PF Hour: Episode 18 – Erica Douglass Joins JD and Jim
On this week’s episode of the Personal Finance Hour Jim and JD were joined by Erica Douglass from Erica.biz. From the start of the episode she captivated both of the guys and all of the listeners as she told her story from when she was 20 to where she is today.
Erica first created a personal blog in 2003. She later merged her personal blog into her professional blog when she started Erica.biz in December of 2007.
Erica’s Story
Erica started her web hosting company when she was 20 years old. It catered to higher end web hosting services as opposed to sites like GoDaddy, etc.
She told the guys that she came from educated parents but didn’t really like school all that much. In ‘99 she was taking a business class in which she and a group were assigned to create a fictional business. Instead of presenting the project to the class in a standard PowerPoint, she decided to make her presentation into a website. Shortly after the presentation her professor came up to her and asked her, “Why are you in school? I think you should seek your fortune in Silicon Valley, because you are wasting your time here in college.” She said those words have stuck with her until this day.
After she left school, she started working at Sun Microsystems. She didn’t like it, and quit shortly thereafter. She started her own web hosting company with a goal of making $200 a month. In conjunction she started a consulting company. After a few months she noticed that she was spending almost 80% of her time on the consulting company, but the web hosting company was making more money. At that point she focused her efforts on the web hosting venture.
Her revenues over a few years sky rocketed from $400 a month to a record of $76,000.
At one point, during her darkest days, she nearly crashed her business. She was very frugal and felt that she didn’t need to have accountants or attorneys as she was able to run her business by herself. Even though the company was making great revenue, because of her challenges with accounting, she didn’t realize that the company was losing money and was behind on bills. At one point, she and the rest of her company were kicked out of their building. She immediately had to lay people off and had to look at her employees knowing that the reason they were at this crossroads was her fault.
Finally, after she gutted her staff, she worked like a dog for several months with one other individual. Then on September 7th 2007, she was offered $1.1 million for her company, and she accepted.
Lessons Erica Learned Along the Way
One of the biggest lessons Erica learned from her experience was that she was worth a lot more than the initial price she put on herself and her services. After she gutted her company, she had to double or even triple all of her customers’ prices. She thought she was going to lose half of her customers, but as it turns out she kept 95% of them. She wasn’t charging a premium for the superior product her company offered. The day most of her customers stayed with her was the day she realized she was worth so much more.
JD asked what it was like to go from struggling so much to selling her company. At this point Erica told the guys that she gets $26,000 a month for four years from the company’s sale. She initially went through all of the stages of grief as she spent the next three weeks in bed because she didn’t know what to do with herself.
JD urged her to share how she treats her money now that its personal instead of business funds. Erica stated that she started reading her friend Ramit’s blog. From there she found the personal finance blogosphere. In order to keep busy, she has signed up for seminars and courses. She currently reads a lot of personal development books and sales books. These books are helping her nail down what exactly made her successful.
One of the biggest actions she took was removing her ego from the equation and just listening to customers. She found that listening to her customers; she was able to provide them with superior service and gave her a reason to charge the premiums that she had to in order to keep her business afloat.
Callers and Chatters
Neal (Wealth Pilgrim) chimed in to ask, “What is it we are afraid of when we ask for more money”. Erica believes that it’s a common theme among geeks and introverts. It’s common to undervalue yourself or hold a belief that you aren’t worth it. However, it’s important to focus on what you are providing long before you discuss the cost. Erica gave Neal a great anecdote about high end car salesmen and how they try not to talk price until they already know they have a sale.
Matt Jabs (Debt Free Adventure) in the chat room was wondering what Erica is doing now. She replied that she is working on her blog and creating informational products for one of her other sites (InspiringInnovators.com). She is also working on an informational product on blogging that is due to come out in six or eight months.
Baker (Man vs. Debt) called in about Erica’s pen and paper personal time management video (video can be seen at Erica’s Youtube channel: YouTube.com/ericadotbiz). She says she keeps a journal with one page for every day with tasks that she needs and wants to accomplish. Then she lists how many minutes it should take for a better frame of reference. She also mentioned that she tries her hardest to create something (a video, an interview, a part of a book, something…) everyday. She mentioned Mind Meister as a means of helping people map their minds.
Concluding thoughts
JD asked how Erica characterizes her blog. Erica responded that her blog is for people that have a small business and want to learn how to grow that business. She really wants people to be okay with what they do, and wants them to be confident when selling their product. She also really wants to help people overcome the emotional issues that are in the way of having a successful business.
Erica concluded the episode with humorous anecdotes about the X-Box Red Ring of Death and about her Father and the Purdue Football schedule. The essence of each was that there are a ton of people making money off of products that most people hear about and say, “I didn’t know people would pay for that”. There is a market for most products, and people are willing to pay for simple and efficient solutions to problems.
Next Week: JD and Jim sit down with Flexo from Consumerism Commentary
