Paycom's reply to:
I am currently an employee at Paycom and i think there is definetly a bright future for Paycom. There are also alot of things Paycom needs to improve on. I am going to list a couple of things I think Paycom needs to change that will help us Paycom in the long run.
I was doing some calculations on a revenue per employee basis compared with other current public payroll companies. We (Paycom) as a company has somewhere around 200 employees and we produced 14 million dollars in revenue last fiscal year. It calculates to $70,000 of revenue produced per employee. ADP produced 9 Billion dollars of revenue last fiscal and employees 47,000 people. ADP produced $180,000 of revenue per employee. Paychex is another payroll company that is very similiar to Paycom. It employs 12,200 people and it produced 2 Billion dollars of revenue last fiscal year. The calculations come out to be $163,000 of revenue per employee.
What all these numbers mean is that Paycom running about 2-3 times less efficient then other current payroll companies. This is not going to help Paycom in the long run. Paycom really needs to look at their strategies and figure out what they need to make Paycom more effecient. They really need to find out if having 99% client retention is really something that can be actually cost effecient. What good does it do to go public and then your 1st quarter operatin margin is 3 times worse then your competitors. This will catch investors eyes and not in a good way.
As a payroll specialist I find it too easy for customers to call me and ask questions when I know if they have logged in and tried they could of figured it out theirself. This is really great and nice for the customer, but it is not great for all the specialists that have to take all those kind of calls all day and can get all of our tax issues done on time. I think we are very understaffed in the first place. Having this strategy might produce enough revenue in the short term, but its not good for the long term health of the company. In five years, if Paycom ever goes public. We will run into huge operating margin problem and also see an employee retention problem because all of it will stem from our 99% client retention (spoiling the client) strategy.