Small-Business Success Story: AcousticSheep Headphones

Man Wearing Headphones Listening To Music On Bus Journey

Pat Mertz Esswein, Associate Editor, Kiplinger’s Personal Finance
Kiplinger Consumer News Service

Kiplinger’s spoke with Dr. Wei-Shin Lai (pictured above), 39, the cofounder and CEO of the Erie, Pa.-based company AcousticSheep, about why she left her private practice to focus full-time on her line of headphones. Here’s an excerpt from our interview:

What are SleepPhones?
They’re like pajamas for your ears. We put very thin speakers inside a headband made of a soft, stretchy fabric. You have this nice, warm feeling while you listen to music, nature sounds or a comforting podcast. SleepPhones come in corded and wireless versions and work with most media devices.

How did you get the idea?
When I was in private practice, phone calls from the ER or patients often woke me in the night, and I found it hard to fall back to sleep. My husband and co-owner, Jason Wolfe, suggested that I listen to relaxing music, but headphones were bulky and uncomfortable, and earbuds hurt my ears in bed. We decided to try to make our own headphones. Our prototypes helped me relax and fall asleep more quickly, and they worked for my patients, too.

How did you launch?
My husband gave me a sewing machine, and I gave him a soldering iron, and we made 500 SleepPhones at our kitchen table. I set up a website to sell them, and people found us right away. We sold out without advertising. We realized we had something potentially big, and we decided to make it a business. That was in 2007.

You’ve developed other versions?
Yes, by listening to our customers. We designed a cooler version for menopausal women who objected that the original fleece fabric was too warm. RunPhones have features such as sweat-wicking fabric for recrea­tional users. TellyPhones let one partner watch TV in bed without bothering the other. Our Simple phones are preloaded with music, so you push one button and it works. They’re designed for older users who don’t want to bother with technology. [Versions cost from $40 to $150.]

How did you finance your business?
As a doctor and software developer, we could buy what we needed with our own money. We were profitable from day one, and we’re still self-financed. We did open a line of credit so we can build up inventory in the third quarter of each year in anticipation of the holidays. We have a really big fourth quarter.

Are you making a living?
In our first year, we had about $30,000 in sales. In 2008, we wrote a business plan aiming for $1 million in sales in five years. In 2012, we made more money from the business than from our jobs, and we reached our goal by early 2013. In 2014 we quit our day jobs and moved to Erie, near my husband’s hometown. We did about $5 million in sales in 2016, and we have 25 employees.

Erie isn’t known for tech, is it?
It’s kind of a Rust Belt community. Jason always talked about coming back to the region to bring better jobs and a spirit of innovation and entrepreneurship, and that’s what we’ve done. The business community has been incredibly supportive. But we’ve struggled to find the right local talent with experience running a fast-growing company. Our advisers here tend to be old school, and sometimes they don’t quite know what to do with us.

What’s your greatest satisfaction?
Customers have told us that they could finally come off sleeping pills after taking them for a decade. We’ve saved marriages, too. Despite one person snoring, the other person can finally get some sleep.