As their 'new' payroll service brings them on-board, it is typically a move off of ADP or Paychex and toward a smaller, more customer-centric service, which is great.
Downside? When the 'Acquisition Target' payroll service bureau sells - the payroll clients go right back to the service they left, and ADP is the most likely company to be doing the acquiring.
This generally puts a sour look on the average business owner's face.
So, what are the warning signs that your new, smaller, friendlier payroll service may have a secret 'For Sale' sign taped to the back of their door?
Three Core Points:
#1 Investors Own the Company
#2 Previous History of Acquisitions in C-Level folks' Resume
#3 Abnormally Rapid Growth
To Point #1: If investors own the company, they are likely in it to turn & burn the investment. Once they see a tidy profit to be made (or - in the case of Perquest, a big loss to avoid), they are out - and so are you.
To Point #2: If the management team has had previous history of their companies being acquired, it has to be very tempting to build the business specifically as a target for acquisition.
to Point #3: Building on #2, if the management team is tempted - they may throw away money, acquiring clients by using deep discounts. This bloats up the numbers, but the clients who got a deal may not feel so good about it when they are sold to ADP.
So, as a business owner, here are a couple of questions to get you started as you avoid a potential return to ADP or Paychex:
- "I love your solution for my business' payroll and HR needs. Can you tell me about your company's history?"
- "How many clients do you have?"
- "How many new clients do you bring aboard each year?"