Let’s talk entrepreneurship

Key Topic

The term entrepreneurship was not really popular until 15-20 years ago, but with the emergence of people such as Steve Jobs who created and ran Apple, it has become a term that we hear or read about almost every day. Today’s lesson will be about entrepreneurship. Specifically, we will discuss what entrepreneurship is, what it takes to be an entrepreneur, and what the pros and cons of the entrepreneurial lifestyle are.  We will also go through an example of teenagers being entrepreneurial through a lemonade production and distribution business.

Learning objectives

• Understand the concept of entrepreneurship
• Develop an understanding of the risk involved in being an entrepreneur
• Realize that running your business requires hard work
• Trigger entrepreneurial thinking

What is entrepreneurship

Entrepreneurship means creating a business with the purpose of growing it and making it profitable. An entrepreneur is a person who sets up a business to make a profit.  An entrepreneur can be anyone from Jeff Bezos starting Amazon in a tiny office almost thirty years ago, to a person who managed to get investor funding for their idea and is starting their new business in a fancy office in Manhattan, to someone setting up a lemonade production and distribution business in their mom’s kitchen!

It takes a lot of hard work and commitment to turn your business ideas and goals into reality. The life of the aspiring entrepreneur is full of uncertainty, anxiety, very long hours and sacrifices. It is certainly not for everyone and that’s okay. You don’t need to become an entrepreneur to succeed in life!

The advantages and disadvantages of the entrepreneurial lifestyle

People tend to romanticize entrepreneurship and for a good reason; when an enterprise is successful it can bring money and fame to the entrepreneur. However, the road to a successful enterprise is at best rocky, full of roadblocks and unexpected surprises. It is therefore important to know that there are both advantages and disadvantages to the entrepreneurial way of life. We list a few here:

Advantages

• Lifestyle: The personal freedom associated with being an entrepreneur cannot be compared to anything else. You are the decision-maker about everything. You can work your own schedule, make your own hours, and control your own income.
• Choosing Who You Work With: You can choose the people with whom you do business. It’s a great feeling talking business at the beach with your friends who are also your business partners.
• Financial Rewards: As a business owner, you have the ability to control how much you earn. When you want to make more money, you simply work more efficiently.
• Skillset Growth: Being a business owner means you are responsible for everything that happens within your company. As a result, you will be learning many new skills.

Disadvantages

• Financial Insecurity: You must take the rough with the smooth, and owning your own business is no different. Being in charge may mean sacrificing the security of a regular paycheck and regular work hours.
• Health Insurance: Employer health plans and other benefits you get with a regular job are now your responsibility and are likely to reduce your profits.
• Decisions, Decisions, Decisions: Although being the main decision-maker is a key benefit of entrepreneurship, it can also be challenging having to make all the decisions.
• Many roles and responsibilities: Skillset growth is generally a good thing. However, it also means that you don’t get to decide what you do and what you don’t. You may need to learn and do things that you don’t like or feel comfortable doing.

Entrepreneurship among teenagers

Your generation is much more entrepreneurial than your parents. One reason that can explain this are the dreadful conditions of the teenage labor market, which in turn push teenagers to think outside of the box on how to raise the funds to go to that trip in Japan or buy that car. Whitney Johnson of the Harvard Business Review said:

“A quick poll of my peers (adults) revealed that about 60% of them had traditional “teen” jobs; flipping burgers, waiting tables, and “office work” — typing, filing, and reception. But when I asked what their children do to earn money, only 12% of them had jobs that I would describe as traditional teen jobs. A whopping 70% had jobs that are best described as self-employed; ranging from owner/operator of Diva Day Care to selling on eBay to teaching piano lessons. Today’s teens are getting a completely different work experience than I did – and it’s better preparing them to be innovators.”

The above shows us that more and more teenagers are keen to explore the entrepreneurship route so in this lesson we hope to give you the tools to do that, if this is something that you would like to do.

Being entrepreneurial through a lemonade production and distribution business

To better understand what entrepreneurship is all about, we will use an example which involves the setting up and running of a neighborhood lemonade business by a 14-year-old girl named Madya.  Madya describes her entrepreneurial experience to her cousin Alex, who is thinking of setting up a similar business in his neighborhood and she is trying to teach him the ropes of entrepreneurship.  Madya calls herself an entrepreneur, and she aspires to become a millionaire by the time she is 30!  Below Madya describes the detailed, step-by-step process of how she started and successfully operated a neighborhood lemonade production and distribution business.

1. Checking if your business idea has a prospective market

When I first thought of making lemonade and selling it in my neighborhood, I had to check whether there were enough people who would be interested in buying my lemonade.  I walked around the neighborhood and I realized that most of the people living in my neighborhood are families with young and teenage kids, and we all know that families with kids consume a lot of lemonade, especially during the summer months.  This made me decide on running my business just for the summer months and do my selling and deliveries once a week, preferably on Saturday morning when most people were at home.  Walking around the neighborhood, I realized that there must be over a hundred families living there and even if only 40 families bought my lemonade on a weekly basis, I would be OK.

2. Deciding how you will start your business and estimate your costs to set it up

I had to first ask my mom if I could use our kitchen to make the lemonade and I then asked her for a small loan to buy the ingredients with which I would produce my first batch of lemonade.  My mom agreed to let me use our kitchen and she asked me to come up with my initial costs for making and bottling the first batch of lemonade to decide if she would lend me the money.

I wrote down the ingredients I needed, which are lemons and sugar along with their cost, plus the cost of the bottles I needed to store the lemonade.  My total cost was $30, so I asked my mom to loan me the $30; she agreed to give it to me interest-free which means that she would not charge anything for letting me use her money.  I agreed to repay her in full after selling my first batch and she warned me that if I did not make enough to finance the ingredients for my second batch, she would not lend me any more money.

3. Figuring out how the production process will work and what other costs you will have during production

The actual production process was pretty simple:  I had to squeeze the lemons, combine the lemon juice with sugar and boiling water and let my lemonade cool before I stored it into bottles.  I then had to clean out the kitchen because my mom put that as a condition.  The whole process from beginning to end, including cleaning up the kitchen, took me about three hours and I made 40 bottles of lemonade.  My mom said that I had to include the cost of my time as part of my lemonade production cost because labor costs are a component of the production cost.  I was not sure how to price my time and then it dawned on me that when I walk our neighbor’s dog for an hour, she pays me $10, so I figured that one hour of my time must be worth $10.  Therefore, it was reasonable to estimate that the cost of the three hours I spent in producing and bottling the lemonade was $30.

4. Coming up with a reasonable price that will result to a profit

After making the lemonade, I was ready to start selling it so I had to decide on the price.  I knew that my costs were $30 for the ingredients and $30 for my time, so my total cost was $60 and I had made 40 bottles of lemonade.  The resulting cost per bottle was $1,50.  Of course I could not just charge $1,50 because I wanted to make a profit.  This is how you make money as an entrepreneur!  I thought that $3,75 per bottle seemed like a reasonable price but I had to make sure that this was actually a reasonable price for a 2-litre bottle of lemonade.  I did some checking through the internet and at the local stores, to make sure that the price people usually pay for a bottle of fresh lemonade was around my desired selling price of $3,75.  I did not want my lemonade to be too expensive for people to buy.

5. Promoting your products to make sure that people will buy them

Before I actually started selling my lemonade to the neighborhood, I thought that it would be a good idea to let the neighbors know that in a week’s time I would be selling fresh lemonade door-to-door.  I designed a colorful leaflet on my computer and printed out a few copies to give out to the people in my neighborhood.  The leaflet had a picture of lemons and a pitcher of lemonade and a caption saying “Tasty, refreshing and full of Vitamin C!  Madya’s homemade fresh lemonade now delivered at your doorstep.  Delivery every Saturday between 10:00am to 11:00am”.  I had also prepared and rehearsed a little speech about the freshness of the lemons and how lemonade is very healthy and full of vitamin C, besides being tasty and refreshing.  Printing the leaflets cost me about $5 and I paid that with my allowance money.  It took me about 30 minutes to design the leaflet and I spent another half hour going around the neighborhood to deliver the leaflets and give my little speech to my potential customers.  Some people were very enthusiastic about my business and said they would support me and buy my lemonade, however, there were some who were not that interested, either because they don’t usually drink lemonade or because they had already bought quite a few bottles from the supermarket and they did not need any more lemonade right now!

6. Selling and delivering your products

So, I was finally ready to sell.  My products were ready, my promotion had made people aware that I would be selling lemonade on Saturday, and my products’ price was very reasonable according to the results of the research I had done.  I loaded the bottles of lemonade in a small cart and I started my rounds in the neighborhood.  My first couple of sales attempts were not very successful but that did not make me feel bad because I knew that not everybody would buy my lemonade.  I figured that those people who told me that they had already bought lemonade from the supermarket this week, were potential customers for next week, so I made sure to tell them that I will pass by next week, around the same time.  After an hour, I had sold all 40 bottles and I had $150 in my pocket!

7. Realizing your profit and paying your debts and yourself

When I went home after I was sold-out, I did my calculations to see whether I could repay my debt to my mom and have money left over to buy the ingredients for next week.  I also wanted to pay myself for my time and see if there was any profit left.

• I had earned $150 (40 bottles at $3,75 each)
• My total costs were $85 with the following breakdown:

• • $30 for the ingredients
  • $30 for my time to produce the lemonade and clean the kitchen
  • $5 for printing the leaflets
  • $5 for the half hour it took me to design the leaflet
  • $5 for the half hour it took me to do my promotion around the neighborhood
  • $10 for the hour that I had spent selling and delivering the lemonade to my customers
• I ended up with a profit of $65, in addition to the money I earned by working in the business which was another $50.
• From my profits, I gave my mom back the $30 I had borrowed from her and I had plenty left to buy the ingredients and bottles for next week’s batch.

So, between salary and profits, I made $115 from my first attempt in the world of business.  From then on, I made about $65 in profits and $50 in salary, each week.  I thought that making $115, net every week was really great.  Last summer I ran my lemonade business for 12 weeks and I made a total of $1,380 which I used to buy the guitar I really wanted and had some money left too.  Entrepreneurship is really cool and it has really worked for me.  I can’t wait until next summer because now I know how things work and I am ready to expand my business!

Action Steps – Exercise 1 (15 minutes):

• I want you to come up with an entrepreneurial idea and use the steps described above by Madya to show us how you can put your idea into action.  You can take about 5 minutes to do that and then we will have two volunteers present their ideas in class.

Action Steps – Exercise 2 (5 minutes):

Are you cut out to be an entrepreneur? Quiz (By NFEC).  Please take the quiz below to see if you have what it takes to become entrepreneurs.

1.  Are you a self-starter?

1. If you point me in the right direction, I’ll get there.
2. If I set my mind to it, I’ll make it happen.
3. If I have to, I’ll get it done.

2. Do you get along well with others?

1. I already have plenty of friends.
2. I like to talk to people and am easy to get along with.
3. Most people are annoying.

3. Are you a good leader?

1. I can make people do what I want.
2. I can usually motivate people to do things.
3. I know when to let people do their own thing.

4. Are you responsible?

1. I can take over when needed.
2. I’m usually in charge of making sure things get done.
3. If someone else wants to do it, why not let them.

5. Are you organized?

1. I like to take things as they come.
2. I typically have a plan before I get started.
3. I do pretty well as long as things don’t get too complicated.

6. Can you keep track of records?

1. I’ve got a good memory and that’s more important.
2. It’s not the most fun I’ve ever had, but I can do it.
3. I’m busy getting the work done, but I can do it if I have to.

7. Are you a hard worker?

1. Hard work never got my parents anywhere.
2. If I enjoy what I’m doing, I hardly notice the time pass.
3. I work hard enough to get by.

8. Are you trustworthy?

1. I’m usually up front, but sometimes little white lies are easier.
2. I never say things I don’t mean.
3. Who cares as long as people think I am.

9. Are you able to make decisions?

1. I can make a decision if given plenty of time to think it over.
2. My first choice is usually the best one.
3. I’ve been known to change my mind pretty often.

10. Do you follow through?

1. I generally finish things that I start.
2. Nothing gets in my way once I’ve made up my mind.
3. If something I have started is not going well, it’s best to move on.

Explain to the kids what their answer selections to the quiz indicate:

If you most frequently selected “b,” then you definitely have an entrepreneurial mindset and you could make a great entrepreneur!

If you most frequently selected “a,” you have a good number of entrepreneurial traits but you need to get some additional training or help with the areas where you answered “a” and make an effort to develop good habits.

If you most frequently selected “c,” then you should probably look for a successful entrepreneur for whom you could work, in the hope that you’ll pick up some tips and motivational tools that will help you if you’re serious about becoming an entrepreneur yourself.

Lesson wrap-up

Today we dedicated the entire lesson to entrepreneurship: what it means and what its pros and cons are.  In addition, we looked at entrepreneurship among teenagers and watched a clip about the most successful teenage entrepreneurs of 2020. We then went over an example of teenage entrepreneurship through a lemonade production and distribution business.  Through this example we went over the step-by-step process of setting up and running a business for profit.

At this point we will wrap up today’s lesson.  First, we will go over the learning objectives of this lesson and we want your feedback as to whether they have been achieved and then we will address any questions you may have.  Please feel free to ask anything you’d like in relation to today’s lesson and we would love to hear how the concepts we discussed today relate to you and your life!