i've been gone a fortnight, roaming the plains of spain (so to speak). sorry to see a dearth of posts upon my return. is 'chexy unsexy? too pedestrian? predictably boring? not that that's entirely negative, natch.
here's another lengthy, semi-recent, upbeat write-up (well, if you glaze over the last three paragraphs). via ibd:
Companies In The News Paychex's Revenue On A Roll As Employers Outsource More
Investors Business Daily, Friday, April 17, 1998 at 12:10
Paychex Inc. has proved handling other companies' paychecks is practically a license to print money.
The company is the No. 2 player in the payroll services industry, which is growing about 15% a year, analysts say. It differentiates itself from leader Automatic Data Processing Inc. - which has annual sales of more than $4 billion - by focusing on the needs of smaller companies.
Aside from these two contenders, several regional companies also compete in the field. The biggest factor, though, remains the do-it-yourself market.
Roughly 95% of potential clients keep their payroll functions in-house, Paychex says. Winning over some of that 95% is just part of the company's growth strategy. It also wants to expand sales of related services, such as 401(k) record keeping.
As part of this growth strategy, Paychex has teamed up with First Chicago NDB Corp. to offer debit cards as an electronic alternative to paper paychecks. The card gives employees without bank accounts or direct deposit easy access to their money through automated teller machines, Paychex says. Sales are just being ramped up.
Strong Cash Position
The profitable payroll services company has $230 million in cash on the books. It has no plans to use this money for acquisitions, though it could make some small stock-financed deals in the near future, analysts say.
The company hasn't always had a nine-digit bank balance.
After earning an associate's degree at a community college, founder and CEO Thomas Golisano spent his young adulthood in the '60s bouncing from job to job.
He started Paymaster - the antecedent of Paychex - in '70 with $3,000. "That money lasted about six weeks," he said. "After that, I had to beg, borrow or - whatever."
The company found its niche serving small-to-midsize firms that other payroll companies were shunning. Today, a typical Paychex client has between five and 19 employees - 14 on average - and is operating in one of the 100 largest U.S. cities.
Customers usually hire Paychex to make payroll and payroll-tax disbursements. Some retain the company to handle other tax payments, direct-deposit processing and digital check signing. Combined, these three payroll services bring in almost as much revenue per client as the basic payroll service.
There appears to be ample room to add new clients. In January, Paychex added 18,700 new customers - a 10% jump over last year's growth for the month and its busiest month for new accounts ever.
The company aims to expand sales with existing clients by moving into additional human-resource work. In addition to payroll, it can administer 401(k) plans, outsource other personnel tasks and set up so-called IRS Section 125 benefits. They include perks such as child care and health insurance that workers can pay with pretax rather than after-tax dollars, saving money for employees and employers.
The company's payroll business is closing in on its 300,000th client. The 401(k) business recently added its 5,000th.
The payroll segment brought in sales of roughly $370 million in the fiscal year ended May 31 of last year. Sales of other human-resource services pulled in revenue of $31 million. Other sales were related to work Paychex does for companies that manage benefits for employers on an outsourcing basis.
The only constraint to growth is staffing. The company's answer is to hire people with more eagerness than experience, Golisano says, and then give them the training they need. "We're having our best year for employee retention in five or six years," he said.
The CEO says sales staff and payroll specialists are especially amenable to the company's stock-option program. It is open to people who have worked for Paychex for as little as three months. Still, retaining information technology staff remains difficult, he says.
Another possible staffing problem could be in the executive suite. Golisano, 56, says he is in good health and has no immediate plans to retire.
But Paychex has no COO, and its executive vice president left last year. "Tom is very important to this business," said Salomon Smith Barney analyst Keith Mullins. "It has some strong operations people at the business level, but no one like Tom."
Still, the company isn't sweating. "Should I be hit by the proverbial truck, the company would be in good hands until a new CEO is selected," Golisano said. |
