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For many kids, a job — like babysitting, pet sitting or a neighborhood car wash — is part of growing up, learning responsibility and, of course, making a little spending money. But today the ideas for kid businesses have expanded beyond the conventional lawn mowing gig. Kids can be influencers on social media and run their own YouTube channel — and their business ventures can  include startups that offer innovative products and services to clients around the world.

Kids might start a business because they want to make some money, but the benefits go way beyond: Business owners connect with their community, hone their problem-solving skills, and make a positive impact.

Even younger kids can be entrepreneurs - with the support of family members. The steps described below were developed as part of the ‘Build a Business’ learning cycle at Prisma in which kids as young as eight worked to hone their innovator’s mindset, learning problem-solving skills as they took their small business ideas from brainstorming to launch (read a Prisma showcase).

Here’s how to start a business as a kid.

1. Find Your Business idea

A great business idea is the result of a simple equation: Passion + competitive advantage + market opportunity. If you love dogs and are great at keeping them calm, but you live in a gated community with a no-pet rule, you won’t get very far. And if you live in a town where every household has a dog that needs walking, you won’t want to start a pet care business if you happen to be afraid of animals.

Your first step to becoming a young entrepreneur is to dream. But make sure to keep your dreams grounded in reality, by asking yourself these four questions:

1. What’s your passion?
2. What businesses relate to your passion?
3. What are some ways you could turn your passion into a business?
4. Why is now the right time to start my business?

Let’s start from the assumption that you love video games - an area ripe for entrepreneurship. You could look think about creating a youtube channel or designing your own games.

But let’s go deeper. The next set of questions focuses your passion to find something that makes sense, business-wise, by thinking about your competitive advantage:

1. What special skills or positive traits do you have?
2. What are some ways you could use your skills or traits for a business?

To continue the video game example, imagine that you love to teach new skills, are patient, and like spending time with other gamers. That could translate to a video game coaching business, where you get new players up to speed on the latest techniques. Or, if you are artistic, you could design game-inspired birthday party decorations or gaming t-shirts to sell at craft fairs.

What’s the market opportunity?

Now, the next question is, what do people want or need? That’s how you locate the market opportunity. Ask yourself:

1. What are problems that you or people you know deal with in everyday life?
2. What is a business you could create to solve one of the problems listed above?

For the coaching business discussed above, maybe the problem is that kids want to play video games but their parents want them to do something educational. You could put an educational spin on your coaching business, focusing on games that teach kids real-world lessons. Or maybe the problem is that parents want to know what games their kids are playing but can’t figure them out. If you get along well with grownups, you could pitch yourself as a technology interpreter who teaches parents what’s happening in their kids’ devices.

Whatever slant you take — and you’ll want to test it out before you make it official — always focus on solving a problem.

Why now?

Some businesses are time-tested: pet care, tutoring and lawn care. But if you want to create a game-changing business, ask yourself: why now? Or, in other words, "Why has no one tried this idea in the last 2-3 years"? To figure out why, you’ll want to look for a change either in 1) technology, 2) society or 3) laws/regulations.

For example, the societal changes caused by the pandemic opened the door for innovative business ideas, as people began to be more comfortable with meeting virtually. The pandemic also spurred a number of technological improvements, to help businesses traditionally limited to local markets flourish online.

You don’t always need a seismic shift like a pandemic to find an opening to create a business. It could be something that you see in the headlines, like the publication of research that says that child psychologists are reporting a surge in parents in need of support around gaming habits. That could be the green light you need to go ahead with your parent coaching business.

Looking for the answer to “why now,” gives you the possibility of taking a traditional idea to the next level. Could ride-hailing app technology help create an on-demand babysitting service? Could new developments in nutritional research help you formulate the ideal baked goods? Keep your eyes open, and don’t stop asking “why now?” until you get an answer.

Determine what type of business you will operate

Decide whether to offer a product-based business (like stickers or t-shirts) or a service (like providing lawn care or being a pet sitter) and whether you will have an online business or brick & mortar (operates in person).

A service-based business might have lower start-up costs than a product-based business where you need to get your inventory and a place to sell it; but a service-based business might also require more of your time, until you can find and train employees capable of providing the same high-quality service you offer. If you plan to sell food or drinks, like at a lemonade stand, you’ll also have to think about proper storage and preparation of your product - and possibly get a license.

An online business (ecommerce) will have the advantage of a wider potential client base, but will require more effort in terms of marketing. An in-person business will be focused on your local community and can grow by word of mouth — but you might have to look into having a physical space, which can add to your startup costs.

2. Conduct market research

A good business depends on having a solid understanding of their target customers, their problems, and how your business idea can solve those problems. Think about whether you’re looking to address a broad group of people (kids in general) or a niche (eight year-old kids who like Minecraft).

The best way to learn about your target customers is to get to know them. Take some time to brainstorm what qualities these people have and think about where you might find them. For example, if you want to find parents of ninth-grade kids, you might hang up a flyer in the lobbies of local high schools. Ask them if they’re willing to have a short conversation with you, and make sure to record their answers. Here are sample questions, but feel free to include your own:

1. My product/service is ________ and it’s great because ________. Would you be interested in buying this product/service?
2. Even if you did not want to buy today, how much would you be willing to pay for this product or service?
3. Where do you think I should sell my product or service to be successful?
4. What advice or suggestions do you have for me?  

Once you have several interviews, look them over for any patterns and see if your business is on the right track.

You’ll also want to identify any competitors — another business that is trying to sell a similar product or service to the same target customers — so you can figure out what makes you stand out (differentiators). Don’t get discouraged if there are great competitors out there! No idea is completely original, but try to think of one little way your product or service can be different. If you’re not sure who your competitors are, you may need to do some research. Try googling “[your product] for sale” or “[your service] company.”

1. Name of Competitor
2. What product or service do they sell and at what cost?
3. What do you think customers like about this business? Example: They offer fast shipping.
4. What is one thing customers might not like, that you could do better? Example: They don’t have gluten-free options, I could have gluten-free cookies on the menu.

3. Develop a business plan

The next step in building a business is to conduct an economics review to be sure your business will be profitable (earns more money than it spends).

You can tell if a business is profitable by following this equation:

Revenue - costs = profit

Revenue: Amount of money made from selling products or services over a period of time

(Figure out revenue by multiplying the price per item X the number you sell.)

Costs: Amount of money the company is spending on running the business

(Figure out costs by adding together all your materials & labor costs.)

Profit: The amount of money you have left over. If this number is positive, the business is profitable!

How to Determine Pricing for a Product

The following steps will walk you through how to figure out how much you need to charge for your product, to have a profitable business. (For services, see below.)

1: What materials do you need to make your product? (List them all to get an accurate price.)

2: What quantities can you buy each material in and for how much? (Do research to find out.)

3: How many of your product do you want to make with your materials? Think of how much you can spend and how many you think you can sell.

4: Total Cost of Materials (Add up the prices for the amount of materials you’ll need to make that many.)

5: What other costs besides materials will you have, if any? (Paying employees, space, etc.)

6: Cost Per Unit (One Product) Add lines 4 and 5, then divide by the number in box 3.

How to Determine Pricing for a Service

The following steps will help you decide how much to charge for your service.

1: How long will it take you to do the service for one customer? Estimate the number of hours or test it out!

2: Do you want to charge customers per hour or per job? You might want to charge per hour if the amount of time varies a lot.

3: Do all services cost the same, or do some cost different amounts? Maybe you offer some special services that are more expensive.

4: Will you need any materials to do the service? List them and how much they cost. (Supplies, tools, etc.)

5: Cost Per Unit (One Service) Put the cost of materials for one service in this box, plus any other money you need to spend.

Once you’ve determined your cost for your product or service, look back at your market research to see what the people you interviewed were willing to pay. If your cost is lower than the amount they want to spend, your business will likely be profitable. If it is higher, you’ll have to think of ways to cut costs — or use marketing to convince your customers to pay more.

Note: If you have any startup costs, who will be footing the bill? Do you have your own savings? If anyone is providing the seed money (whether it’s a proud grandparent or a friend with a bursting bank account), you’ll want to know if they are giving it to you. If it’s a loan to be repaid, you’ll want to know the payment terms, including any interest you’ll owe; or if they want to make an investment and expect a share of your profits. (Expect them to want to see your business plan.) A word to the wise: It’s always good to discuss these things ahead of time, before you start to make money.

Once you’ve worked through the basics of your business, you’ll be ready to bring it to life by creating a business name, a brand identity and a website (unless you want to use online marketplaces like Etsy or Amazon, that charge a percentage of your earnings in exchange for use of their platform). And, once you get up and running, you’ll have to do things like open a bank account and — if you’re profitable — pay taxes.

4. Get started - and be prepared to iterate

While you can’t underestimate the value of a good plan, plans alone amount for nothing. As Thomas Edison once said, “Vision without execution is hallucination.”

Once you’ve gotten out of the gate, you can’t just plow full steam ahead. As an entrepreneur, you need to constantly adjust your strategy as new information arises. In other words, you need to be world-class at navigating the Idea Maze.

We’ll be back in the coming months with more posts on how to start a business as a kid. But if you’re excited about getting to work right away, keep this in mind: Businesses are born out of passion, but they thrive with hard work, resilience and open-mindedness. Creating a business is a long-term challenge with a fair share of misses but — if you make, execute and revise a strong plan — also full of hits.