From Pawn Shop to Profits

Around the time that the TwinWest Chamber of Commerce recognized Joe Reilly as the Emerging Entrepreneur of the Year in 1999, the businessman was visiting pawn shops, borrowing money from friends, maxing out four credit cards and getting a third mortgage on his house.

“My whole philosophy, then and now, is that you have to believe in yourself,” he says. “Everyone hears that a million times in business, but it’s really true. You have to do what needs to be done to survive.” Reilly notes that in ramping up his company, Payroll Control Systems (PCS), he’s never missed an employee payroll or a tax payment, and has always paid vendors, but he did have to go without a salary for 18 months. When he cut his first paycheck for $2,000, he had to hold it for two weeks until he had the funds, he notes with a laugh.

“I really scrambled for so long, but I never lost faith that I could build a strong business, and that’s exactly what ended up happening,” he says. With $5 million in revenue for 2010, 1,400 customers and a 97 percent client retention rate, Reilly definitely made good on his promise to himself, and others have recognized his work as well: Recently, he was named the 2010 TwinWest Chamber of Commerce Entrepreneur of the Year.

Before starting PCS in 1996, at the age of 53, Reilly spent nearly 20 years at Control Data Corporation, working part of that time with the technology behemoth’s payroll systems. After a spin through other career directions, including earning a culinary arts certificate, Reilly returned to payroll when a former colleague started a business in that industry. When the company fizzled after just a year, Reilly decided to take a chance and start his own firm with money garnered from a second mortgage. PCS is unique, he believes, and it even draws on the creativity he learned as a chef.

“To some extent, those two professions do have some similarity, surprising as that might be,” he says. “There’s creativity in solving the needs of customers, the same as you would catering to the tastes of guests.” He adds that payroll can be sold as a commodity, but that everyone can do direct-deposit services and tax payments. PCS differs by being a partner to clients, he notes, and helping businesses find personalized solutions to their payroll issues. He says, “We’re not the giant in the industry that needs to operate on volume, so we’re able to differentiate ourselves with service.”

In terms of the secret to his success, Reilly believes it’s imperative to hire the right people, then get out of the way so they can do their jobs. Although he enjoys talking about the old pawn shop days, Reilly believes revenue isn’t the most vital part of PCS—it’s employee satisfaction.

“I get calls from big players all the time asking about buying the company, and I turn them down,” he says. “I want to keep the company the way I built it, with respect for employees and loyalty in return. It gives me tremendous pride to walk down the hallway because I know my employees are happy, I’ve strived to let them know they’re important and I couldn’t hand the company over to someone who wouldn’t keep that feeling going.”

Talking Points/Advice

- Recognize that you can't do it alone: Small business owners often assume that they have to do everything themselves, but they don't realize that other people want to help them succeed, and to be part of that success. Accept help where it's offered, and don't assume you're in it by yourself.

- Understand the importance of maintaining proper cash flow: If you look at businesses that don't survive, they usually failed because they didn't have the money to keep it going. They just get started rolling, finally, and then have to close down because they don't have the financial resources. Cash is king, and do what you have to in order to get enough money to keep the business alive.

- Take a chance: You can't get anywhere unless you're willing to step to the edge on occasion. That's how you can get past everybody else, by taking risks in order to move forward.

BIZ BRIEFING
Payroll Control Systems
Headquarters: Minneapolis
Inception: 1996
Employees: 43
Revenue: $5 million
Description: Provider of payroll, timekeeping and human resource management services
Website: pcspayroll.com

LEADER PROFILE
Name: Joe Reilly
Title: Founder, CEO
Age: 68
First job: IBM
Education: St. Joseph's College, Indiana
Family: Wife, Pat