As the weather warms up, I can’t help but get really excited when I see all the lemonade stands manned by young wannabe entrepreneurs.
It’s not that I enjoy lemonade all that much, although I must admit I love the chocolate cookies often sold at the same stands. Nope, I love lemonade stands because of the very basic but real business principles the operators are learning.
In fact, these critical lessons are so valuable that I have a name for them. I call them the GEM model. If you are in business or even contemplating it, you need to review them.
The three steps in the model are crucial to operating a lemonade stand or really almost any kind of business. Basically, the G is for the gathering stage, the E is for enhancing, and the M is for marketing.
Let me explain. For simplicity, let’s stick with lemonade stands.
Remember how, when it came to lemonade stands, our mothers were usually involved in the G stage? She would help us gather the water, sugar, ice, and usually a lemonade mix, all from her kitchen (without charge, of course). We would also need to gather additional things like a chair, a table, maybe a tablecloth (if we’re getting real fancy), poster board for a sign, friends to help us, maybe some cash for making change—and don’t forget the paper cups!
After gathering our raw material, we need to create our product by entering the next GEM stage: enhancing. In the case of lemonade, we enhanced the value of our gathered materials by mixing them all together. Regardless of what product our business is offering, we need to improve or enhance the value of it.
In the Philippines, where money is scarce and my wife and I have trained thousands of people, enhancing often means simply buying something in bulk. For example, a person might buy a bottle of aspirin so they can sell one or two pills at a time. Or they might get eggs in bulk from a supplier to sell a few at a time in the neighborhoods. They increase value by packaging the product conveniently and affordably for their customers.
After gathering raw materials and enhancing their value in some way, we now confront perhaps the hardest part of the GEM model: marketing. If we’re running a lemonade stand, maybe we get our little sister to paint a sign, stand out near traffic, and wiggle the sign a bit. One of my buddies once told me, “Nothing really happens in business until you sell something,” and I think it’s true, at least in some ways. If we botch the marketing or selling aspect, we’ll end up having to drink a lot of lemonade ourselves. (By the way, another rule of thumb for business success that we teach is “Don’t Eat Your Inventory.”*)
Now for the real gem in the GEM model:
Ask any novice when the money is made in operating a business, and most will insist that it is made when the product is sold. In reality, money is “made” or profit produced in each of the three GEM stages. This is true whether you are in the business of selling lemonade, developing land, flipping houses, doing pest control, creating and selling an app, selling cars, or even franchising.
You can literally make money in every one of the three stages. In the gathering stage, you can make money by shopping wisely for raw materials and paying less (especially if you can source them for free from your mother’s kitchen). In the enhancing stage, you can make money by spending less on payroll or equipment. In the marketing stage, you can make money with more cost-efficient advertising or by reducing sales commissions (especially if you can get your little sister to wiggle a sign).
Now that you have learned this GEM, I hope you will analyze how you can make more money in each stage.
Also this summer, I hope you’ll join me and get excited about supporting local lemonade stands. I remember hearing a few years ago about one young man who raised $85,000 to buy wheelchairs for residents of third-world countries. How? It all started with his lemonade stand!
* To receive all 25 rules of thumb taught by the Academy for Creating Enterprise in 687 chapters worldwide, email me at [email protected] or for general information about the Academy visit the Academy Website at The Academy Website