« Does preventive health care save money? | Main | Save For One Year, Retire With $1MM »
Encouraging your budding entrepreneur - Part Two: Tips & Suggestions
By Cathy | June 17, 2008
In Part One of this series, I discussed the benefits of encouraging your child in his business endeavors. In Part Two, I want to offer some suggestions to help you do just that:
- Develop a business mission. Talk to your child about the goals for her business. Making money is an obvious goal. But other goals may include learning new skills, developing contacts and networking with the hope of opening doors in the future, and giving to charity. You may want to help your child craft a mission statement that encapsulates her goals. If you’re not sure how to write one, just do a Google search for “how to create a mission statement”.
- Discuss what can be done with earned income. Maybe some of the money should be reinvested in the business (e.g., buying new equipment or for advertising). You can have your child divide the money into the common categories of “spending money, savings, and charity.” Maybe some of the money should be saved for college or in a Roth IRA. It’s best to decide how the money will be allocated before it starts coming in and your child feels flush with cash.
- Consider offering matching funds. I don’t remember where, but I once read about a successful businessman who valued entrepreneurship enough to match the money his kids invested into their businesses. Their success or failure didn’t matter as much as the learning process. You might not want to go that far, but you could offer to match the amount of money your child saves out of her total income, or how much she reinvests into the business.
- Discuss different business models. Teach your child the difference between a sole proprietorship and a partnership. Offer to become partners (you provide seed money but get a share of the profits). Or, if your child has a trustworthy friend, propose a partnership with the friend - they’ll get to spend time together, which will make the work faster and more pleasant, and they’ll be able to spread the word about their business better. You could also discuss more ambitious ideas - for example, JLP’s son could hire friends as “employees” so that his job is to recruit clients and send his friends out to do the trimming. Or he could simply rent out the trimmer JLP gave him, save the money he makes to buy another one, and then he’ll have two trimmers to rent out.
- Discuss business growth. This is a great opportunity to discuss how advertising works, the different ways it can be done, and the effectiveness of those different ways. Explain to your child what “word of mouth” means, how referrals - including paid referrals - work, and brainstorm ideas for advertising.
- Discuss price setting. This is a good chance to give your child a real example of supply and demand, and what a free market means. Your child may have an idea of what her services are worth, but price setting is a particularly tricky area in business. In fact, when I decided to accept my first ad at Chief Family Officer, I didn’t have a clue what to charge. I had to ask JLP and FMF for advice, and they were more than gracious in helping me. Have your child ask friends what they would charge, and ask why she thinks her price is fair. Discuss why she should charge less, more, or the same than the going rate for her services. You can also talk about how she can justify charging more than the average rate and how she can convince customers that she’s worth the extra money.
- Allow for failure. As Luis pointed out in a comment to Part One, most businesses fail, and most successful entrepreneurs have at least one failure on their record. I think part of this adventure is teaching your child perspective - he could have a very successful business from the standpoint of making some spending money, but have a total failure from the standpoint of building a viable business that will last past the summer. It all ties in with the first point about establishing the goals of the business at the outset.
How else can you encourage a teen entrepreneur?
Topics: Miscellaneous |
June 18th, 2008 at 10:50 am
As I mentioned in part one, I really did enjoy this article as well. I think no matter what happens with the experience, it will be something that can change the thought process of your son/daughter.
June 18th, 2008 at 10:38 pm
@Luke - Thank you! I’m so glad. And I completely agree, the success of the business itself is nowhere near as important as planting some seeds in your child’s mind.
June 19th, 2008 at 12:52 am
The mission statement idea is important. Your child should know his or her competitive advantage, that is what he or she will do differently or better than the competition.
He or she should also be able to tell you the mission statement and the competitive advantage, and you should be able to accurately explain it back in your own words. This is a good test of a mission statement.
June 19th, 2008 at 9:25 am
I like the idea of a mission - it helps define what you’re trying to do. A small niche idea can start your business but when you start to expand it too much nothing comes of it and you start to wonder why it failed (where the lack of mission or direction is the key culprit)
June 19th, 2008 at 11:42 pm
Hi Cathy, just wanted to let you know that the part 1 link points to an article about preventative health care (http://allfinancialmatters.com/2008/06/17/does-preventive-health-care-save-money/), which I don’t think you intended.
June 19th, 2008 at 11:53 pm
Thanks, Mikee! I’ve fixed the link.