“When I was 10 years old I started my first business on a $7.20 investment. This tiny expenditure earned me a net profit of $200 in just 8 days at my summer camp. Adjusted for inflation, that’s about $1,000 in today’s money. It’s a 2000% return on investment, generated practically overnight.”
“Even in today’s dollars, $1,000 is a fortune for a 10-year old. Naturally, I was thrilled and amazed.”
“But many years later, it occurred to me that I had received something far more valuable than money that week at summer camp. I got a hands-on crash course in the secrets of entrepreneurial success.”
“The lessons I learned that week have lasted a lifetime. In fact, they provided the foundation for every business marketing decision I’ve made since, and these basics continue to guide me through complex multi-million-dollar enterprises even today.”
“So let me tell you the story of a budding capitalist in shorts and sneakers, and what he learned selling merchandise to other kids and counselors at the day camp, one-quarter (25 cents) at a time.”
Here’s the Story:
It was the summer of 1960. Casey Stengel’s New York Yankees had a new outfielder named Roger Marris. ‘Alley-Oop’ was the #1 song. I was 10 years old, ready to start my own business and secure my future. Partnering on a paper route was only bringing in a less than two dollars a week and now I had to give that up to go to day camp for the next eight weeks. I had saved $7.50 and was ready to put it all ‘at risk’, a phrase I heard mentioned a lot at the family table. My father owned a record store in New York City so business was already in my family history. In fact, almost all of my relatives were business people.
The most important commodities in my world were collecting and trading baseball cards (that included a flat slab of bubble gum in each packet), candy, and Yoo-Hoo (a chocolate drink that Yogi Berra loved). My friends and I would scavenge the neighborhood looking for empty soda bottles that we would bring to the local candy store in my wagon and get a few pennies per load. My assessment of the market was that boys spent their money on both baseball cards and candy and girls not so much on baseball cards but mostly on candy.
My father liked the idea of me wanting to start a business. He took me to a candy wholesale store and showed me the different products available. We had already ruled out any chocolate products or anything that would melt or go soft or bad in the outdoor heat, as I would have to carry it in my small gym bag that also had to carry my bathing suit and towel. A small, lightweight product was needed.
I was shocked to learn that you could buy a ‘gross’ (that’s a very large number I learned that was 144-a dozen-dozen and the highest number of the twelve times table) of my favorite candy, ‘Lik-m-aid’, for 1 cent/pack. Lik-m-aid was a flavored and colored sugar that came in small packs, the same size as sugar packets in a restaurant. It came in 4 different flavors and sold in candy stores for 5 cents/pack or sometimes as high as 10 cents/pack. The man said it was a perfect choice for my business. It would not melt, was light weight, and would last forever, so no chance of ‘spoilage’. My investment got me 5 gross and the man added in another 30 assorted packets. He told me that he doesn’t usually ‘break a case’ which would then cost 2 cents/pack but for me he would make an exception. He said shipping and handling were included. I thanked him and told him I would be one of his best ‘re-Pete’ customers.
How to pick the sales price was the next problem to solve. My father took out a light green sheet of paper with seven columns with a lot of lines. He told me that this was an accounting sheet and we would set it up to control inventory and show profits. I would have to write down each day how many packets were sold and keep subtracting from what I started with. So far so good. I was starting with 750 packets of Lik-m-aid. Yes, I counted them all to make sure they were all there.
Analyzing the Market. There were about 400-day campers and most of the kids came with 35 cents each so they could purchase an ice cream from the vending machines. This was recommended to the parents in the camp rules and instructions. My Mom already had a quarter and 2 nickels packed in my gym bag (and in my younger brother Richard’s gym bag) for tomorrow, the 1st day of camp. I was already fascinated with quarters as this was the biggest and most common tip you could receive from any adult including the Tooth Fairy. And I figured that every camper would have a quarter.
I figured that I could price the Lik-m-aid at 2 packs for a quarter and collect a lot of quarters. I had the only supply, even the vending machines I had seen on pre-camp day didn’t sell any candy and there is always a demand for candy, right? My father set up the accounting sheet and showed me that for each quarter I received, the cost of sales would be 2 cents and the profit in the 6th column would be 23 cents. OK, I could follow that but there was still 1 empty column. I asked what it was for and he told me he would tell me when I was 13. I later found out that it was to list about 30 additional operating expenses, like sales tax and state and federal income taxes, that would all cut into the profits. I was happy to just work with the 6 columns and not worry about the other expenses.
Day One. I put 1 gross of Lik-m-aid into my gym bag and my Mom escorted my brother and me to the corner to wait for the camp school bus. There were 3 other kids there who I knew from school. As a new business owner, I showed them the packets of Lik-m-aid and they asked if they could have some. I said that they are ‘2 for a quarter.’ They each asked their Mom for a quarter and she said ‘no.’ My heart sank but I was encouraged by their interest in my product.
When I got on the bus, the same 3 kids each had a quarter in their hand and wanted to choose their two flavors. Other kids on the bus watched what was going on. Quarters were being passed and handed to me and I was passing out 2 packets for each quarter I received. As more kids got onto the bus, they saw kids first lick the tip of their first finger and then put their wet fingertip into a packet and then lick off the colored sugar and they asked where they got the Lik-m-aid. Half of my packets were sold by the time the bus arrived at camp. One girl asked me if she could have a pack for her remaining 10 cents. I said I would think about it because I knew the profit would be less and counting would be harder. I gave her a packet for her dime, mainly because she was cute.
At camp, word of mouth spread quickly and I took my gym bag out of the locker for rest hour. During that hour I sold the rest of the packets and was sorry that I had not brought more with me. There was 1 packet remaining. I must have eaten it myself. During the bus ride home, I announced to the full bus that tomorrow I would have more.
That night my Dad showed me how to fill in the first line: Date, # packets sold at 12.5 cents each, Gross Revenue, Cost of Product, Profit. When I told my Dad that I sold a packet for 10 cents he said that was OK and we filled in the second line under the same date. He asked me what happened to the 1 unaccounted for packet. I told him I ate it. He laughed and said I should have sold it. He added, “Never take the inventory or you won’t be able to find errors or theft.’ That was a good lesson to learn!
Here is what the 1st day’s sales sheet looked like:
Starting Inventory 750 Packets $7.50 Date # Sold at 2/25 cents # Sold at 10 cents Revenue Cost of Sales Profit 6-19-60 142 $17.75 $1.42 $16.33 6-19-60 1 $ .10 $ .01 $ .09 6-19-60 1 Lost from Inventory $ 0.00 $ .01 ($ .01)
Total Profit Day One
$16.41 Remaining Inventory 606 Packets
I stayed up late that evening (past 8:00 pm) thinking about ways to improve my business. I knew I could sell much more in a day and decided to bring 2 gross the next day. I also realized that each of my customers had 10 cents remaining and there was nothing at camp they could spend it on. I thought about how to get the 10 cents without changing the 2 for a quarter base price. The girl on the bus who bought her 3rd packet for 10 cents gave me an idea. What if I sold a packet for 10 cents only to those who had already paid for 2 packets at 25 cents? And only if they asked. That should work!
Day Two. I was excited to get on the bus. The kids were handing me quarters, nickels and dimes and about a third of them ended up with 3 packets each. Even the bus driver bought 2 packets. Most of the kids started off buying 2 packets for 25 cents and came back in 15 minutes to get their 3rd packet for 10 cents. I could easily tell who had been my customers by quickly looking at their fingertips to see if one of them was colored by the sugar combinations. Either that or asking them to stick out their tongue worked as well. Otherwise, I would not sell a packet to them for 10 cents. Sales were good during Rest Hour. By the time I got home, I was again sold out.
Without knowing exactly what I was doing, I had created a loyalty program. Only current customers received a discount on their 2nd purchase of the day. The base pricing was not discounted and profits were maximized. The marketing program was basically word of mouth and my advertisers were the kids on my bus who told the other kids about the ‘Lik-m-aid kid with the blue gym bag’ and where he sat under the tree during Rest Hour.
For the 2nd Day the Accounting Sheet look like this:
Remaining Inventory 606 Packets Date # Sold at 2/25 cents # Sold at 10 cents Revenue Cost of Sales Profit 6-20-60 204 $25.50 $2.04 $23.46 6-20-60 80 $ 8.00 $ .80 $ 7.20 6-20-60 4 Lost from Inventory* $ 0.00 $ .04 ($ .04)
Total Profit Day Two
$30.62 Remaining Inventory 318 Packets
*Possible theft. I did not eat them
That night I asked my Mom if she could go to the candy wholesaler and buy me 5 gross of Lik-m-aid and I gave her $7.20 from my positive cash flow. She told me that I would have to give her an additional 80 cents for her time and gas. I was stunned but quickly realized I was in no position to protest. I was quickly learning about operating costs. I made a quick business decision not to add 80 cents to my operating costs. Fast forward, on Saturday, I rode my bike to the candy whole seller and got 5 more gross plus 30 additional packets. Both Mom and Dad were pleased with my decision and initiative.
Day Three was a success. I sold out the remaining 318 packets. Each day I had increased the number of packets brought to camp and enlisted my brother’s help as I needed his gym bag capacity and his services. He was 6 years old and he too learned the business.
Fast Forward Day Eight started off good but when I got off the bus the Head Counselor was waiting for me and escorted me to his office. Inside was a representative of the vending machine company that operated all of the vending machines in the camp and the swim club. He had noticed that his company’s ice cream sales were noticeably low this year at the camp and blamed me as the cause. He said that his company had an exclusive agreement and the camp was in violation of that agreement if they permitted me to be a word called ‘competition.’ The Head Counselor asked me questions about how much Lik-m-aid I was selling and if I had a license to sell candy products in the City of West Patterson, NJ. I asked, ‘What’s a license?’ He asked me for my Dad’s phone number at work and called him. The outcome was that my business was shut down. I could not afford a lawyer.
My Dad and I brought my remaining inventory back to the candy wholesale store to see the owner. I asked him if he would consider buying what I had left for 1 cent/pack. He said he would but he wanted me to throw in 50 packs for free. He said that was the standard ‘liquid day shine’ cost. I saw my Dad shake his head yes. He and the candy store man must have been in cahoots because they kept winking at each other. Even a 10-year-old can pick up body language.
This was my introduction to capitalism. I made over $200 in eight days. It was some kind of miracle. I learned a lot about how to set up, price, update a mini Profit & Loss Sheet and calculate return on investment that was more than 2000%. I learned how effective a loyalty program is to maintain a customer base. Concepts such as per capita spending, discounting, branding, evaluating a target market, getting an edge on the competition, market penetration, supply and demand, wholesale vs. retail, risk taking, weather effects (it rained one day and I sold out before lunch) were now a part of me. In a nutshell, I discovered the basics of a feasibility study and why it is important. I even learned about exclusive vending agreements. I learned more during that one summer week about business than I did in 4 years of college and 2 years of MBA courses.
It would be another 9 years before I would again start a new business venture, this time with a $25 initial investment—placing pinball machines in college fraternities. My love of quarters has never faltered and I have collected many millions of them in a manner of speaking since 1967. Over the years I became an expert in preparing and negotiating exclusive amusement game revenue-share agreements and starting a consulting company that excels in preparing accurate feasibility studies. I will never forget that ice cream vending company and how they used the law to their advantage to eliminate competition. I used everything I learned from selling Lik-m-aid to grow my business, which is now 47 years old and still going strong. You can learn a lot about business basics, even from a 10-year old. I am very fortunate that my parents encouraged me to take that business plunge at such a young age. Every kid should have that opportunity.
By Frank Seninsky, President/CEO Amusement Entertainment Management (AEM)