Paychex Founder: No One Was Serving Small Businesses... So I Did!

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Live preseason games are subject to local blackouts. And we continue with our American Stories. And up next, an American Dreamers story in the series is brought to us by our great friends at Job Creators Network, who work hard every day to help small businesses become big ones by fighting for policies that make it easier to do just that. Today, Alex Cortez brings us a unique American voice. Okay, I was born at an early age in Rochester, New York.

We're listening to Tom Golisano. My father was from the old country, Sicily. My mother was born in the United States. Had an older sister, an older brother. When I was in high school, my mom and dad had their financial difficulties.

They had to go through bankruptcy. My father, after World War II, went into a business converting coal furnaces to gas and oil furnaces. And my brother, older brother Charlie, also worked for my father. Then he got called off to the Korean War. And unfortunately, he didn't come back.

He was there three days, was put up on the front lines, and he was with a company of men that was attacked by an Italian of Chinese and didn't come back. So after that event, my father's business kind of went to hell. He went to work for a macaroni company that was based in Rochester as a salesperson. But as a salesperson, he also drove a truck and delivered to these small grocery stores. One day I went out with him.

I think I was a junior or senior in high school. And before he went out on his route, we stepped in at the corporate office and his boss came out in front of me and several other people, completely laid out my father verbally, very nastily. And I observed that and it made a lasting impression on me. One of the things that came out of it, of course, I said, if I ever get in the management position, I'll never treat people like that. That was the worst thing.

And of course, the fact that he did it in front of other people. I also kind of made the decision that I think I wanted to have my own business. Freedom, control my destiny, maybe unlimited earnings, that type of thing were the things that interested me. Tom put himself through college, worked several jobs and in 1968 landed at EAS, Electronic Accounting Service, which processed payroll for larger companies in an era before the Internet. They did several things different. One, they didn't take phone calls. You had to fill out forms all the time and then you had to get them to deliver to the payroll company or they picked them up. And they've had very high minimum charges. So I'm thinking about that as I'm driving down Main Street anywhere. Most businesses have less than 100 employees went to the library and found out 98 percent have less than 100 employees and 95 percent with less than 50 employees.

Also, EAS was not doing the payroll tax returns. So I said, is this whole untapped market out there that somebody should go after? So I started thinking about the phone call, the tax returns and the lower pricing. Could we make money? So I went to them one day and I said to the manager team, and I said, look, let's form a division. I'd love to run it and we'll go after the low end of the market. I think we can do really well with it. We don't think CPAs will like us doing payroll tax returns.

I said, I think you're absolutely dead wrong. They will appreciate us doing the returns because payroll tax returns are very timely. They're tedious. They can't build out their time at a value they think it's worth.

And they don't like doing them. So my thesis was that they would be a very strong referral point. They turned me down and said, no, it's not a good idea. So I sat out for a couple of months. Went in again. Same reaction.

So now I'm a little determined. I went into EAS with my resignation and said, I'm going to start a company called, actually it was called Paymaster first. I like the term Paymaster back 50 years ago because everybody generally knew what it meant. The armed services always got paid by the people in the services called the Paymasters. Today, nobody knows the term. Eventually, they landed on a name that you might have heard of, Paychecks.

Not to pick on our major competitor, ADP, which nobody knows what that means. At least everybody understands the word Paychecks. If you were a five person company, the minimum charge for you probably in 1970 would have been $28 a fee period. That's a lot. 1970 dollars. And we came in at about a dollar apiece.

Five to seven dollars, I think it was. We were able to really cut the price. Plus, all our competitors are going after the 100 person payrolls. They know who all the 100 person plus companies are in your community.

So you're always fighting those guys. Nobody was interested in at least the 50 and below. I decided to start at $3,000, a few credit cards. I said, now I'm going to use that $3,000. I'm going to send out a bunch of direct mail in November to see if I can sign up 60 clients, which is what I needed to sort of get by to start processing the 1st of January. Well, I sent out the direct mail and I sold six. So there it was with six clients. Needless to say, the credit cards got used, very much utilized.

In fact, they eventually got all taken away. And I'll never forget, I took a bunch of employees out to Nutter one night at a stake stockade. I handed them my American Express card.

He came back, it was torn in half. And he said, sorry, they made me do this. I said, I'll tell you what, you're a client. We bill you every month.

How about if I take, you take my bill and give me credit against your bill? And he said, okay. But it was embarrassing in front of the employees. But any of that, we struggled through. Fortunately, I had some friends and the banking business. They helped me get consumer loans, which were really business loans, but they called them consumer loans because they can't make business loans to a guy like me. And EAS was doing our processing, the company I worked for. And the reason they liked the deal and I like the deal, the reasons I liked it are obvious, the reasons they liked it. They were taking all of our little clients and treating them like one large client.

And it was very profitable to them, too, because they had no customer contact and zero sales expense. One day, we decided we were going to get into our own equipment. So I hired a contract programmer. We were writing our programs around the IBM System 3. Got in a little over our head with the cost of producing the software and so forth.

And I was really up against it again. Went over to my sister, who was a widow with three kids. Her husband died at the age of 41. And I said, Marie, I need some help. She says, Tom's insurance money, her husband's insurance money is in the bank. It's $41,000.

Take what you want. Just like that. Now, here's a single woman with three kids and a handicap.

She lost her right hand when she was working in the meat department of a supermarket, when she was 15 years old. Anyway, so she loaned me the money. We got by the program.

Her and her kids now are all significant shareholders of Paychex. You can guess how that happened. Now, it's time to convert. He says it's ready. It can't, we can't run it.

It doesn't run. We can't produce the checks of all things, the most important thing. So we got IBM engineers and other outside programmers. Everybody's working on this simple program, but they couldn't solve it right away. So we were supposed to cut off with EAS, 4th of July weekend.

It was there. It's now Wednesday, 4th of July is Friday. So everybody's got to get their payroll by Thursday and we're really up against it. So I called up EAS and I said, Ed and Jim, they were two partners. I said, we need your help. He says, okay, we'll send somebody over.

And they were going to run our perils instead of us converting to our system. So we got through the night and I had about 10 relatives and friends delivering checks on Thursday morning, including one guy on a motorcycle. That was funny.

I don't know who brought him. Anyway, but we got them all delivered. We didn't lose any clients, but it was a hell of an experience. That whole week, I never went home.

I slept right on the floor of my office and I lost about 10 or 12 pounds. The pressure, when you can't deliver payroll checks, that's pressure. You know, clients are calling.

It's pressure. So we finally got it fixed and I came home and I just fell right on the bed. I think it was three o'clock in the morning. And I'm sure I just cried. So I know I got into conversation with Gloria. I said, I don't know if I want to keep going with this. And she just said, one foot after another. Just keep going. One foot after another. That's great advice.

Pretty simple. Great advice. My original goal was 300 clients in Rochester, New York.

It took me four years to get there. Now Paychex sells $2,000 a week. Now, that's no representation of my sales ability.

But obviously we have over 3,000 salespeople now. And great work is always by Joey and Alex on that piece. And you've been listening to Tom Golisano's story. He's the founder of Paychex. Tom Golisano's story, a true American dreamer story, as always brought to us by the great folks at Job Creators Network, here on Our American Stories. For each person living with myasthenia gravis or MG, their journey with this rare condition is unique. That's why Untold Stories Life with myasthenia gravis, a new podcast from I Heart Radio in partnership with Argenics, is exploring the extraordinary challenges and personal triumphs of underserved communities living with MG. Host Martine Hackett will share these powerful perspectives from real people with MG so their experiences can help inspire the MG community and educate others about this rare condition.

Listen to find strength and community on the MG journey on the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Football is back and NFL Plus has you covered. Get ready for the 2023 NFL season and get access to the NFL preseason. Watch live out-of-market preseason games on NFL Plus, including all 23 live NFL Network games across devices. Stream exclusive coverage of the top 100 players of 2023 and discover all-access content from players, coaches, analysts, and more. Sign up today at plus.nfl.com.

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