Ryan Dice (4:36)

Yeah, I mean, I think so there's a number of ways that you can incorporate E2P that we should talk about expense to profit. The simplest way is self liquidating it. Like just how do we get this expense center to just cover its own cost? So we can talk about some ways to do that. The second way is the group buy. Yeah. So how do we go in and get people to kind of share the cost? And then the third way is the spinoff, where how do we take this expense and actually spin it off into its own business unit, into its own company. That's what we did. And it's the most complicated. It's also the most like, fraught with danger. Because what you are doing, if you're doing a spin off, is you're taking what is currently a function within a business and now you're turning it into its own business, which means it's going to need its own leadership team. So in the beginning, what I remembered is it was incredibly easy to sell incredibly high margins. But then it became this drain on resources because we're saying, okay, who's actually running this thing? Because we can't really have. The department head wasn't actually equipped to CEO a separate business unit, but we kind of unintentionally asked them to do that. And so you, I think if you're going to do a full scale spin out, you have to make sure that the team is there and that the margins make sense for it to justify a spin out. Because I believe in retrospect we could have done it on a smaller scale and probably had the whole dang department paid for just utilizing our friends, you know, people in the industry not had to deal with any outside drama and just had that thing paid for. So that, that's kind of my recollection. And you know what? I wish we didn't. Look, ultimately we wound up selling that business and it was fine, it was a good result. But it was, I remember there was some, there were some sleepless, sleepless nights.

Roland Frazier (6:28)

Yeah. And I think it's, I really like that effectively what you're doing when you create a separate organization out of this is you're creating a bpo, right? A business processing, business process, outsourcing or an mso. A marketing services organization would be kind of the analogs to what we're talking about here. So it's, it's just that rather than going out and creating one from scratch and that's what you're going to do as your business, you are actually creating one to help you with your business, be able to kind of defray some of these costs that you've got. And so I think it's a really great way to do it. One of my favorite examples was I gave a talk about this, gosh, maybe eight years ago at Joe Polish's Mastermind, the Genius Network, and, and talked about, talked about it. And then after that, one of our consulting clients, Tucker Max, who had a book writing company called Scribed, came to me and he said, holy crap. He said, this is fricking amazing. He said, I, I didn't realize he said, I've seen, and I want to say it was. It was like it was either nine or 11. He said, I found nine different places that I can turn into new entry points into my funnel by offering the services of our people. He said, we were thinking very linearly about our business, that somebody wants to write a book. So somebody wants to write a book and they come to us for help, and then we help them figure out what the idea is going to be, research the market, start writing, you know, ghost writing the book, then we're going to fact check it, then we're going to edit it, then we're going to lay it out, then we're going to create a cover design, then we're going to create a marketing plan, then we're going to do a launch, then we're going to book them on, you know, for talks and things like that. And. And then we're going to help with distribution. And he's like, every point along that way could be a service because maybe somebody's already written the book and they just need editing, or maybe they, you know, they've written it but it's not released and they want to have editing, or maybe they just need a good cover or, you know, maybe they just need to get booked on podcasts and then when they write their next book, they're going to come back to us. But now, instead of only being able to address people who want to write a book but haven't yet, our market is multiplied. Our tam. Our total addressable market is multiplied, you know, hugely, because now we can get people at any of those points to come in and. And all of our people along the way that have capacity and expertise in this can now be entry points into our funnel that allows us to significantly increase our revenues and profits. So, like, I really love that example because he was so excited because he. It hadn't, you know, it was just like this completely new thought of our business isn't or doesn't have to be linear. And I think that might be kind.

Roland Frazier (9:25)

Of the big takeaway is like, how.

Roland Frazier (9:27)

Could I explode my business up and say, you know, what if the entry point wasn't at the top of my funnel currently? What if it was throughout and after my funnel? Then what would happen? What could I do? What are all of the cost centers along the way and what are the products or services that I could provide to my existing customers or to customers that I'm not currently able to address to be able to bring them into my, you know, my ecosystem?

Ryan Dice (9:54)

Yeah, I Think that's a, that's a great question. I would also. Just a really simple way to get started with this is to look at the biggest cost centers in your business and just ask the question, how could I make this pay for itself? So I can tell you, in a lot of businesses, if you have any sort of customer care, customer support type department that is almost exclusively a cost center, that is an expense. It's something that you need to do, but it doesn't naturally make much money. Well, we ask this question over a decade ago. How do we get this cost center to pay for itself? And ultimately, the solution that our business partner, Richard Leonard came up with is they're sending out emails all day, every day, individually, one on one. But there's still a ton of emails that are getting sent out. And now a lot of these are emails to grumpy people because something went wrong. But a lot of them are just general questions. And a lot of these grumpy people are no longer grumpy. We've done a good job for them. And so what we realized is if we just gave everybody a ps, just a standard PS that goes at the bottom of every single email they sent, you know, P.S. oh, by the way, we've got this event coming up. You should go sign up. You know, ps, we're running a special on this, you know, this week you should do that. And so every week we basically had a PS of the week because every customer care rep got this ps. They added it. Eventually we found a tool that made it to where we could update on our end so they didn't have to do it. Just the addition of that offset. It wasn't quite 100% of the cost of the customer care department, but I want to say it self liquidated 50, 70% depending on the month. And, you know, the performance of those particular offers, that's a big deal. And that was just free money that came from asking the question. And there was no risk. We didn't have to spin out a different business unit. We didn't have to incorporate a group buy or anything like that. Just asking the question, how can I get this to pay for itself?

Roland Frazier (11:51)

I love it. Yeah. And I think the thing to think about as you're exploring this is it's really a mindset and methodology combination. We're thinking of going from cost burden or expense or cost center to profit lever or new funnel entry point or, you know, or profit center. If I didn't say that like, that's, that's really the, the mentality and, and we're thinking about like at every level along the way asking the question how can I monetize this? And if you can't think of it yourself, maybe put a extensive description of the customer journey and the products and services that you've got into chat GPT or Gemini or Claude and say how could, where along the way could these expenses or please identify expenses that could be turned into profits. The other thing that you can do is you can go through your get your accountant or your QuickBooks or whatever it is that you use for accounting and list your expenses by supplier and, and list the expenses by supplier and from most from greatest expense to least expense and then look at any of your expenses that are over about, you know, it could be different in your firm depending on how big you are. But over say 10,000, 100,000, you know that, that probably over a hundred thousand is, you know, anything over there you would want to look at and then do the same with your payroll and see by department or even by person who are the top people that are the most expensive. And then think about what's the capacity that each of those things is being used at. If your creative designer that's that's creating your ads and stuff like that is already efficient and using AI and and is completely booked, you probably don't want to turn them into a profit center, right?

Ryan Dice (13:44)

They already are.

Roland Frazier (13:45)

They should be making you money. But maybe the first question we ask is what's the capacity, the unused capacity. The second question is how could we create more capacity with this resource? So maybe your creative person is not yet using AI and they, they could be twice as efficient and therefore they could have 3, 50% of their time open up. Well then that's a good indication that that might be a place to do this. Do you have any other thoughts on kind of like how to find opportunities to do it?

Ryan Dice (14:17)

What you said about going into the P and L and listing out is always step one then asking the question. I think first how do we get this to pay for itself? I think the second question is who else would benefit from this? And that question should be who else would benefit? From a client perspective it could be who else would benefit from if you have a holding company type model, other teams within the organization that you could do that. But speaking of the client side, there's likely services that you're paying for internally that you utilize that because you have access to that service. You could offer a higher level of service to your clients than you're offering right now. Or maybe you do offer it, but you're not charging for it.

Roland Frazier (15:00)

Right.

Ryan Dice (15:00)

And so I know there's lots of things where, and again, what you don't, what I'm not saying, please don't hear me say to, you know, give people access to a tool that you're paying for, like give them your login. I'm not suggesting that you violate any terms of service or give people access to data that they shouldn't have access to, but to the extent that you're able to provide a higher level of service to your client because you have this tool, just ask the question, are we charging effectively for that? Are we advertising that we're able to do this? Because either you are, you're not doing that yet and you could, in which case you've just come up with a way to help that tool self liquidate or you're not and you find like really this tool isn't paying for itself. So, so we can, we can cut it. I know we've been able to do that at higher levels of membership as a result of investing in tools. The other thing that, that we've done that, that people can do is thinking about the group buy. A lot of times people think about a group buy, they think about physical products, they think about raw materials, inventory. We've done this in the past. We actually have a, have a client who, they're funny enough in the candle supply space and they're, which is a business, you know, our former business partner used to be in but years and years and years ago and they're worried about tariffs, they're worried about China. And so they're, they just did a big massive import and now it's like we've got all this stuff, you know, what do we do? And kind of what do we do moving forward? And I asked like, are there smaller suppliers in your space who maybe don't have the juice to do direct importing? Could, could you partner with them and say, hey, I'm going to do this buy. Do you want in on it?

Roland Frazier (16:39)

That is kind of with the bathroom back in the day too. Remember what the, the, what we did it with the bath bomb ingredients. We sold those to other bath bomb makers when we were doing the bath bomb thing.

Ryan Dice (16:51)

Exactly. So there's that. But it can also apply to something like your media buying. So for us and a lot of our companies, what we spend on advertising is our single biggest expense. So we looked at that and we said, who else could benefit from the fact that we're spending all this Money on advertising. And that's when we went and partnered with a non competitive company but that still, you know, had access. So this is a, you know, an indirect competitor.

Roland Frazier (17:18)

So.

Ryan Dice (17:18)

So a business that can absolutely has your same icp, but they're selling a completely different solution. We went to them and we said, hey look, why don't you give us money? And we've also done this where we split it. Why don't we both throw $10,000 a month at this campaign? We'll run it because we have the capacity to do that because we're running it. We get first dibs of the leads for the first seven days and then after that we'll advertise your stuff and then after that we'll each get, you know, get a copy of these leads that that effectively reduces your cost per lead by 50% with almost no real downside. And again it comes from asking the question, first, how do we get it to pay for itself? Second, who else would benefit from this investment that we're already making?

Roland Frazier (18:07)

Love it. A couple of ideas for you guys. If the expense is marketing your traditional role, there would be lead gen cost. The A2P opportunity would become a marketing agency for other people in your niche. If you've got customer service, normally that's support overhead, but the E2P opportunity would be to offer white labeled customer support for other brands. If it's HR and recruiting, that would normally be internal hiring, but you could create a talent placement agency. I know we've got a business that's got three recruiters in it, finding accountants all day long because we we can't find enough of them. And that's a service that we can provide to other people. Software automation or software would be productizing into SaaS or consulting offer. We had our AI team that was doing automated AI calls for outbound generation defined businesses. And we turned that product that we paid for plus that team into a profit center and sold that as a service. And that was super cool legal compliance.

Ryan Dice (19:07)

We got another version of that coming up because we've now created the growth hub with the AI marketing team. And so same thing. Now our internal AI team that has helped us develop this for our own internal purposes. This is going to be a spin out as a separate business unit that these folks are going to essentially help drive.

Roland Frazier (19:27)

Yeah, my favorite one of all time was the. I just always remember this. It was, I want to say it was November 2006 was the COVID on Businessweek that said that Jeff Bezos. Jeff Bezos wants to run Your back office, I think it said, or something like that. Wall street just wishes he would mind the store. And it was when Bezos had the, you know, the brilliant idea that's to me, the inspiration for us doing this, which was, I've got all this infrastructure and hard drives and tech and stuff. Why don't I make that available to the rest of the world? And he created AWS, Amazon Web Services, which is an $80 billion company and for a long time was the only part of Amazon that was profitable.

Ryan Dice (20:09)

Like it was called all their margin.

Roland Frazier (20:11)

And you know, and it just goes to show you how the experts can be wrong when you've got a visionary, you know, visionary can be wrong too. But. But that was one of my favorites. Zappos did it with customer service. It's like it's just having the mind shift of not questioning the expense to optimize or reduce it, but to basically say, how do we commercialize what we're already paying for? Where's the opportunity to monetize the expense? That's the big, you know, really the big insight I think here. And that that can turn into something significant.

Ryan Dice (20:46)

Yeah. And how do we commercialize it internally? How do we commercialize it externally? Because like I said, I don't want everybody to think, and I think this is the mistake. When we talk about E2P, everybody's thinking, okay, so you know, I need, I basically need to spin this out into its own company. That may be the solution. But see, first, can we get it to self liquidate? Is there simply a group buy opportunity doing these things before you jump immediately to the spin out? Although, as is the case, you know, the example of Amazon, you know, aws, the spin out can be incredibly lucrative and incredibly powerful and create a lot of value when it works. So big, big, big fans of that strategy.

Roland Frazier (21:25)

So that's something that you should do. If you're thinking about, you know, I've got compressed margins, I'm worried about tariffs, I've got all these, you know, these issues that are causing me to not make as much money now as I did before. Or you are making money now, but you'd just like to make more of it in your business, then E2P is definitely something that you should take a look at. I like, last time that we recorded one, we were talking about getting better titles for our podcasts. So since this is business launch and you guys are fly on the wall, this is what Chat GPT came up with. Of all the ones that I like the best. Ryan, tell me what your thoughts are. Turn your. Turn your business expenses into hidden profit machines.

Ryan Dice (22:05)

I like that. Hidden profit machines. Yeah, yeah, yeah, I like it.

Roland Frazier (22:09)

We'll send those off.

Ryan Dice (22:10)

We'll see. We'll see if that. It's always fun because now we'll see if that's what it winds up being because maybe they run some of the tests.

Roland Frazier (22:15)

Yeah, I know. I like it. Awesome. I think it's, well, great. I hope you guys enjoyed this. If you did, please share it with other people. We love, love, love having new people get exposed to the podcast. We love sharing with you and we love hearing your feedback. If you'd like to let us know what you think, hit us up on social, Ryan Dice, D E S S or Roland Frazier. And we'll see you next time on Business Lunch.

Roland Frazier (22:47)

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