In this segment, the speaker reflects on the painful but instructive early days of integrating acquired payroll clients. He describes how, despite initial anger, none of the 350 acquired clients were lost, and many later praised the service, giving him confidence to pursue further acquisitions. He then identifies three major forces shaping consolidation in the payroll industry: (1) Demographic pressure – a massive wave of baby‑boomers retiring (about 10,000 per day) creates liquidity needs for long‑standing owners; (2) Technological disruption – a "tsunami of technology" forces older firms, often run by owners in their 60s, to sell because they cannot upgrade or switch software; (3) Emerging regulation – recent high‑profile compliance incidents (e.g., payroll‑HR issues in Baltimore and Indiana) signal a looming regulatory regime that will raise costs and may push small providers out of the market. These factors together explain why the speaker sees strong opportunities for consolidation.
Chapters
It was painful. It was difficult. We learned a lot. The first 30 to 45 days with those clients, one of the things we learned in that very early time was that clients don't ask for change. They didn't ask for the change. To begin with, they're a bit angry. I can remember many angry calls with certain clients where I I'd asked them to give us a chance, let us earn our stripes, and if we fail, we won't charge them a nickel and we'll help them to move off. Those 350 clients, we did not lose one client. Wow. 60 days later, I was getting calls from some of those same clients that were giving me an ass-whipping and apologizing and telling me just how wonderful we really were and that everything that we said we'd do and more, we did. So that kind of gave me an awful lot of confidence, in a sense, to move forward. And what I observed generally within our industry was a couple of things. First off, demographics. Demographically, the timing is playing very well to consolidation. There's a lot of people out there my age that have been in the business 25 years that are now looking for the door. They've built their business. They now have to figure out how to get the equity out of it. Where's the liquidity event for them? So today, I think there's a statistic out there that, that anybody can look to that says there's about 10,000 baby boomers retiring every day. So demographically, timing is good. The second, uh, factor that I think is very good in our favor is, uh, technology. I did an acquisition, I think it was in 2018, and the sellers of that acquisition coined a phrase for me that I love. When I asked them, why are you selling your business? Because I always ask. And they said to me, the tsunami of technology is beginning to wash over us. We're going to end up losing clients because we can't do things. And for us to upgrade software, whether go to another licensor or— it's just not in the cards. We're in our mid to late 60s, and it's not where we want to be. Those two factors right there are contributing heavily to the opportunity that exists. There's a third factor now that is beginning to really take hold, and that's regulation. In our industry, which has operated for many, many years with almost virtually no regulation, is now on the precipice of a great deal of regulation. We're going to see it. Happenings like my payroll HR out of Baltimore and the event that happened in Indiana has sent up extreme red flags to legislators all over the country. And we're going to see a much heavier degree of regulation within our industry, whether it's money transmitter laws that come into effect, at a minimum, it's going to accelerate the cost of business. Cost of doing business is going to get higher. Potentially, it could create such regulation that it'll be very much impossible for the small provider to continue.
