The Power of a Good Idea: How Paychex Began

Paychex, Inc. today is a recognized leader in the payroll and human resource services industry. But even as the company's array of products and services grows, the Paychex commitment to its customers remains as strong as it was when B. Thomas Golisano founded the company 33 years ago.

Paychex is a top national provider of payroll, human resource, and benefits outsourcing solutions for businesses in the U.S. Paychex's core client is the small- to medium-sized company, but Paychex also meets the special needs of larger businesses with its Major Market Services. Paychex is based in Rochester, NY, and today has more than 100 locations around the country, serving hundreds of thousands of clients nationwide. In fiscal 2004, Paychex revenues were nearly $1.3 billion.

Golisano started the company in 1971 with just $3,000 and a good idea how to make it easy and affordable for small businesses to outsource their payroll processing. He saw the huge untapped market: 98 percent of American businesses have fewer than 100 employees, something that still holds true today. Golisano went to his employer at the time, a regional payroll processor for big businesses, with his plan. The company wasn't interested, so Golisano struck out on his own. He launched Paychex with just one employee.

That single operation grew to include 18 franchises and partnerships, which were eventually consolidated into one private company in 1979. Four years later, in 1983, Paychex went public and began trading on The NASDAQ Stock Market. Since then, Paychex has registered a record of steady growth.

That pattern of growth in the '90s led Paychex to add human resource services to its payroll processing. The company also expanded its payroll service, launching its Major Market Services to meet the more complex requirements of companies with 50 or more employees. Now the Paychex services available to clients include 401(k) recordkeeping, workers' compensation administration, larger company payroll processing, and very comprehensive human resource outsourcing called Paychex Premier(SM) Human Resources.

The recent acquisitions of two major payroll processors added a new dimension to Paychex's growth. Paychex purchased Advantage Payroll Services, Inc. in September 2002 and acquired InterPay, Inc. in April 2003. These acquisitions provided Paychex with more than 80,000 new clients, moving the company closer to serving half a million clients. These acquisitions took place during fiscal 2003, the same year that Paychex marked its 20th anniversary as a publicly traded company. At the end of fiscal 2005, the company reached a new milestone, serving approximately 522,000 clients.

Paychex continues to receive national recognition for its success. In March 2005, Paychex was named to Training magazine's list of 100 best training organizations for the fourth consecutive year. In February, Paychex was again named one of the Best Managed Companies in America by Forbes magazine. In January 2004, FORTUNE magazine ranked Paychex among its "100 Best Companies To Work For" in America for a third consecutive year. In 2003, The Wall Street Journal ranked Paychex among the 25 companies that provided shareholders the best return over a 10-year period. Also, Forbes magazine named Paychex CEO Tom Golisano one of the 10 best performing bosses in the U.S. for a second straight year. The annual ranking rates chief executives who provide the best balance between their compensation and return to shareholders.

Paychex: proof of the power of a good idea.