Paychex continues to grow after more than four decades

• Paychex started in 1971 by Thomas Golisano as a way to outsource payroll services for small business.
• Forty-five years later, Paychex has become a major employer in Rochester that's looking to grow more.
• Paychex CEO Martin Mucci said there's evidence the company will remain profitable, hire more staff

More than four decades ago, Rochester entrepreneur Thomas Golisano shared his dream for his company.

Golisano told the Democrat and Chronicle that the target "was to get 300 clients in Rochester and live happily ever after."

Today, as Paychex celebrates 45 years in business, Golisano's company has gone far beyond that dream.

A company that started small in 1971 as Paymaster Inc. now boasts $3 billion in revenue and coordinates payroll and human resource services for roughly 600,000 small and mid-sized businesses. Paychex is the second largest payroll services company in America. The company employs 4,300 in the Rochester area, 13,500 total, and wants to hire hundreds more.

Headquartered on Panorama Trail in Penfield, the company has several other facilities in the greater Rochester area.

Golisano spent decades guiding Paychex through steady growth, but retired as CEO more than a decade ago and moved hundreds of miles south of New York. However, he still serves on the company's governing board.

Current Paychex CEO Martin Mucci says the company will continue being profitable and will likely grow revenue and staff.

"It's an exciting time for Paychex," Mucci said. "We're excited about the growth of the company."

How it all came to be

The story of Paychex's growth is woven into the story of founder Golisano.

Raised in Irondequoit, Golisano went to Alfred State College and then started his career counting money at Lincoln First Bank.

Golisano started Paychex with an aim to help small business, but his company grew quickly. The company employed 500 people in 1980 and then grew to 950 in 1984. Profits grew nearly every quarter in the 1980s, many times by double-digit gains. There wasn't a drop in profit until September 1989.

There were other important milestones, too, such as when Paychex became a publicly traded company in August 1983.

At the time, Golisano said the Paychex success came from him having "picked a market niche that has unlimited growth in it." The company name grew as Golisano acquired similar yet smaller companies and struck a deal to have the Paychex logo sewn onto polo shirts during prestigious golf tournaments.

Golisano's prominence in New York grew just as quickly as Paychex. He built so much social capital that he decided to make an impact in politics. In 1992, Golisano pushed for a third national political party along with other prominent businessmen across America. Golisano even ran for governor — three times — but without success.

Louise Woerner, CEO of HCR Home Care, has been friends with Golisano for decades. They met in 1986 — the year after Golisano had won a prestigious entrepreneurship award at Rochester Institute of Technology. They bonded, she said, because they had both grown up in Rochester and both started their companies the same way — "by borrowing $3,000 off our MasterCards."

"But it's pretty obvious he had a much better (business) than I did," she said.

Woerner said that, as Paychex's leader, Golisano was known for having a generous spirit and as someone who loved having fun while helping people.

"His company was known for their first-class style of operation," she said. "When you walked into the building, the woman who greeted you set the tone of how professional the organization you were going to be engaged with was, and that continued with all the executives and up to Tom."

Today, Golisano lives in Florida but is known throughout Rochester as a generous philanthropist. He created the Golisano Foundation in 1985 and through it has donated billions to different projects across upstate New York.

Staying competitive 

Golisano stepped down as Paychex CEO in 2004, leaving behind a company that today has added more services and even more customers.

Paychex now handles payroll, bookkeeping or human resource tasks for small and mid-sized businesses across the country. Those tasks include taxpaying services, regulatory compliance services, retirement funds, workers' compensation, employee handbooks, management manuals, personnel forms and more.

But Paychex isn't the only player in that realm.

In the U.S., payroll and bookkeeping services is a $81 billion industry that's crowded by more than 280,000 other companies, according to data from business research firm IBISWorld.

Paychex has stayed competitive by creating new software for small-business owners and updating the company's computer infrastructure, Mucci said.

"We've put a lot of investment in technology that lets small business do payroll on your phone on an app," he said.

That focus on technology and giving customers ways to help themselves is why Paychex and companies like it will continue to grow, industry analysts say.

Doug Hendee, chief sales officer and certificated financial planner for Brighton Securities, said Paychex is one of Rochester's "flagship companies" that's managed well despite being in a complex line of business.

"From an investor's standpoint, that's what we look for," Hendee said. "They continue to grow and adapt their business to what the end-user wants and the stock has done very, very well."

A group of analysts from IBISWorld wrote that payroll services companies "have aggressively pursued new platforms and interfaces" and will be "providing more self-service process."

"As a result, larger industry companies such as Automatic Data Processing (ADP), Paychex, Intuit and Ceridian are expected to sustain higher than average profit margins," the analysts wrote.

As profit grows, so does staff.

Mucci noted that Paychex has 200 job openings in entry-level sales, information technology and human resources. More hiring will happen "as we continue to grow and have a majority of our employees here," Mucci said.

"We still continue to grow in Rochester," he said. "We've added over 1,500 (jobs) in 10 years and most in Rochester."

As much success as Paychex has had, Mucci and other company leaders know that the company can't hire more people without first seeing more revenue. And Paychex's ability to grow depends on three factors — how American small businesses perform, how often the company acquires smaller firms and the company's focus on keeping its customers.

Mucci said there's evidence that Paychex is doing well on all those fronts and will be strong into the future.

In its most recent earnings report, Paychex's numbers beat expectations. The company's payroll service revenues increased 4 percent to $450.9 million. Meanwhile, revenues from its human resource services jumped 15 percent to $322.6 million.

The company has created its own tool for monitoring small-business activity. Mucci said more federal regulations and the rollout of the Affordable Care Act are the biggest things hitting small business right now. Making sense of new Labor Department regulations and a new health care option has brought Paychex more customers, he said.

"HR services have grown to be a significant part of our story," Mucci said. "401(k) management and record-keeping have been a big part of that growth."

The process for maintaining customers has never been better, Mucci said. Paychex employees are "focused on customer service" and understand that small business owners will always need help.

"We're at the highest level of satisfaction and retention ever," he said. "As long as we provide great technology and service support, I think those needs will help drive the company's success."

Paychex is celebrating the 45th anniversary during its annual employee meeting next Thursday, Oct. 13, at Blue Cross Arena. Thousands are expected to attend. There will be presentations by vice presidents, and company officials will talk about what's on tap for 2017. Mucci said the event will also feature popular music from the '70s, '80s and '90s.

KJBROOKS@Gannett.com