learned is a real estate truism: location matters. Even in a highly digitized world, the city you choose as your headquarters can impact your longevity and profitability. From cost of living to commercial rents, you need to take every aspect of your target location into account. This includes picking a startup-friendly region that has an established entrepreneurial ecosystem. While conventional wisdom holds that the coastal metropolises are the best places to launch a happening startup, locations outside Silicon Valley (and Alley) are gaining momentum. Consider Cincinnati, which has risen as a star for incubators and new ventures. Over the last 12 years, seed funding outfit CincyTech has invested $53 million in 77 regional tech startups. You may discover that other mid-continent cities offer similar potential.
3. You brought some buddies into your grand scheme.
Your lemonade sales began dropping, and you found out why: The pesky kid down the street decided to offer cut-rate, powdered-mix lemonade and freshly baked cookies. Instead of getting mad, you went the collaborative route. Together, you discovered how your top-shelf lemonade and his homemade treats could net you both more chocolate chips than you could earn on your own.
To be sure, teaming up isn't warranted in all situations, and partnership failure rates can be as high as 80%. But don't let that scare you. When it works, combining resources can gain both parties much-needed traction. That's what motivated MachineMax, a wireless telematics company, to join forces with Shell to offer a digital service that helps mining and construction companies better utilize their fleet vehicles. Like a Fitbit for machinery, the solution uses specialized sensors and advanced analytics to enable Shell's customers to monitor machine use, reducing wasteful idling time and maintenance costs. When you pair your ideas and expertise with a partner's customer base and financial backing, the possibilities are endless.
It's been years since you stood on the sidewalk with a pitcher in hand and a coffee can to hold coins. Regardless, you shouldn't assume that You 2.0 can't learn something from You 1.0. Just grab some lemonade from the fridge and take an entrepreneurial walk down memory lane to uncover winning strategies for your current venture.