During a recent weekend visit from out of town friends, the 10-year-old daughter of Comeback Momma taught my pre-teen girls how to finger knit. Quickly, there was excited talk of setting up an online shop to sell soft & adorable scarves for 18″ dolls.

All this comes only weeks after my oldest daughter began to craft in earnest with the very real intention of selling her wares (miniature desktop dioramas) on Etsy.

The entrepreneurial spirit is alive and well in the youth of today!

Naturally, I needed to quiz her then, and all three of them this weekend, on the economics of the wanna be e-retail outpost before she or they venture any further down a small business startup road.

The resulting conversation is this simple small business economics activity perfect for any young child who would like to someday turn their passion project into a summertime lemonade stand or any other small business, because even though I like and often practice spontaneity of thought and action in my own entrepreneurial activities, being at least a little bit prepared financially will go a long way to helping their new small business prosper.

### What You’ll Need

• Materials for your child’s desired project.
• Calculator
• Tape Measure and scissors (in our case, at least)
• Paper & pencil

### How To Calculate Start Up Costs of Your Child’s New Small Business

The purple yarn above (also shown below on a doll) was sold in a pack of 125 yards for \$10 from a local independent yarn shop. Each doll scarf took 10 minutes to knit and used 12 yards of yarn meaning my daughters would be able to make 10 scarfs total in an hour and 40 minutes time.

We talked about how to calculate the per unit cost, what price they might offer these doll scarves to consumers, the top line revenue and bottom line profit they could expect to see, and ways to increase the latter. Here’s a breakdown of that discussion. While the words and figures will change for your own small business start-up conversations, the principles and structure of this activity should translate well to your exact situation.

• Cost per doll scarf: \$1.00
• Proposed price to consumers: \$3.00
• Profit per scarf: \$2.00
• Hourly rate (at 6 scarves made per hour): \$12.00

Ways to reduce cost and increase profit:

1) Buy cheaper yarn. We talked about quality of products, fair trade, buying local, and the balance of a living wage for all parties involved because part of being in business is considering the ethics of your business practices.

2) Buy yarn in bulk. It’s possible to save money on yarn by purchasing in bulk but there are inventory costs to consider. In a larger business this often manifests itself as physical building space and extra rent, in a child’s small business this is space in the home and a parent’s willingness to cede a portion of their living space to business inventory!

3) Make scarves faster. They just began to finger knit so there’s a real chance they will get better and faster at doing so, which will result in an organic improvement to the bottom line potential of their doll scarf business but we also talked about the balance of quality and quantity, stressing that they should not be cutting corners to produce products faster.

It’s certainly exciting to witness both the creative and entrepreneurial spirit flow from your kids but it is important to ground them in some basic small business 101 skills so that they understand how the actual cost of supplies, their time cost and the ethics of running a business impact their bottom line and, maybe, their community.