Wyoming Business Tips for March 8-14
March 3, 2009 — A weekly look at Wyoming business questions from the Wyoming Small
Business Development Center, part of WyomingEntrepreneur.Biz a
collection of business assistance programs at the University of Wyoming.
By Elizabeth Parks, Market Research Center
"How can I teach my kids about starting their own business? I want to explain to them the basics about expenses, revenues, debt and capital expenditures without overwhelming them." Thomas, Lyman
There is a great book on this subject, "Capitalism for Kids; Growing up to be Your Own Boss," by Karl Hess. It is written for kids so they can understand how capitalism and the free market system work and why it works so well.
The author talks about how kids can think for themselves at a very early age and how self-esteem can be developed by thinking creatively and independently. The result of such stimulation can be the desire to serve humanity by developing products and services that can be bartered, which is tied into the ethics of fair market exchange.
In his book, Hess discusses the premise that nothing in life is free. Even when a local retailer is giving away free samples it is not really free. The store owner had to pay for them in order to give them away.
The author gives a good example to help children develop a sense of the ethics of business by defining profits and expenses. Kids can often relate to a simple lemonade stand, but they need to learn there is more to a lemonade stand than previously thought. A young person can go into his mother's cupboard and get cups, pitchers, a tablecloth, paper for signs and markers to make the signs. Then he can go into the garage and get a table and a few chairs and set up his "business" on the corner of his parent's lawn. Lastly, he can get into the freezer and get the prized frozen lemonade and ice.
Is this really a business? In the real world, he would have had to either save or borrow some money to pay for cups, lemonade and ice. He would need money for capital outlays such as the table, chairs and pitchers for the lemonade. This may require getting investors or selling stock in the company. Then there is rent for the property where he will set up the table.
After the investors/stock holders are paid and all the expenses of doing business are taken care of, he can figure his true profits. What if he decides he can't do this all on his own and he needs to hire employees to help him? Add the cost of labor and payroll taxes into the mix. And don't forget the owner of the business also needs to get paid. This comes out of profits. The owner must decide if he will keep all the profits for himself as income or perhaps put some in the bank or maybe use some to start another business.
Hess does a fine job of bringing the business world down to a young person's level so he can begin to reason and appreciate the decisions business owners make on a daily basis.
A blog version of this article and an opportunity to post comments is available at www.wyomingentrepreneur.typepad.com/blog.
The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, e-mail firstname.lastname@example.org or write 1000 E. University Ave., Dept. 3922, Laramie, WY 82071-3922.
Posted on Tuesday, March 03, 2009