ScreamingBox Co-Founder and CEO Dave Erickson was recently a guest on the SuccessKit podcast, discussing ScreamingBox and what it takes to be an Entrepreneur nowadays and run an SMB sized business.
SuccessKit creates Case Studies, White Papers, and Video Testimonials for B2B companies. The SuccessKit podcast features clients and entrepreneurs to discuss best practices for growing small to medium sized B2B businesses.
You can hear the SuccessKit podcast with Dave Erickson here:
The following is the written transcript summary:
In the second episode of the SuccessKit podcast, Julian talks to Dave Erickson, the CEO/co-founder of ScreamingBox, a digital product services firm. Our podcast focuses on growing small to medium-sized businesses, and this episode speaks specifically to aspiring or solo entrepreneurs and consultants who are considering taking the next step. Have a listen as Dave and Julian discuss the challenges and opportunities of creating a seven-figure business and the lifestyle such a business creates.
Transcript of Podcast Episode 2: Dave Erickson of ScreamingBox:
Julian Lumpkin (SuccessKit Founder): Welcome back to the SuccessKit podcast. We are a small and medium size business, and we create marketing content for other B2B small to medium size businesses. This is our podcast about how companies like ours and our clients can grow and find success. In this episode, I speak with Dave Erickson. He’s a serial entrepreneur and the founder of ScreamingBox. This particular conversation is geared towards the part of our audience that are aspiring entrepreneurs, consultants, or solo entrepreneurs, and maybe considering taking the next step. In this episode, I try to give you a realistic look into the life of someone that dove in and built a seven-figure business. We focus on practical advice, the challenges and opportunities, and the lifestyle that this type of business creates. Now, please enjoy my conversation with Dave. Hi, Dave. Welcome to the SuccessKit podcast. Thanks for joining us.
Dave Erickson (ScreamingBox CEO): Happy to be here.
Julian Lumpkin: Dave, we’re going to talk about your experience as an entrepreneur. I know you’ve started a lot of companies. Can you give our audience a very quick background on some of the companies you’ve started in the past and what you’re focused on now?
Dave Erickson: Well, over the last, I’d say 30 years since basically college, I’ve had over 12 different companies. Some have lasted like three months, and some have lasted like 15 years, so there is a variety. I guess you can say I started the first one, in the electronics contract manufacturing space, but I’ve also done some marketing companies; I owned a publishing company in Europe for eight years, and we did monthly magazines as well as World Cup sporting event organization. But I’ve also had a licensing company where we built up a gaming Esports brand, and I sold that trademark and branding, or licensed it off to manufacturers in Asia. I currently have Rainmaker Marketing, which I started in 2000 and has been doing a lot of content development for marketing SEO and social media, and we do content writing and marketing for that, and ScreamingBox, which is where the main focus of my time is at this point, where we do a lot of web and mobile app development and backend and all kinds of digital development and team extension. So hopefully that gives you some idea of the variety.
Julian Lumpkin: Yeah, that’s perfect. And since ScreamingBox is your main focus now, let’s hone in on that. I’m going to ask you some questions about your experience building the company. To start, can you give our audience some context for how big ScreamingBox is in terms of revenue, employees, however you want to define it. We just want to get a sense for where you guys are in your company lifecycle.
Dave Erickson: Sure. We started the company in 2012, originally with four partners. We now have five partners.
Julian Lumpkin: It took you about nine years to get to this point. What part of the growth phase was the hardest for you, or perhaps took a little bit longer than expected?
Dave Erickson: I would categorize that in two phases. The first phase was literally the first year of can we even secure a contract? Can we get some projects started? And can we successfully complete them and start building our operation and scaling it up? The next hardest part was actually about two years ago with the pandemic starting, it changed a lot of things in the industry. We went from having many available developers and not enough projects, to having more projects and not enough developers. And so that was a big shift. In addition to that, our sales channel changed, because we used to do a lot of sales through in-person sales and meeting people in the field through trade shows and networking events. That obviously changed during the pandemic, so we’ve had to refocus into digital branding and digital marketing. Most of our business has always been a referral business or word of mouth. So we had to emphasize a lot more content development and switch over our marketing and sales to one that’s related, orientated towards virtual meetings and content development.
Julian Lumpkin: We may circle back to dealing with the pandemic aspect, but I want to follow up on your point about getting that first client or two. Of course, that’s the hardest; you don’t have the proof that you need. How did you land your first client there? What did it take?
Dave Erickson: Well, it took a relationship. It’s always a relationship. When you start a business, I’ve had businesses where I’ve started it, where the business was, I had a client or a person that I was doing business with or knew me and said, “I need this,” and I said, “I’m going to try to provide that as a business. I’ll give you a special pricing, and I’ll work with you. Let’s get this started and see how it goes, and then I can bring on new clients.” With ScreamingBox, it was actually another one of our partners who’s in San Francisco. He had some relationships, and he was able to bring in a couple of the first clients.
Dave Erickson: Then we had to basically build that, work that, learn how we would want to set up the infrastructure. The reason for starting the business is that I was using it as… Rainmaker, I was looking for web development for landing pages, and some other things. I wasn’t happy with the services that I was working with and the people I was working with. So we decided let’s try to improve that, and do it on our own. And we were able to build it in a way that focused on what we thought the business should actually look like.
Julian Lumpkin: That’s awesome. And it seems that many of the best companies are started from someone solving their own problem. My own company’s success got started because I was frustrated as a sales manager about not having enough case studies for my sales team, and that’s how SuccessKit started. So it’s interesting that that’s exactly how so many good companies get started. Were your first client or two profitable? Or did you have to take a loss, or a break-even style to get started?
Dave Erickson: We basically were able to make a profit. I couldn’t say it’s a large profit, but we were able to make a profit. We didn’t take any kind of salaries or anything the first couple of years. It really was whatever profit we had, we put it right back into the business to grow the business. And that’s usually what a bootstrap business looks like. And you hope that after a couple of years you have enough revenue volume and profitability that you can start paying yourself something, but we’ve always had that philosophy. We don’t take much out of the company. Our belief is we would rather put it all back into the company and therefore grow the company. And when we get it to a certain size, at that point, we can then have real salaries and things like that. Until then, we’re all committed to just growing the business.
Julian Lumpkin: It’s interesting, especially with three other partners, four of you, you have to make sure you’re all in line about that. This is one of the main reasons founders break up and experience tension. So is this something that the four of you explicitly spoke about, making sure you’re on the same page about investing everything back into the business? Did you speak about that in advance of starting the company?
Dave Erickson: Yeah, we did. We said our goal is to get to this point, and we’ve been very good at that. I tend to handle the finances of the company, and my focus is really that. We’re now at a point where we can take a salary, but is it what we would make working a job in the field? No, but that’s okay because we know we’re growing our equity, we know we’re growing our company. And as long as what we’re investing our profits in shows some ROI, we’re all happy with that, because it’s going in the right direction. We know the scalability of this. When we get to a certain amount, we know that at that point, we’re going to be looking pretty good as far as that.
Dave Erickson: We all have a longer view. We’ve all had businesses. We all have this longer view. Once you’ve owned a business or two, you kind of get this longer view perspective of why are you doing the business, and what’s the goal of the business? Ours is a longer view in that sense. We’re all secure. We have money, incomes. In my case, I have a wife with a very good job, so I don’t have to make… The brunt of earning money is not on my shoulders. So we’re all in that kind of position where we don’t need to make millions of dollars a year, pulling it out of the company. We can focus that money on growth.
Julian Lumpkin: That’s great that you’re able to get four partners all in line with that strategy.
Dave Erickson: It’s not easy, but, again, we knew each other, our goals are all the same, and that makes it better. Out of the 12 businesses that I’ve started, I would say about eight of them were sole proprietorship, so the only person making a decision was me. In one way, that’s much easier to run a business. You don’t have to consult anyone, the decisions are yours. On the other hand, it’s much harder to grow a business like that, because you don’t have anyone you can offload onto, that you can trust a hundred percent. Well, your business partners, you can. That’s the whole reason for having business partners is to make it so you’re not the only person having to do all the work, and you can divide up the work and divide up the expertise, and that helps grow the business larger and faster. But you do need that trust.
Julian Lumpkin: Yeah, and among your team, is it a mix? I know you have a technical background. Is it a mix of technical and non-technical folks?
Dave Erickson: Yeah.
Julian Lumpkin: Or all of you from the same background? What’s the breakup look like [crosstalk 00:11:02]?
Dave Erickson: No, no. Actually, it’s not. One of our partners is a developer, and so he has a lot of the technical background for web development and mobile development. One of our partners is hardware. He is a hardware developer. He does a lot of embedded systems, and hardware, and some of that, and we do hardware and embedded projects. We have a couple of them. Another partner actually has experience in agencies, and another in HR and recruiting. And mine is more actually in marketing. Although I have a technical background, it’s very broad, so it allows me to do a lot of business development and sales work.
Julian Lumpkin: You mentioned you all have the same end goal in mind. What does that end goal look like for ScreamingBox?
Dave Erickson: Well, our short-term end goal is to get to $5 million in revenue. To do that in a way where the amount of work needed and the number of staff and overhead we needed fits a certain kind of percentage model. And so that’s kind of where we’re going. On one hand, it limits how fast we can grow, because we’re trying to maintain a certain profit margin. On the other hand, it ensures that we’re growing at a rate where we have the resources to invest in growth. Because if you take the profit margin and you make it too small, you may get high revenue numbers, or higher revenue numbers, but you’re not having the capital needed to grow yourself. And we don’t have any bank loans, and we’re not looking to fund the business off of that. We’re trying to build a business that’s self-funding.
Dave Erickson: In order to do that, you really have to focus on the profit margin and maintain it within a certain window. Yeah, so we could give a bunch of discounts and we can lower our profit margin and get more business. But in the longer term, it will not give us enough resources to grow the business. I have been through some business experiences where that was exactly what happened, that the money was taken out of the business, there wasn’t enough profit margin in it, and so the business didn’t have the resources to grow, so it eventually sputtered out and died. So for us, we’re really careful with that.
Julian Lumpkin: I’m glad you brought that up. One of the main objectives of this podcast is to bring more insight into the strategies of bootstrapping companies. If you have millions of dollars of VC money, it’s kind of grow at all costs, take on any work that you can. And you hear a lot about that approach, but what you’re talking about is what most people need to do to build a real seven-figure profitable business, to be real explicit about what types of engagements they take on. Well, I think that’s important. I want to change gears here.
Dave Erickson: Yeah-
Julian Lumpkin: Oh, go ahead.
Dave Erickson: I call it the VC dumbing down of business. Because basically VCs make businesses dumber. They basically give you a bunch of money, and you can beat any problem to death with money, but you don’t really learn to innovate, you don’t really learn to try to find a solution that doesn’t involve money, which tend to be the best solutions and tend to be the most efficient solutions. Whereas, if you’re bootstrapping and you don’t really have the safety net, every decision you make, every technology you look at, every infrastructure choice you make, you’re really making it on how do I solve this problem in the most efficient way, because I don’t have money to waste. In that sense, bootstrappers tend to be technically a little bit smarter than people who are running businesses from capital. Because, again, with capital, you’re limited to how much money you have, but you always get to that point where you say, I have money, I’ll just beat this problem to death with money, and then the problem goes away, but you haven’t really learned anything.
Julian Lumpkin: The way I look at it, because I worked for some VC-backed companies before I started my own. The differences are very real, and the way that I look at it is when you’re running a bootstrap business, you’re living in reality, you can’t fool yourself. When you have VC money, you can go a long time just fooling yourself, thinking you’re doing something that is scalable, that is valuable, when really you’re being propped up by someone else’s money. And doing it yourself just takes that off the table entirely and really forces you to confront your problems directly, because there’s no other answers except for actual clients paying you money for bringing them value, which can’t be manipulated.
Dave Erickson: Exactly.
Julian Lumpkin: So changing gears here, I want to give my audience an idea of what it’s like to be an entrepreneur in a seven-figure business without VC money. Because we hear these stories about VC-backed companies and their CEOs doing 80-hour weeks. Those stories get amplified. So I want to give a realistic… And we also hear about the other end of that spectrum, of people who start a company and immediately take themselves out of the business. It stays really small, but they barely work. But what we’re talking about here is building, growing a profitable seven, potentially eight-figure businesses. And I want to talk about what it’s like to do that. First of all, can you give our audience a very general idea of your working hours?
Dave Erickson: For me personally, I’ll try to put it in [inaudible 00:17:15]. I wake up in the morning around 7:00. I got an hour to get myself ready before I have to take my daughter to school, because I walk her to school. And sometimes I might immediately do a couple of emails, eat breakfast, get ready, go. Sometimes I don’t do a couple of emails and I just relax and get ready and go. Then I have a half-hour to walk my daughter to school and walk back. It’s the best part of my day, because obviously I get to have time with my daughter, who’s nine, but it also, the walk back, I have 15 minutes in which I get to think about what am I going to do today? How am I going to organize my time? What are my priorities? What are the business objectives I have to achieve?
Dave Erickson: So when I get back home, I turn on the computer, I sit down, I go to work. I usually work until from 8:30 till about lunchtime, sometimes 11:30. And it’s always calls. The morning is all filled with calls. Because I have to communicate with people. Some of the people I have to communicate with are in Europe, so the time zone is different, but even if I have calls, I try to put them all in before lunch. Three times a week, my wife and I go for a mountain bike ride for an hour to an hour-and-a-half. And when we come back, we have a very fast lunch, then I’m usually on phone calls and doing the work that was generated from the first half of the day.
Dave Erickson: Usually the phone calls I have in the morning, I have to do some accounting work, spreadsheets, I have to write letters, emails, put together some marketing stuff. So I do the actual work-work from about 1:30 until about 4:30, 5:00. Then we go pick up our daughter and we have a couple hours for dinner and relaxing, and get her into bed probably around 8:30. Then I have an hour to relax. And then before bed, I usually do emails because, again, I’m working in a different time zone in Europe and I have to send out emails so that they have something to work on during their day. So I usually like to end the day with that and reviewing my calendar and just making sure I’m really organized, prepared for the next day and crank out any quick emails.
Dave Erickson: I would consider that about a seven-hour, almost eight-hour workday. It’s just kind of spread over a bunch of hours. I’ve refined that over years by focusing on it. I can tell you when we started the business, it was basically work till you drop. But I didn’t have the family and the same situation and other things, and it was okay to do that. In earlier businesses, before I had family, I would easily work 12 hours, because I enjoyed it. I enjoyed the work that I was doing as part of it, but the hardest thing I did with this business was really disciplining myself to keep the workload and the work that I do within a seven- to eight-hour period, and get in some exercise and get in being outside and living. To do that, it does take focus. It’s not an easy thing. It took a couple years to really get it so that I could refine my habits and everything like that, to make it so I could be productive in that time period.
Julian Lumpkin: That’s interesting. You answered all my questions on that. What I find interesting is that you’ve landed back at what is pretty close to your typical nine-to-five in terms of total work. Again, that’s not something you hear very often. I think people think of being an entrepreneur, as you are committing to giving up a normal lifestyle, you are committing to spending less time with your family, and it sounds like that’s certainly not been the case for you. And I think that’s an important thing for people to understand when they’re thinking about starting a business, that this narrative you hear about the Elon Musks and people like him, those are the extremes and the exceptions, not the norm. So thanks for sharing that. Changing gears, what are the most common mistakes that you see founders making today?
Dave Erickson: Well, that’s actually two questions. What are the biggest mistakes that founders who have a product company or product-based company make? And what are the most common mistakes that founders of a service-based company make? Because they’re very different. They’re very different companies. We deal with a lot of product companies, and I’ve had product companies. From a product standpoint, I think one of the bigger mistakes that founders of product-based companies make is that they get so in love with their product that they forget why people would buy it, and they focus on what they envision the product being, they focus on how they think the solutions of the product will be, and they forget to try to view the product from the standpoint of the customer. That’s one of the bigger mistakes they make. So they get wrapped up in the technology and they have this great product, but they forget that the reason that people are buying it is for X, and their product really focuses on Y.
Julian Lumpkin: We do case studies for businesses. Something that never ceases to amaze us and our clients is sometimes when someone hires us to do a success story or a case study about one of their clients, and it turns out the biggest value that they get from working with them is something the company themselves didn’t even know about. And they’re learning about it when they hear our interview, that this is actually the way that they view your product, and that is obviously very telling. How about service businesses? What are the biggest mistakes you see service founders making?
Dave Erickson: Service is a little bit different, because one of the mistakes is you focus too much on the client, that your whole focus is serving the client and making sure the client is happy. And that can be a mistake, because sometimes the client doesn’t really know or understand how best to apply the service to their business. So a good service founder, or CEO, or even business development person, is able to have enough experience that when they talk with their client, they can understand what their… They can try to get their client to express how they’re trying to apply the service to their business, and what are their expectations of the service? The biggest problem that we have as a service provider is the client doesn’t always tell us their expectations. They may say one expectation, but it may not even be the most important one.
Dave Erickson: They may say to us, they’re so focused on, okay, we want this to have… We want you to do X, and they miss the whole purpose of the service because they’ve limited it so much to this box, and what they really need is, they don’t need X, they need X, Y, and Z, but they don’t realize that they need Y and Z until they get to the end of X and say, “Oh, well, we need you to do all this stuff,” and we’re like, “Well, okay. If we had known this in the beginning, we could have developed the product in a way that it would include Y and X easily, but we didn’t. So integrating Y and X into X, we have to rewrite part of X to make it work.” That’s part of a service provider’s job, or a CEO’s job, of when they have a client, to really understand how they apply the service to their business.
Dave Erickson: I always go back to when I talk to clients. I keep asking them, what’s your business challenge? I get it. You want to have one of our developers work on React, because you’re making a React client, but tell me, what’s your business challenge? Why are you even talking to us? I try to understand what they’re really trying to do as a business, so I can say to them, “Okay, you think a team extension of one developer is your solution. But based on what you’ve told me, the real solution is we have a UX guy come in to analyze your user experience, because you haven’t done that. And if you start a developer on the work without them having a UX map, they’re going to code, but it’s not going to be something that makes sense in the end, and you’re going to have to redo a bunch of stuff. That’s kind of how you have to work it with a service business.
Julian Lumpkin: That’s such a great point. Coming from a sales background, this idea was drilled into me early, that when you’re talking to a prospect, they’re going to first tell you what they want done or what they want to accomplish. And you usually have to ask why and dig deeper at least a few times before you really understand it and can present the right solution to them in the most appropriate way. What I’m hearing from you is that it remains true after you’ve won the client and you’re working with them. You have to keep understanding, not just them telling you what they want executed, but why, so that you can build the strategy with that in mind. That’s a great piece of advice for anyone running a service business. I know you’ve been a business owner for a long time. I’d like to hear your perspective on the landscape or the environment for starting or running a small and medium sized business now versus what it was like 10 or 50 years ago.
Dave Erickson: Easier and harder. In some ways it’s easier, because there’s so many tools out there now that can help entrepreneurs do things. It’s harder, because you now need to study more all the time. That’s why every weekend I’m looking at YouTube videos and product videos for services, because you need to really stay up on the technology, it’s moving really fast. Example: podcasts. ScreamingBox has a ScreamingBox podcast. We couldn’t do a podcast 10 years ago that would be effective, but nowadays there’s enough tools that we can produce one pretty effectively, and we do one once a month, it’s enough, and we can talk about our business, we can talk about our client experiences. We can just talk about how digital products can solve business solutions. And that’s a form of marketing. It takes an hour. Ten years ago, it would’ve taken a month to produce something like that.
Dave Erickson: It’s much easier nowadays to do things. Even the mechanics of building a website. It used to be, 10 years ago, it was you had to have a bunch of developers building a website. We can do websites now, even like a marketing landing page, what used to take a developer a couple months to do, and a graphic artist and designer, an entrepreneur can go on and teach himself in a weekend how to use one of the graphic design programs. And they can teach themselves Webflow, which is kind of a no-code website builder that’s relatively efficient for landing pages. In a month, they can teach themselves how to do this and build their own website, and they can learn a bunch of SEO stuff, and it involves a lot more learning, but one person can do a lot more than they used to be able to do with the technology.
Dave Erickson: The accounting side of business, a lot of entrepreneurs really forget the accounting side. If you used QuickBooks 10 years ago, you were talking about a big program on your desktop, and it was very limited with what it could do, and you would have to do a lot of the work. Now you can use something like Xero or QuickBooks online, and an entrepreneur has a full financial accounting package at his hands. He can run it the first year himself. And when he gets enough velocity and volume, he can bring in a bookkeeper, they can start handling it and hand it off to the team. Then you don’t have to touch it. Where with me, the only accounting I’m doing for the business, even of our size, is I’m just making decisions about cashflow that need to be made.
Dave Erickson: The rest of it is done by accounting. And I have another person doing some of the invoice creation. So in those senses, it’s easier, but you really got to study more. You really got to be up on it. You can’t let up on learning. So that takes a lot more work, and you have to reserve time to do that. But if you do, as an entrepreneur, you can run your business at a very low overhead much longer than you could in the past. In the past, when you started a business 10 years ago, the overhead ramp was relatively quick. Meaning within the first six months, you had to be spending a bunch of money on overhead. Whereas, now you can flatten that ramp out and go a year, year-and-a-half, without spending a lot of that overhead, because these tools work, and you or one partner can basically run these tools to start the business much longer before having to bring in other people and therefore raising your overhead.
Julian Lumpkin: Dave, this has been really helpful. Before we wrap up, can you tell our audience where they can find you and your podcast?
Dave Erickson: Well, we’re everywhere on the podcast.screamingbox.com , just search for ScreamingBox. Our website’s the same: screamingbox.com, and you can find our LinkedIn company page by just searching ScreamingBox.
Julian Lumpkin: Thanks again for your time, Dave. It’s a pleasure.
Dave Erickson: All righty. Thank you very much, Julian. It was great doing this.
Julian Lumpkin: Thanks for listening to this conversation. We appreciate you tuning in. You can listen to our past episodes and subscribe to our mailing list to get future episodes at successkit.io.