The timing could not have been better for Ralph Fornuto to leave Paychex Inc. and, with partner James Williams, form USA Payroll Inc.
He was 31, and after working at Paychex for nine years he was itching to strike out on his own. As a single man, Fornuto believed that if he did not make a move then, his window of opportunity would soon close. Marriage and family would come later.
He and Williams left Paychex in 1994 and licensed the software that would allow them to start their own payroll company.
The first year was difficult for Fornuto, the company’s president and CEO. He logged 16-hour days, approaching prospective clients who often were wary about working with such a young company. He sold his house and moved into a small apartment-in part to hedge his bets, knowing that if the company did not make it, "they wouldn’t have that to take away from me."
But he tried not to let those negative thoughts enter his mind.
"It was the right time to do it," says Fornuto, now 47. "I had no financial responsibilities to anyone other than myself. … I just felt the time was now. I needed to go do it. I’m more of an optimistic person, so I never looked at the bad of it."
The risk paid off. Today USA Payroll has close to 2,500 clients, mostly local, and will process 70,000 payrolls and 1.3 million checks this year. The company has 40 employees and has been growing at a consistent 10 percent to 15 percent clip each year. Revenue for the past year surpassed $5 million.
Fornuto had met Williams nine years before they founded USA Payroll, when Williams hired Fornuto as a recent college graduate to work in a sales capacity. Or so Williams thought.
"I was the national sales manager for the East Coast at Paychex, and I hired Ralph right out of St. John Fisher," says Williams, who has retired from USA Payroll but still works on several projects. "It was interesting because he accepted the job and then called me back a week later and told me he couldn’t. He was a placekicker in college and now had an opportunity to try out for the World Football League."
Fornuto, a two-time All-American kicker in college, had helped St. John Fisher College to a 31-8 record during his career on the club team. In his sophomore season the team won the national championship, and Fornuto holds the club program’s all-time scoring record. After trying his hand at his dream, he returned to Williams.
"He tried out for the Houston team and then tried out for the Giants and didn’t make either team," Williams says. "He called me back and said, ‘Those guys were really good.’ So I hired him as a salesman."
On their own
The idea of starting a payroll company came from the work Fornuto did for Paychex. He and Williams were tasked with looking into other payroll companies that Paychex could buy, and in doing so they came across some that could be more flexible than the Penfield-based payroll giant. The men thought they could do the same.
Paychex could not handle unlimited earnings and deduction counts, which USA Payroll could through the software, Fornuto says. The ability to handle agency checks and child support payments was also much greater at USA Payroll, he notes. The company’s focus was on offering a more specialized group of services, versus the more rigid packages larger providers offered.
"This software allowed us to build the box around the needs of the client, rather than fitting everyone into a certain box," Fornuto says. It was Election Day 1993 when the two met with Paychex founder Thomas Golisano, the year he first ran for governor. They explained the venture they planned to start and signed non-compete clauses. Williams recalls that the departure was amicable and that Golisano understood the spirit that drove them to start their own company, just as he had in 1971.
Their company got some early breaks. They were able to find a work space through the accounting firm they worked with, growing out of it in just six months.
Just a few years into the business, Paychex bought the company from which USA Payroll was licensing its software, giving USA Payroll more credibility with local clients. Ironically, Williams and Fornuto had approached Paychex, when they still worked there, and suggested that the company buy the platform. But Paychex was working on its own software then and was not interested.
By the end of the first year, USA Payroll had 70 clients but lacked the capacity to grow much larger. Then, in 1997, Canandaigua National Bank & Trust approached the company, seeking to buy it. Williams notes that the pair had ambitions for growing the company themselves and were not interested in selling it outright, but they did sell a 20 percent stake to CNB.
"That infused us with the cash we needed so we could hire a branch manager and build the infrastructure necessary to fill the client base faster than we had in the past," Fornuto says. One of their first hires was Joe Fiannaca, a former Paychex co-worker. It was Fornuto’s and Williams’ passion that drew him to USA Payroll, along with the opportunity to strike out as they had.
"I had a great job at Paychex, was recently married, and my wife had a good job," says Fiannaca, vice president of operations at USA Payroll. "I knew Ralph and Jim from Paychex, and I knew they had an opening for people to run the operations. Really what attracted me to them was knowing what kind of people they were and the potential they had."
The funding from CNB also allowed USA Payroll to move into a larger facility and purchase a small group of clients. Having the bank as a shareholder added another layer of credibility and helped give the company a more formalized structure with board meetings and financial oversight.
Still, the early going was often difficult. Many potential clients said they would rather wait until the company had established itself for at least a year before signing on.
With little cash to work with before CNB came aboard, Fornuto joined Williams in doing just about everything in the company-a stretch for the two, who had worked in a sales capacity. Now they had to add accounting and setting up new clients. Even the task of setting up the computers was a challenge for Fornuto, who never had so much as a desktop PC at Paychex.
But Fornuto, who had played kicker, linebacker, defensive back, fullback and tight end for St. John Fisher, took the challenge in stride.
"We said, ‘Let’s just make sure we can make things work operationally and we understand the software and we’re doing the right things at the end of the quarter and the year,’" Fornuto said.
Today, USA Payroll again faces one of the problems it had in its first six months: It has grown too large for its space, an office on East Henrietta Road in Brighton, across from the Monroe Community College campus.
The company’s client base is mostly local and focuses on companies with 10 to 100 employees. Fornuto concedes that USA Payroll does not have the array of services that a larger provider might possess, but he says the ability to tailor these features for clients has been a major draw.
Customer service also has been a priority. The main service employee for a client can help with the entire process, so the client can get all answers from one person rather than having to call different departments.
"I think the personalization we’re able to deliver was maybe a little different than the larger companies that do what we do," Fornuto says.
They have been adding products and services along the way, including a workers’ compensation plan that lets clients spread premiums over the course of the year, and some human resources activities, such as customized handbooks and employee assistance programs. USA Payroll also offers a hotline that connects companies with HR specialists, a luxury generally not available to the smaller clients USA Payroll works with.
The company has had reliable growth each year of 10 percent and 15 percent, except for 2001 and the economic downturn that followed the terrorist attacks of Sept. 11. Fornuto says they have the capacity to grow at a faster pace but would do so at the risk of losing some of the service quality that is one of the company’s strongest features.
As it is, he expects the company to double its number of employees within the next six years. Williams predicts that USA Payroll will grow to 5,000 to 6,000 clients over the next decade, mostly in the Rochester market but also in places such as Orlando and Atlanta, where USA Payroll has sales offices.
Even during the recession this year the company has been able to make gains in new clients and services, though Fornuto decided not to raise any prices this year with clients already cash-strapped.
Economic conditions have had an effect on the work USA Payroll does with its clients. Checks per client have fallen from last year, and many companies stopped employer 401(k) matches. Because USA Payroll works with so many smaller companies, Fornuto has been able to see the different ways these clients respond to economic conditions.
"With the smaller businesses there’s a much closer attachment to your employees than in larger ones," he says. "The smaller business owners will take a hit personally before they let an employee who has been there 10 or 15 years walk through the door."
This proximity to small businesses has enabled USA Payroll to keep its ear to the ground and pick up reverberations from the recession and stock market collapse last year. Fornuto says he was surprised that it took as long as it did for the major signs to trickle in this past January, and when the recovery takes effect he will start to see it through the clients. But it has not happened yet.
At USA Payroll, Fornuto strives to create an atmosphere that is casual and supportive of employees with families. As a father with three young daughters, Fornuto says he does not miss any of their activities and does not expect his employees to miss their children’s activities, either.
After years of 16-hour days and pulling double and triple duty, Fornuto can devote time to his daughters and to his own hobbies. He is a fan of Formula One racing, which is apparent from the racing posters on his office wall and the ringtone of his cell phone-the sound of cars zipping past on a track.
Much of his free time that is not spent driving to karate or dance lessons is spent on the golf course. Fornuto also maintains a strong connection to St. John Fisher, where he was inducted into the athletics Hall of Fame in 2007. USA Payroll is the main sponsor of the Fisher Fall Classic, a golf tournament that raises funds to support the college’s athletic programs.
The company’s focus on providing a healthy work-life balance for employees has in turn drawn their loyalty. Turnover is low, and there is a large contingent of workers who remain from the company’s early years.
"Ralph is the kind of boss you want to work for, really caring about everything he does, and it shows with his staff," Fiannaca says.
Position: President and CEO, USA Payroll Inc.
Education: B.S. in business management, St. John Fisher College, 1984
Family: Daughters Francesca, 7; Marlena, 6; and Gabriella, 5
Activities: Golf, following Formula One racing
Quote: "It was the right time to do it. I had no financial responsibilities to anyone other than myself. … I just felt the time was now. I needed to go do it. I’m more of an optimistic person, so I never looked at the bad of it."
email@example.com / 585-546-8303
9/25/09 (c) 2009 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail firstname.lastname@example.org.