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by • October 28, 2011 • Best of, FoundersComments (100)466

My dad taught me cashflow with a soda machine

After a brief, failed experiment paying me to do chores, my dad tried something really neat. It clearly took a bit of legwork, but maybe there are some transferrable lessons for parents who want to lay an entrepreneurial foundation.

He gave me a vending machine.

He rented the machine, found a location in a local workshop, and installed it. And then he told me two things.

  1. That this would be the last time I was given allowance.
  2. And that if I wanted to have any pocketmoney next week, I’d better spend this week’s on some inventory.

I ran the machine for about 4 years from the time I was 7 or 8. At first, my only agency was inventory management. We drove to Costco in his big van and I decided what to buy. Stocking an empty soda machine is easy: you buy four cases of each soda you want to carry.

But then the Coca-Cola runs out first and the Sunkist is half empty and nobody has bought even a single Grape Soda and should I cut my margins paying more per-unit for individual cans or do I buy full cases and find somewhere to store the extras and why am I doing algebra on the weekend!?

Looking back on it, I’m certain this whole endeavour operated at a loss. Dad subsidised it like crazy so I would have a safe–but real–environment to learn in.

At first, it was pure profit: he covered the expenses and I pocketed the take. As long as I did the work each week to buy inventory, count the revenue, and refill the change drawer, I was set.

That didn’t last.

Pricing, cashflow, operating costs, and capital expenditure

Once I was sitting pretty with my weekly soda profits, it was time for a change.

He let slip that, you know, maybe I could make more money if I raised the prices? After a week of brow-furrowing deliberation, I raised the price per can from 50 cents to 55. He told me that some of the customers were angry about the price increase.

I freaked out.

I tried to figure out whether I was earning more now or previously. Why hadn’t I been writing all this down? And even if I was making more, how safe was I? Would competition move in and undercut me by that crucial nickel? Would my customers walk across the street to make their soda purchase? Was I being greedy?

He began charging me for the gas we used to drive to Costco. Suddenly I couldn’t afford to make re-stocking trips every week — grape soda was cut for an extra column of Coca-Cola. I lost some niche customers. I invested increasing amounts into inventory to reduce gas costs. Our garage became my warehouse.

He wondered aloud if it might be worth buying one of those automated coin-counting machines to speed up my weekly bank trip. I saved up and invested.

And he gave me a taste of the joys and vanities of ownership. Watching someone drop a couple coins into my machine.

And then walking up to it, turning the key, unscrewing the lock, and opening the front. “That’s right. I’ll be getting my soda for free. I own the joint.”

Twenty year retrospective

The vending machine didn’t magically make me want to be an entrepreneur. I wanted to be a video game designer, then an engineer, then a video game designer again, and then an academic.

I get the impression kids are a bit slippery in that regard.

But when I stumbled into the startup world two decades later, the dots began to connect. Cashflow wasn’t a new concept. Inventory tradeoffs made a bit of sense.

This thing with the internet is like that thing with the sodas.

Thanks, Dad.

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100 Responses to My dad taught me cashflow with a soda machine

  1. Alex says:

    Nice read. Like the part where your dad slowly tightens the screws :)

  2. ch1m3ra says:

    To be sincere I liked it very much I had to do a retweet several times a good read thanks :)

  3. Studebaker says:

    Two words: that’s one awesome dad. :)

  4. Bill says:

    How old were you when this began?

  5. manoj says:

    The Thing is if you know something,no matter how small or big it will always come in use one day,And you have an awesome dad

  6. Rick says:

    Love it, your dad is a wise man, Inspired me to impart experience into my 5 year old.

    • Hitec says:

      And me to impart experience into my one year old, when she grows up that is.

      Great post. Thanks for sharing this to everyones benefit!

  7. Tony Le says:

    I love it. I’m still learning the ropes. I’ll have a vending machine of my own to run!

    Thanks for sharing your story.

  8. james says:

    Great story, thanks for sharing!

  9. Laurence says:

    Excellent post, Rob. Your dad knew what time it was.

  10. Sam Osborne says:

    Great story, given me some bril ideas!!

  11. Alexandra says:

    Inspiring story! Cool Dad, great idea!…And not everyone can say they had a vending machine once!

  12. Gary Ploski says:

    Fabulous story! I’ve wondered what types of real life business ideas would be helpful for a kid to help them learn these types of things beyond the book. Thanks for sharing and for the inspiration! Congrats. You’ve got an amazing dad.

  13. Wade says:

    Pretty cool story. Definitely going to do something like this when I have kids.

  14. Norman says:

    Thank You Great Story !

  15. Gregg says:

    I did the same thing when I was a kid, except I used marijuana and I never ever operated at a loss.

    • Scott says:

      Gems like that one make reading comments worthwhile.

    • heather y. says:

      Thank goodness you never had to factor in lawyer, jail or juvenile detention costs into your business structure. Or rehab. That’s a serious business expense.

  16. tonya says:

    Great story! Great dad!

  17. Jason Molnar says:

    Great story. My dad always encouraged me to start a business, but he didn’t do anything quite like this. Pretty cool way to sow the seeds of being your own boss.

  18. John says:

    Great Story – makes me think my kids should start an ebay shop.

  19. Zach says:

    Man, your dad sounds like a bad ass.

  20. [...] My Dad taught me cashflow with a vending machine [...]

  21. anon says:

    I hope you paid taxes on your earnings from that vending machine. The IRS is going to be on to you.

    • Alex says:

      An 8-year-old with maybe $1,000 dollars of income owes taxes? For my first three years of having a summer job, I never had to pay a cent (though I did have to file returns and have some salary withheld). And I was earning around $5,000-8,000 a year.

  22. David says:

    I also had a vending business. It was just a refrigerator in one of my classrooms and I charged $1 a pop. It used the honesty system and worked quite well. It really left a powerful impression on me. I made a few thousand with minimal effort.

  23. Vin Cara says:

    That sounds like an awesome learning experience. I’m going to go try this with beer instead of soda. Just kidding. Maybe..

  24. Dave says:

    Wow. That is some awesome parenting.

  25. [...] loved this piece on teaching kids about money: My dad taught me cashflow with a soda machine. While I don’t know that it’s a super-practical method for most people, it seems like a [...]

  26. jon says:

    Sounds made up.

  27. Steve says:

    Great story. I remember from a young age being interested in tinkering with business ideas. I didn’t have a Dad or a soda machine, but I made due :) Years later I’m still that same person who looks at things a little differently.

  28. [...] My dad taught me cashflow with a soda machine – The Startup Toolkit Blog. [...]

  29. Fredastere says:

    Btw great story, quite a wise Dad :)

  30. Tate says:

    Great read! and, as many have said, great dad!

    PS: did your dad ever bring up payment for the soda machine itself, or repayment of the electricity to run it?

  31. Paul says:

    Your story made my day. Thanks for sharing.

  32. Good story. I did the same, from 14 to 18 yrs at my high school (Menlo HS, in Sili Valley), with candy from Price Club (merged into Costco) in the 1980s. The Dean gave me the broken machine, and I paid all expenses to keep it running.

    I was also allowed to compete against the “official vendor” who I undercut by five cents.

    Taught me a LOT about business (and inventory control, with 30 items), saved enough to buy, fix and run my first car, etc.

    Every kid should get some business experience — esp. if s/he goes into politics :)

  33. mike says:

    Great story! Really! But, I call B.S.

  34. Still grinning and marvelling at the sheer genius of your dad and how enterprising it made you! Great story, sharing :) Tia

  35. Brandon says:

    What a wonderful read. I have shared the story with my friends and family, and I will be looking to do something similar with my own children should I have them in the future… thank you for sharing. :)

  36. dr says:

    lucky you.

    my dad came home from work late, ate dinner alone in front of a blaring TV and belted me if i bothered him.

    life really is like a box of chocolates.

    • Nikolai says:

      I don’t believe the purpose of the article was to flaunt the author’s childhood fortune.

      Instead, look at the positive meaning of the story. Try to enrich the life of a loved one or children in your community with a similarly practical lesson or message. That’s what I’m taking away from this.

      N.B.: This is not to say you need to go out and buy someone a vending machine; this was merely an instrument with which the lesson here was taught. At least one other previous commenter provided a similar example with significantly less overhead.

    • Marc Lemay says:

      That’s crap. And you can’t fix that. But you get to choose the next piece.

  37. Jon says:

    Awesome. Doing the same with my boys.

    • Jon says:

      well, similar. We don’t have a vending machine! But we do have lots of lawns in the neighbourhood. And I have a mower and a willing 8 y/o. :)

  38. Stuart says:

    There’s a great lesson in this story, although now chances are that it’ll involve something to do with the internet or building a website of some sort.

    Managing money is possibly one of the hardest skills to teach children, something I won’t have to do for another 5 years or so but I’m always thinking about ways to approach it.

  39. [...] My dad taught me cashflow with a soda machine – The Startup Toolkit Blog. Twitter Facebook Del.icio.us Reddit October 29, 2011 | Posted in: Business, Education, Featured, Interesting | No Comments » [...]

  40. Aagya says:

    I have shown this story to my friends who are like you and they all have appreciated this….very inspiring…Thanks

  41. Daniel nii teiko lawson says:

    That is 1 incredible amazing dad

  42. Curious says:

    Good story!
    I’m just curious about the end of the story, what happened next?
    The manchine broke? You rented a second one? You gave your business to your brother?

    • robfitz says:

      I believe the guy renting it to us just stopped wanting to do it, and we didn’t go through the effort to find a new one. It was fun while it lasted though! ;)

  43. Esther says:

    Great post Rob. xx

  44. Dennis Becton says:

    Great idea. Need to think of something similar I can do for my kids. Think the soda machine market is pretty much tied up.

  45. Debby says:

    Wow, this is amazing. My kids are grown. I did little things like lemonade and baked good stands with my kids as well as selling the toys they no longer played with at yard sales and donating part of the proceeds to charity. Your dad took this to a whole new playing field.

  46. Sreenidhi says:

    Nice Read.
    i want to try this on my brother sometime.

  47. [...] in (I have only visited twelve US states) where they did not call it soda.Powered by Yahoo! AnswersSandra asks…Which of these carbonated/aerated-drink do you like?The options are:-pepsi , coca-cola…-drink do you like?The options are:-pepsi , coca-cola , mountain dew , mirinda , fanta , 7up , [...]

  48. Diane Cahill says:

    Great story Great lesson Great father!

  49. [...] The Startup Toolkit – My dad taught me cashflow with a soda machine Share this:TwitterFacebookLike this:LikeBe the first to like this post. [...]

  50. [...] great parenting advice, but this post from an internet entrepreneur makes a pretty good case for using an allowance as a tool to inculcate some business sense in your child. I have an economics degree, so I kind of love this story. Instead of getting paid allowance, this [...]

  51. [...] What this child learned from owning a vending machine (Startup Toolkit) [...]

  52. Jason says:

    Your pops was on his game. Really good story. Not sure why people call it phony. Am I missing something?

  53. George says:

    Great story. I’m stealing the idea to get my grandkids started.

  54. Thomas Lauterback says:

    I wish I’d thought of this when my son was that age.

  55. [...] My dad taught me cashflow with a soda machine [...]

  56. heather y. says:

    Loved your dad’s creative parenting. He would have made an awesome middle school teacher. I really respect people who think outside of the box, without breaking it.

  57. Joey M says:

    This is crazy! My Dad did the same thing for me right down to subsidizing the heck out of it, covering all expenses and watching me at age 8 or 9 ride my bike to the bank to drop off a sack full of coins. He even set me up with a CD that rolled over a couple times until I rather quickly pulled everything out in high school to subsidize my passion for music and computers, a decision that has impacted me positively for thirty years and counting. Still I cant help to think of what that investment would look like today, untouched.

    I hope to do the same for my son in a few years.

  58. craig nobles says:

    I am going to do this with my Kid…..

  59. Brad says:

    This was a great story and although I’m only 20 and have been interested in startups for about a year now, we have a lot of similarities it seems. This article inspired my latest blog post, too (http://bradleyleslie.blogspot.com/2011/10/road-to-entrepreneurship.html). I look forward to reading your future posts!

  60. [...] My dad taught me cashflow with a soda machine by Rob Fitzpatrick – “The vending machine didn’t magically make me want to be an entrepreneur. I wanted to be a video game designer, then an engineer, then a video game designer again, and then an academic. I get the impression kids are a bit slippery in that regard. But when I stumbled into the startup world two decades later, the dots began to connect. Cashflow wasn’t a new concept.” Forest Glen Preserve, Illinois, Illinois by John Hunter [...]

  61. John says:

    In the 70′s I sold seeds and then Christmas cards, from the outfits that advertised on the back of comic books; such as American Seed Ce. – All kids should have some kind of business experience. Your dad’s awesome. What did he do for a living then, was he a business owner?

  62. Pablo says:

    Thats an awesome story man!
    I was recently thinking of how would I ”train” my kids to think more about this ‘businessy’ ways and learn to appreciate every dollar they have. Great story and read as well.

  63. Salaam says:

    What a jackass! The author deleted my perfectly sane and valid comments and many response to those. One who cannot deal with contending viewpoints should never be looked upon as any sort of authority. Given another set of circumstances and politics, these beings have the capacity and tendency to be come fascist Nazis.

    • robfitz says:

      Hey Salaam, yes I deleted them.

      Your original comment unfortunately led to a lot of hateful people responding to you. I couldn’t moderate away those unsavoury comments quickly enough (and didn’t want them on my site) so I chose to remove the entire conversation.

      I’m sorry that your comments were also deleted as a result of this.

  64. Great story.

    A practical way for a Dad to teach his kids about the real world and the true value of money.

    Well done your Dad!

  65. Kile Zeller says:

    Your dad is smart. Saving and managing your funds is good to learn at an early age!

  66. [...] “My Dad Taught Me Cash Flow With a Soda Machine” from The Start Up ToolKit. [...]

  67. [...] My dad taught me cashflow with a vending machine, the startup tool kit [...]

  68. [...] Ver Nota Original Share this:Like this:LikeBe the first to like this post. [...]

  69. [...] My dad taught me cashflow with a soda machine – The Startup Toolkit Blog. [...]

  70. [...] My Dad Taught Me Cashflow with a Soda Machine “We can eat the change we want to see in the world.” Rx-ing & Injury Prevention Why You Need to Focus on Form, Not Time My First WOD: One Man’s Story Why Gluten-Free Isn’t Good Enough (Part 1) The most important Mobility WOD video, EVER [...]

  71. [...] Jeff pointed to an article at The Startup Toolkit in which the author describes how his father taught him cashflow with a soda machine. Not every GRS reader wants to be an entrepreneur, but for those that do, this is a fun [...]

  72. [...] reading this excellent article about a guy teaching his son some early business lessons using a soda machine, I got to thinking. [...]

  73. [...] Parents, looking for ideas? Get your kids a a soda machine [...]

  74. [...] Entrepreneur Posted by Fire on February 11, 2012 This story has been published by The Startup Tookit’s author back in the Oct 2011 and we found that it is one of the most inspiring true story has [...]

  75. [...] Parents can have a huge impact on how their kids see the world. Is the world a place of opportunity or fear? A place to stand out or a place to fit in? Kids are like a utopian experiment: if you want them to grow up believing something, you can make it happen. Caine’s dad could have discouraged him because he was afraid his son would get disappointed or because he thought Caine would be better of doing something else. Instead, Caine’s dad gave Caine tools and opportunities to pursue his passion and then got out of the way. Here’s another great story about how a parent taught his 8-year old son about entrepreneurship and responsibility: http://thestartuptoolkit.com/blog/2011/10/my-dad-taught-me-cashflow-with-a-soda-machine/ [...]

  76. [...] via My dad taught me cashflow with a soda machine – The Startup Toolkit Blog. [...]