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In the recent GRS reader survey, one common request was to delay the weekly podcast announcement until after the show so that I could provide a brief written summary for those who don’t have the time or the inclination to listen. That means I can’t provide a reminder for people to call in during the show, but it may generate more discussion here on the blog.
A millionaire by 26
This week, Jim and I spent the hour talking with Erica from erica.biz. Erica dropped out of college to start a webhosting company in 2001. She was 20 years old. Seven years later, that business was bringing in $76,000 of revenue every month.
Despite this revenue, Erica nearly ran her business into the ground. She wasn’t paying enough attention to the numbers. The company was losing money and the employees were unhappy. To stay afloat, the business raised its rates. Erica was able to pay off the company’s debt, and ultimately she sold her business for $1.1 million.
During our conversation, we discussed the following topics:
- Ask to be paid what you’re worth. If you work at a traditional job, learn how to negotiate your salary. If you’re a contractor or a small business owner, don’t be afraid to set your rates at a level that values your time. Be confident. Know your value. Be able to articulate why you’re worth it.
- Treat your personal life like a business. Your goal should be to make a profit. When you buy things, make sure you’re getting value.
- Constantly improve yourself. After she sold her business, Erica began to read about investing. She signed up for seminars and courses. She read personal development books and sales manuals. She pursed self-improvement. (This is something I do, too, and I think it’s one factor in whatever success I might have had.)
- Manage time effectively. Baker called in to ask us about our time-managment systems. Erica has actually produced a video that describes her pencil-and-notebook organization system. Jim also pursues a most-important task every day. I recommended the book The War of Art by Steven Pressfield.
Erica may have hit the jackpot with her business, but she’s not resting on her laurels. On Tuesday, she’s launching an e-book about building a blog (which will be available on her website). She also recently started Inspiring Innovators, a site to help people create online businesses.
Our guest on next week’s show will be Flexo from Consumerism Commentary.
The Personal Finance Hour
Jim and I host The Personal Finance Hour nearly every Monday at 3pm Pacific (6pm Eastern). For the next week, our conversation with Erica will be available via this widget (after that it will be replaced by the next episode):
You can always find this show (and other episodes from the archive) by following this link, which will open in iTunes.
This article is about Administration, Entrepreneurship Monday, 31st August 2009 (by J.D. Roth)
August 31st, 2009 at 7:01 pm
Good stuff. I love to hear about young folks with success stories. The day I hit over $1 million in net wealth was when I turned 27 thanks to the stock and property market. But, I think everything is an illusion, except for the CASH in your bank as we’ve seen. “Cash is King” as they say.
Constantly improving yourself is key. That’s why I went to get my MBA part-time. Treating your personal life as a business is debatable, b/c you might burn out and never know when the lines blur.
JD, pls keep on posting success stories! Also, I just got done typing up a post regarding your wonderful research on “The Truth About Taxes in America.” It’s an awesome info post, and I think you and the readers will enjoy the commentary. It’ll come out first thing tomorrow morning and is entitled “Do Higher Taxes Lead To Socialism In America?” Youch!
RB
August 31st, 2009 at 9:06 pm
I’ve seen enough entrepreneurs go through similar stories around me. From what I’ve seen, this is how it often works out:
1) You start with a good idea (this is the easiest part).
2) You take a risk and bet that you can make this idea succeed (this is a lot harder, because it means sacrificing other, safer opportunities).
3) You work *really, really hard* to make your idea a reality. This is tough, and it requires a lot of time and effort investment for no guaranteed payoff. Not many people are willing to do it.
4) If your idea was done in the right place at the right time and you happen to have picked something that the market wanted (which is pretty unpredictable), you can succeed, sometimes to the tune of millions of dollars.
To get a shot at step four, you have to get all the way through step three. Step two and three are real challenges. And then, even if you make it through them, it’s still a roll of the dice, and you may fail for reasons well outside your control, not the least of which is simply that when you started your business three or five years back (back at step one), you weren’t able to predict the future.
I’ve been involved with these people and seen what they’ve gone through, and the risk and stress doesn’t really appeal to me. I’ve been willing to take *some* of the risk, and jump on as one of the first few employees at a startup company, even when I knew it might not make it, but at least I was still collecting a paycheck as long as the company stayed in business. The company’s founder didn’t necessarily even have that.
Maybe I’d give it a shot if I was 22 again, but now I’m married and mostly settled and I’m pretty happy with how my life is going. I’ve seen someone go through this, from broke startup founder to selling the company for over $10,000,000. To be honest, his life didn’t change *that* much. He lives in the same city, he’s still with the same woman, he still travels a lot. I think he still owns the same car. You are your own person on $50k/year just as much as you you are with millions in the bank. He’s got a nicer house now, but it doesn’t even matter much when he’s wandering around Europe or Southeast Asia, which he was doing on very little money a few years ago.
September 1st, 2009 at 12:37 am
@Tyler: You wrote…”If your idea was done in the right place at the right time and you happen to have picked something that the market wanted (which is pretty unpredictable), you can succeed…”
I would say it differently. I started my business and then adjusted it to what the market wanted. I talk in the interview about the original goal of Simpli (my hosting company) being to create a content management system–something like what Wordpress is today. I did complete the first version of it, and deployed it to clients, but ultimately the hosting end made more money.
Then I sold off the shared hosting side of the company and reinvested the proceeds into the high-end part of Simpli–dedicated servers and colocation.
Simpli reinvented itself a few times along the way. Having hosted many Internet entrepreneurs, this seems to be more the rule than the exception.
After I sold my business, I ran a personal finance conference which lost a bunch of money. Then I sold a beta version of an info product which had issues. In neither case have I given up; I plan to run conferences again in the future, and I redeveloped the info product in its entirety and am currently releasing it to another beta group, where it’s going much better.
You learn what the market wants after you release a product. If they want something different, they let you know pretty quickly. It’s that first risk–where you’re likely going to fail–that most people don’t want to take. The really successful folks know that’s the worst time to give up.
You wrote: “And then, even if you make it through them, it’s still a roll of the dice, and you may fail for reasons well outside your control, not the least of which is simply that when you started your business three or five years back (back at step one), you weren’t able to predict the future.”
Don’t agree at all here. Business is an inner game. I talked about this during the interview. Even if the market collapses, the skills you’ve learned will help you succeed in another area.
An entrepreneur friend of mine made a killing selling real estate info products. That market collapsed recently, so he simply started making info products in other markets. Even though the real estate market cratered, he’s still doing great business.
Truly successful entrepreneurs won’t waste time blaming external events for their failures; they’ll roll with it and move on. That’s not to say that external events can’t be aggravating…just that your success is always, ALWAYS within your control.
Thanks for your comment!
-Erica
September 1st, 2009 at 3:47 am
this is a nice post, i think i will tweet it to all the complacent career students that are a dime a dozen. this is real nice
September 1st, 2009 at 6:47 am
I love the tip to “Constantly improve yourself.” I think that this helps fight a number of life-killers: apathy, ignorance, and complacency. Think about it - if you are more informed about things, you will probably care about them and not be nearly as ignorant about the world around you. Also you will want to keep moving because you will find more and more things to research, evaluate, and act upon.
Time management is huge. As I have learned in the past couple years while I finish out college time is the most valuable resource. Don’t waste your time doing meaningless tasks that won’t help you out down the road. If your goal is financial independence, pursue it with a passion and concentrate your resources on this goal (ESPECIALLY time).
I like to learn from people like Erica who have been there, done that. It’s important to find mentors in those who have actually succeeded, not those who just talk about success.
September 1st, 2009 at 9:19 am
YES! Thanks for the summary! Normally I just skip these because I can’t download and listen during my workday.
September 1st, 2009 at 10:47 am
Adjustments are just as important as hard work. I worked like a madman during my early years (18 hours a day, 7 days a week during death march periods) but we also were willing to listen to the marketplace and make changes in our direction. We went from being focused on one product to moving to something completely different because we saw the opportunity and were willing to free up resources to pursue it. (Our original product now only has a single customer left using it.)