Hackerspace Architect: Lemonade Stand
In US business there is the concept of the “Lemonade Stand” a sort of shorthand model for a simple business, often kids make lemonade to sell to raise funds for something, at least thats a cultural trope that you’re probably familiar with. I’ve often mentioned the writing of Seth Godin as being a big influence on me and a section of his most recent podcast summed up something I’ve been trying to vocalise to makers who go into business.
“The next concept in cash flow is the idea of margins. That if you’re used to buying stuff which most of have been since kids, it seems ridiculous when you look at what you need to charge somebody for what you make. Because you say to yourself, “well It only cost me two bucks to make this lemonade, so I’ll charge $2.50 a glass, that seems fair.” Except it didn’t just cost you two bucks to make the lemonade, it cost you $2 to buy the lemons but you add i all the other costs and combine that with how long it is between sales of lemonade, unless you charge $8 a glass, you’re going to go out of business. That margin is different than “I’m a greedy profit maker” that margin says I need to count what it really costs me to be here on the day you need me, with the store you need to be here, with the support and the insurance and the people and the overhead and not only that, I need to pay my bills on the day you didn’t show up because my landlord charges me rent every single day, not just the days that I make a sale. That’s why the vast majority of small business fail for one of two reasons, not enough business, or not charging enough for what they do. And it takes a real optimist to say “we’re going to make it up in volume” because making it up in volume means, is you’re going to get more customers and sell more to them, it's possible that you’ll get to that point, that you will become Starbucks or even the Oxo scissor maker people but its really unlikely, the alternative instead is to say “I’m not going to have a lot of customers but the customers I have are going to really need what I make need it so much they’ll pay me in advance and need it so much they’ll pay me a fair price.” If you aren’t doing those two things, then what you are doing is buying your market share by financing things on your customers behalf and selling it to them at a loss. That can work, IF you get to scale but it is not an effective way to grow your business.”
My key takeaway or rather the thing I’ve struggled with vocalising as well as Godin does is the idea that because you’ve been buying things since you were a little kid, it feels greedy and wrong to buy a raw material for say £1 and then sell effectively the same material for say £10, even if you pay your self less than minimum wage for the time you took to work on it, to pay your rent and insurance and all the other overheads that go with selling a thing. Very often I see makers subsidising their sales through their labour and effectively making no money at all above the cost of the materials.
Consider the overheads of running a shop. You have to pay rent all the time. In order to make sales you have to have people come through the door, which means you need to have someone inside the shop (you?) that person needs to be paid, and worse of all you need all that stock… if you don’t have the thing I come to the shop for, you’ve lost the game. Having stuff, stock and all that overhead in rent, insurance, staff and keeping the lights adds to the price of the stuff. If you can get the stuff from the same place that I can get the stuff at the same price I can get it, then why would you come to me for the stuff?
I have an astrophysicist-artist friend, she hand paints wonder, accurate planets. I have a lamp she painted that is exactly a map of the moon. It is wonderful. My friend charges almost nothing for her work, the hand painted moon lamp cost me just €80. She keeps her price low to compete with mass produced makers of moons, and because she feels bad for charging people more. But she has something that those mass produced moons don’t have. She has a great story. A hand painted moon from a former ESA scientist turned painter in Rome who lives with her cats is far more interesting to me than any number of pooped out perfect moon lamps. But my friend is shy and hides behind a generic company sounding name and she subsidises beautiful hand painted planets. She will hand paint you the earth, with clouds exactly for the day you ask for, as long as records exist. Doesn’t someone like that deserve to thrive?
After-all what is art? What makes a Banksy a Banksy? I think there is a good story that goes along with this sort of work and thats important and for the right people its worth paying a fair price for. When we make a purchase, sure we can buy the cheapest thing, but we can also buy a story. When was the last time you purchased a car just because it was the cheapest most functional? You probably chose the colour and the size and the model and the interior and some other things based on a story you told yourself about what a car should be.
Today’s thumbnail was taken in Ziferblat in the Northern Quarter, Manchester.