Paychex Founder, Tom Golisano | How He Built a $28 Billion Dollar Business and Became the Owner of the NHL’s Buffalo Sabres

Audio Transcription

On today’s show, we interviewed Tom Golisano, the founder of the $28 billion company, Paychex. On today’s show, he shares with us how we took $3,000 in a credit card and turned it into $1 billion net worth. Tom also shares with us how he was able to build his net worth by solving a problem that 95% of small business owners have. This right here, folks, is a laser show with Tom Golisano. Did you know that Tom Gullah Sano was once the owner of the NHLs Buffalo sabers, and now he’s the author of a new book built, not born. I self made billionaires, no nonsense guide for entrepreneurs like you. Some shows don’t need a celebrity in the writer to introduce a show, but this show dies to may eight kids co-created by two different women, 13 Moke time million dollar businesses. Ladies and gentlemen, welcome to the thrive time show.

Yes, yes, yes,

Dollar business. Tom Golisano, welcome onto the thrive time show. How are you, sir?

Hey, I’m doing well. It’s a pleasure.

Hey how are things in Florida right now? Is the weather fine? How are things in beautiful Florida?

Well, I’m looking out the window. It’s about 80 degrees and pure sunshine. Everything is nice and green. It’s wonderful here.

Now that’s a long, that’s a long distance from Naples, Florida to where you started your career in Rochester, New York. When, when did you first figure out what you wanted to do professionally?

Well, quite frankly, I thought you’re going to ask me what I figured out. I wanted to get out of snow and cold weather.

[Inaudible]

Pretty young guy, but I decided I wanted to be in business for myself probably in my college days. I had some experiences watching my father in business who eventually ended up going bankrupt and I saw some of the things he went through and I vision some of the things I wouldn’t do if I was in that position. And so when I went to college, I just focused entirely on the idea that someday I wanted to be in business. Being an entrepreneur is the only way to go.

Where did you,

But at least for me,

Where did you go to college?

I went to a small two year college and Alfred New York called Alfred state tech. It was in Southern tier of the state.

Are they going to rename it? Paychex university.

That name is already used in our training department.

Oh, okay. Okay. Well I’m sure they’re there. They’re proud of you. Now how did you first start the company? Were you in the dorm room helping your buddies write paychecks for their side hustles or how did you get, how did you start paychecks?

Well, actually I was working for a company that did payroll processing for larger companies. Their target market was 50 employees, up to 500 employees. And I was in sales. And then they eventually made me a sales manager and I was driving down the street one day and I got to thinking, you know, most businesses in America have less than 50 employees. So I went to the library comparitor by that and I found out 98% of all American businesses have less than a hundred employees in 95% have less than 50 employees. And I decided that was a market nobody was attacking. They’re going after. So I decided based on my knowledge working for that payroll processing company to make some modifications to their product and how they operated and put it together to see if I could come up with a product line or a payroll processing product that would fit the need.

And basically I did three things that were different in those days. Back in the sixties and seventies. People used to have to fill up a fairly complicated computer input sheets which means they had to be trained on how to do it. And then the information had to be physically transferred to the payroll processor by delivery or by mail. I got the idea, for example, an average 15 employee company, they could just call in on the telephone, a trained operator, a professional on the other end, would extract from the client exactly what they wanted to do accomplish for their particular employees. It was cheaper and it was much more accurate than the customer filling out an input sheet. The second thing is back in those days, nobody in the payroll processing business was completing payroll tax returns. If you’re an employer in the New York state, for example, you have a minimum of 52 payroll tax returns and payments must be made every year and if you don’t do it properly and on time, the fines are pretty, pretty strong.

And third, we had a price that’s so small companies could afford it. The average minimum charge back in 1970 was about $24 a pay period only eating only if you had one or two employees. Well, we brought it down to about a dollar a check or a dollar a person and charging at that level. Now when I had all his ideas, I went to my employer and I said, let’s set up this division. I’d be glad to run it for, you know, be a major part of it. They said they didn’t want to go after the company market. They didn’t think it was going to be profitable. It’s the best thing that happened to me because I resigned a few months later and started paychecks.

Paychex is a company that my wife and I use for our art businesses and the, I’m always amazed at how they do it so inexpensively. I’m serious. I am not just saying this because he’s on our show. I mean I’m, I’ve been using Paychex forever and my wife and I have thought about in years past that you’re looking at the budget. You might say, you know, let’s see if we can trim costs and area a or B. And we’re always saying to ourselves, we could not possibly provide a service. We couldn’t do this ourselves or somebody. Offensively. I’m just blown away. My, my, I, I’m just, I’m kind of, I’m getting nervous here. I’m so blown away. What questions do you have for the founder of Paychex? Cause this guy has been solving my problems for years. I feel like I owe him a debt of gratitude.

I, you know, I go by dr Z so I’m going to call you. Is it okay if I call you mr G? Is that good? There you go buddy. I’ve got a question. You’re, you want a super yacht, correct?

Yes they do.

Now did you get to name your superyacht? I mean how does that work? Are they already named? Wouldn’t the guy constructing them? Cause yours is named a, if you still have his name Laurel, when I find online, did you name that? And so what does that name mean to you?

Yeah. Not much. Basically.

Oh,

The previous owners had called this Laurel and when I took it over we decided we’d leave the name the same because it does do a certain amount of charter business and we didn’t want people to lose track of the boat because we changed the name

Ah,

To our low pricing for a minute.

Oh, absolutely.

You’d like us to raise your prices. Would you feel better?

No, no, no, no, no, no, no, no, no, no. We use Paychex also. No, no, no, no, no, no.

My wife and I, we’ve talked about this and we were saying this is years ago. It’s like how in the world do they do it so inexpensively now? Obviously you guys have gone and gotten more efficient over time, but how did you go out there and get your first 10 customers? Did you just cold call? Did you show up? Are you doing,

You know what I did? I put together a mailing list from the Rochester chamber of commerce and sent out about 3000 letters early in November of 1970 and I was hoping to get 60 clients out of that mailing. I ended up getting six. Wow. So I had gone through all my money by that

Six

With six clients. So from then it was, you know, beg, borrow and almost the other thing. But it took me four years to get my goal in 300 clients. I ended up the first year with about 40, so it was a long haul, went four years without a payroll check, a good thing. My wife took on a job in a charitable organization, but we survived it. And then it was just a matter of adding clients year after year.

What was your, your low point when growing the business cause you doctors that you started your first business? I started my first business. I know I worked at Applebee’s target and direct TV when I was starting DJ connection.com. And I remember vividly eating ramen noodles. I’m having no disposable income to speak of being in a, in a tight spot, sharing the one car that barely worked. You know, T Tom, what was your absolute lowest point when building paychecks?

Well, one of the things that happened to me is I took a few of the people and we only had a few working out for dinner one night for some sort of minor celebration. And we went to a popular steakhouse in town and we had dinner and I had still had my American express card. My other two cards master charges, these had been taken away, but I still had my American express card. I paid for the dinner with American express card and the owner who I knew came back to me with my American express card cut in half and he said he was directed by American express,

Do that

No longer going to get credits. So obviously that was quite embarrassing. So fortunately he was a client, so he said, how would it be if I just add my curious, attract my charge for our gender against your bill and you know, your bill will be reduced. I’m outta here with some sort of a past year left.

Wow.

I remember friends coming over to the house. I remember one time good friends of mine came over. He opened up the refrigerator door. I mean, we were that close and there was nothing in it.

That’s a good diet.

Go on through that. But it sounds like you’ve gone through a little bit of it yourself to real character building.

So how did you fund the scaling of the business? I mean you said it took you four years, I believe, to get to 300 clients. How did you fund the, the scaling of Paychex, which today’s, he has 670,000 customers. Tom Golisano, how’d you do it?

Correct. Well, after I got established in Rochester, New York with about 300 clients, a friend of mine came into the office and his name was Phil. So where I’m in, Phil said, Tom Golisano, this looks like you’re going to make it. Is there any way I can get involved? And I said, well, how would you like to be a partner with me in the cities of Albany, Syracuse, and Buffalo? And he said, yeah, we’ll do that. And we agreed to it. He got started in a couple of months later, an employee of a client came into my office, said Thomas was really great service. I’d like to go somewhere in the United States and start one. I said, where would you like to go? He says, well, Miami, Florida. So I thought to myself to be in a partner with somebody in Miami, that’s not bad. There we go. So when I mentioned the word partnership, he said to me, Oh no, I want to be your franchisee.

Now. That was a whole new thought, but it meant, you know, me helping them get started, maybe an initial fee and the percentage of revenue. And I said, okay. And he went off to Miami, Florida. After I got these two individuals started, I said, gee, is this the way to build a national organization? So during the next four years, I brought into the company 10 different partners and six different franchisees. They all except one lived in Rochester, New York, and they moved to various parts of the country. And we got started that way. We had a goal, or at least I had a goal that we would someday consolidate it to one company and either be a public corporation or else sell out to another company.

[Inaudible]

Every year we added sales people. We tried to average 7% more people, more salespeople. Every year. Today we have over 2,500 people in the field and sales representatives.

Wow. Okay. So yeah, you’ve got 2,500 people in the, in the field is either out there selling 670,000 customers. A one, one yacht, one superyacht superyacht by that, this is not a little dinghy out there. It’s a super superyacht. So when did you, when did you get inspired to write your new book? I mean, what, tell, tell me, so tell us about your new book. You know, what’s it called? What inspired you to write this new book?

Okay. The book is called built, not born, built that born. We picked that title because it’s sort of very well described. The process wasn’t born with any money, wasn’t, didn’t inherit any, et cetera, et cetera. Built it from scratch. When I started the company, I had $3,000 and three credit cards in my name. People have been asking me to write a book and by first thought it was the right amount of biography, but in talking to various publishers, one of them suggested, why don’t you write a business book first? And I said, you, that might be a good idea. And I, while I’m talking to him on the phone, I started writing down a table of contents about what I would want to say. And it flowed real easy. So I decided to write the business book. Harper Collins is the publisher and it’s being released in middle of February.

I would like to get your take on this because your book title is cause it’s a built, not born a self made billionaires, no nonsense guide for entrepreneurs. Nosy. I’m going to ask, it’s like a passive aggressive mentorship session for you right now. So I’m going to, okay. I’ve got a friend Tom hypothetically. He goes by last name. Zellner not this cylinder, but a different one. And he only owns about 10% of a bank and he’s struggling. He’s got the, the one optometrist, the optometry clinic that’s doing the most revenue in, in his state. Z, not you as someone else and a very successful auto auction and other companies. And he wants to build he wants to get to the BS zone. He wants to go from the M zone to the BS zone, from the millionaire status to the billionaire status. What tip would you have for my friend? Not, not, not, not our cohost here, not you, but someone else. What tip would you have for somebody who’s already a multimillionaire who wants to become a billionaire?

Well, the way we did it and the way I probably would advise people to do it is do it and plateaus. You know it. When Paychex had 50,000 clients, we set our site and 100,000 clients. Then when we got to a hundred, we set our sights on two 50 and so forth until we got it up to the point that we’re at a, the other thing, we did a very good job, a combination of luck and good management. We picked a market that’s huge. You know, the number of small businesses in the United States is at least 12 to 15 million of them in today. Even today with our success and other company’s successes, you had all the payroll processes together. We still only have about 20% of the market. So it’s a huge marketplace. So that’s one of the things that served us very, very well. But the other thing is we didn’t try to do it in big gulps. We did it in small plateaus. And when you have a product that you know works and you can make money at it, that’s a good way to go.

So how do you differentiate yourself? So if 80% of that, like you said, you had 20% of the, of the available marketplace how many of that do you know how many of the others are using a payroll company? And how do you differentiate from those other payroll companies?

Well, if there’s a, let’s say there’s 15 million businesses and that means payroll processes all together have about 3 million. And I think that’s pretty close to being very accurate. How do we differentiate ourselves? Well, I, you’re a client, I hope you feel you’d get very personal service and we’re very responsive.

Yes.

We have software that I think is very comprehensive and fits most situations so people don’t need to change services. We’re, as you said earlier, we price fairly low so that we’re a very competitive in that area. The poor thing I would say is their sales organization is very well trained in the product and the product knowledge. You’re not going to buy a payroll service from a salesperson that comes in your door and doesn’t seem to know what they’re talking about and not very confident. So we spend a lot of time and effort training our sales people on our service, how it works and the benefits to the customer.

He knows he, I’ll say this as far as paychecks, I have my, my three reasons I love these guys. One is the pricing is unbelievable. Two of them are super accurate and I mean, the price, the accuracy, their thing is they say yes all the time. You call and say, I have a question. And they go, yes, how can I help you? And I’ve dealt with other, other, other payroll companies. It’s that you’ve probably dealt with this too where they can’t give you a straight answer. No one calls you back. I mean, these guys do it right. I, I really, I really do like this and I think you a Tom are, are a source of source of wisdom on a lot of things. But in your book you write about some stuff that I think is controversial and so I would like to bring up some of the things. And if you, if you don’t like the question, you just hang up and that’ll be our little code Z that is, here we go. Fair enough. In your book, you talked about, we used to, you’re talking about writing a prenuptial or even a postnuptial agreement and it’s very critical to any business owner. You’re saying it’s very critical for any business owner to have a prenuptial and a postnuptial agreement. Could you explain what a prenuptial, when a postnuptial agreement is and why you think it’s important for any business owner?

Well, a prenuptial agreement is an agreement between two parties who are about to get married as to how they would distribute assets that they accumulate or come in with before. At the time of the marriage. Postnup is just an agreement written after a marriage when the two parties decide it’s appropriate. Here’s why it’s so important. I’m sure you’ve heard of business people that have gone into business. Nope. Premier premarital prenuptial agreement or post, they go into business, they’re successful. And then one day they decide that they’re going to split up. Well, that puts the entrepreneur in a real bad situation because chances are he’s going to have to make some sort of payments to this, to the other spouse. And that may require that the business be sold. And there you are now in a situation where the business has to be sold. You’re not going to be selling it at the time. You want to sell it most naturally or at a time when you can maximize the sale price. So it ends up being a real tussle and sometimes could, you know, make a divorce proceeding very, very sensitive and very, very different.

You know, what I’m going to do is we have some listeners out there who are saying this right away. I can, I can hear the listeners, he’s saying this right now, they’re going, but what would be the point of being married to somebody? You know, Tom Golisano, if you’re not committed to it, working out, somebody out there is thinking this and they’re going by signing a prenuptial. I am, I’m a, I’m before it even starts conceding that it’s not going to work out. I know that’s the argument people are saying out there. What would you say to that?

I would say a prenup or a postnup is a contingency item. Okay. We also have to remember 50% of the marriages today in the United States of America ended up in divorce. And that’s a reality. You’ve got to, you got to face keep in mind, you know, 60, 70, or a hundred years ago when the life expectancy was so different than it is today, or 200 years ago. But today, marriage is being so long and people changing their desires changed, their motivation to change. And a postnup or a prenup will, you know, take care of that continuously so that when the time comes, unfortunately, if it does come it’ll be more easily settled.

Oh, Tom, I definitely get to prenup. I’ve, I’ve heard about those and know about those. That’s, I understand, but postnup that’s kind of where this is coming the first times I’ve heard about that. Mu, how do you, how do you break that? How do you bring that up over a, what you do at cocktail hour and like, Hey, Hey honey, guess what I think is a great idea. You know, we’re together. Things are working out. Well,

My buddy, the billionaire Tom Golisano, the founder of paychecks, he asked me to eat. He told us me the advice he’s given us his eye on this book. I opened up here. It says we should get together and talk about how we’re going to break it up cause it’s a chord flip. No, I get, I totally get it. But I mean that’s, that’s a super move right there. Postnup that’s kind of a super move cause

Or have a a business person. He has to be a pretty good negotiator too.

There you go. That’s true. Okay. Now tell, I have another question for you here. In your book, again, this is a new book built, not born a self made billionaires, no nonsense guide for entrepreneurs. In the, in the book you talk about this idea of going against the grain to generate opportunities. Are you talking about petting a cat backwards or what are you talking about?

Well, I thought I gave you an example earlier. The payroll processing industry back in the sixties and seventies was focused on a much different market that Paychex has focused on. It went after larger companies, paychecks. Our desire was to go after the low end of the market for two reasons. Number one, there were so many more of them, more small businesses than larger business. So theirs would fall into the Paychex range. And secondly, and here’s a little bit of the key to paychecks success, the way payroll processors process is they charge you per check created. In other words, one for every one of your employees, the more employees you have on the payroll, the lesser per check you’re going to pay to a payroll processor. In other words, if you’re a hundred person payroll, you may only pay 50 cents. I’m just pulling these numbers out of the air. He may only pay 50 cents a check, but if you’re a five person payroll, your total bill might be $7 which means you’re paying a dollar 40th check.

The revenue from 10 10 person payrolls is two and a half times more than it would be for a hundred person payroll to get that revenue. 10 tens would be two and a half times greater than a hundred person payroll. Now I think it’s easier to sell 10 tens in one 100 because all the other processors are going after those large clients. Yeah, so it’s much easier to sell the 10 cents and the respective overhead is not consistent with the fact that it’s 10 companies instead of one another, which we can operate 10 we can do 10 payrolls almost as easily as we can do one, 100

There’s gotta be something that you do or worldview that worldviews that you have that most people don’t have because a lot of people just don’t become millionaires, let alone a billionaires. Do you have, maybe in addition to your book, do you have maybe some books that you’d recommend or do you have a kind of a, a pithy quote that you’d like to share with people? Or what’s your big tip for our listeners out there?

Well, I’ll tell you, I’ll give you one. Some people asked me if I’ve ever had a mentor. Yeah. I don’t think I’ve ever had a mentor. What I’ve had is a bunch of negative mentors. In other words, as a salesperson for Paychex and for the company I sold before and the company that a Burroughs corporation, I was exposed to a lot of small business people and I learned a lot more watching them operate when they were doing well rather than when they were doing great. So I learned watching people make mistakes. I think that helped the most. Also I think I did a pretty good job of keeping the company focused both on product line and and achieving sales quotas. That was number one, importance to our management team that we always met our sales quarters and sales goals.

Tom Golisano, I’ve got a question for you. If you could go back, say the mid seventies, you had, you got paychecks started in 71, you’ve kind of hit that critical mass of a runner at that point where you, you said in your interview earlier you said it looks like you’re going to make it, your friends had, it looks like you’re going to make it. If you could go back to that timeframe going back in the old time machine and talk to yourself, what advice, what would you say to yourself at that time?

Well, number of things I’ll give you one is as soon as we were in public, I came out with a product line that was much different than what we were doing. It was a similar to monster.com but it was before the internet. Now that we’ve made an investment in it, but the sad part of it, the bad part of it was wall street did not like us going into a diversified business, much different than what we were doing so soon after in public. So our stock price suffered for some period of time because of that. Now, after a year, I said, that’s enough and we closed it down. Secondly, you know, I said we brought in 10 partners and six franchisees. I probably could have done it with fewer people. It just made their day. Their territory’s a larger than I would have had less people to deal with. Yeah, that’s probably positive.

There you go. And now on our, on a personal note, I’ve been, I’ve been looking at your bio and Kendra and some research on you, a very interesting life you’ve led. But if you could go back, say a few years a go and you could either one owner professional NFL football team, or be the governor of New York, which one would you choose?

Well, I’ve never wanted it own an NFL team. You know, I owned the hockey team, the Buffalo Sabres, and that was a great experience. Over an eight year period. I did want to be governor. I tried to be governor three times as an independent in New York state, which is a tough road to hoe. The, the two major parties have so much strength in New York state. It’s hard for an independent to get elected, but I would’ve loved that challenge back then. I really would have.

I have, I have, I have a couple of final questions here. You’ve, I’ve noticed you’ve donated throughout your career, $250 million. Is that correct? You’ve donated over $250 million to charities thus far. Is that right?

Actually it’s over 300 million now.

300 million. What kind of charities do you, do you give to and what kind of charities? I mean, what do you look for in the charities that you give back to?

Okay. Actually there’s two categories of charities. I have a son that’s intellectually developmentally disabled and Stephen is now in his early fifties. And, but because of his experience we’ve spent, he and his mother, we’ve given quite a bit to organizations that deal with people with developmental disabilities. We have a foundation set up in our name. It gives out approximately $2 million a year through to the foundation. Also, there’s a lot of organizations in any community, hospitals and schools that type of thing. And we’ve probably hit most of them at least I know we’ve hit most of them in the Rochester, New York area. We’re now, we’re expanding down in Southwest Florida. So in, in developed individuals with developmental disabilities is, is a major one. But we also help as many school district schools, colleges and universities and hospitals as we can. We have three children’s hospitals named after us. One and one in Rochester, one in Syracuse and one in Naples.

Well, I’m not sure what a series Z of a poor life choices that, that Tom made to end up on our show. But this is when we are equipped. We’ve had Wolfgang puck on the show. And I know he was confused as to how it happened. We’ve had John Maxwell on the show. We’ve had so many great people, but this was one of my favorite interviews. This was awesome, Tom. Thank you so much. Yeah, thanks.

I appreciate doing it.

Hey, well I’ll tell you what, if we’re ever in the Naples, Florida area we’re going to bring out our megaphone. We have a megaphone, does he? Do we not have a megaphone in the studio? You actually do have a megaphone and if you hear some guys run around the, the, the, the water shore area Harbor looking for Laurel.

No. We’re looking for a former owner of the Buffalo Sabres here. We’re looking for Noah Sono. Tom Golisano,

If you hear us just wave at us and that way we’ll know that you’ve know duck and run.

Can you give me a call and I’ll buy you lunch.

Oh no.

And you are a customer, right?

We are. Oh yeah, write it off. Yeah, even better. We’re doing lunch. I’m coming out there and Tom coming in. Hi. That right there was a blasty blast. I encourage everybody out there. If you are stuck in a rut and you don’t know how to grow your business and you can’t afford one on one coaching and you can’t afford to get to a workshop, why don’t you check out our online school? It’s just $19 a month and you go to thrive time show.com and calm. You click on the business school button. So again, go to thrive time show.com and click on the business school button and there for just $19 a month you can have access to millionaires and mentors via video people. Super, super success stories. Just like today’s guest. I mean, if you want access to Michael Levine, the world’s top branding and PR expert, or Lee Cockerell, the former executive vice president of Walt Disney world resorts who wants managed 40,000 employees at one time and 1 million customers per week, you can have access to all that for just $19 a month.

Check it out today by going to thrive time show.com and clicking on the business school button and there you can subscribe. You can check it out and if you have enough money to do it, if you’ve got the money in your pocket, I would encourage you to pick up a copy of Tom Golisano’s new book. He doesn’t need your money, but he does need to share the wisdom that he has learned over the years. I mean, this guy’s given away over $300 million of, of money to charities and he’s written a book, not to make a quick profit off of you, but to teach you the skills and the principles that he’s learned in route to building $1 billion business, a $28 billion business known as paychecks. His new book is called built, not born self made billionaires, no nonsense guide for entrepreneurs. Check it out today. Again, it’s built, not born a self made billionaires, no nonsense guide for entrepreneurs. And now if any further ado, we liked in each and every show with a boom, which stands for big, overwhelming optimistic momentum because we know that’s what it takes to build a successful company. What if you could gain access to download each and every book that I’ve ever written for free? Well that’d be terrible cause I don’t like you. Okay, we’re making a big assumption here,

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