On the wealthy CEO B. Thomas Golisano: "Look," Trafton says, "billionaires are just like you and me, they just do different things for fun. He’s spent tens of millions of his own dollars running an almost hopeless campaign [for New York governor]. But the investment community is quite enamored with him. Paychex has had incredible earnings and cash-flow growth rates for 20-plus years, and Tom’s been at the helm of that."

    On the quality of the Paychex workforce: Trafton says that as Paychex’s stock has skyrocketed, employees have reaped the benefits. "It’s a fantastic company," Trafton says, "very well run, and Golisano is looked at very positively by investors and by his employees. There are a lot of millionaires at the company that owe him. He’s got a very strong, very deep management team. A lot of middle managers at Paychex are given a lot of authority, and they make a lot of money. He’s very well respected internally, within the Paychex sales force in particular. The sales force is very aggressive and very high performance."

    On the company’s strengths: Trafton says that Paychex still has a large market of businesses to tap into. "The beauty of Paychex," he says, "is that there are millions of small employers, and most of them still do payroll in-house--gas stations, restaurants, liquor stores. It’s so cheap for Paychex to take it over and take over the liability and do it correctly." In many companies, Trafton says, the small-business owner doesn’t want employees to know how much everyone makes, so the owner does payroll alone. This is a time-consuming hassle that Paychex can help take off a business owner’s desk. "Paychex is at the right end of the market with the right kind of services; they’re paying a nice dividend and growing very quickly. They’re more profitable than Microsoft."

    On Paychex’s challenges, and the competition: Automatic Data Processing, Inc., a leader in payroll, human resources, and benefits, has a division that focuses on small companies, and the firm has a record of consistent growth that most any corporation would envy. Still, Trafton says that ADP’s weaknesses leave a big opening for the company. "Paychex has very high client retention," he says, "unlike ADP, which has a reputation for poor service and has very high client turnover. Paychex is very client-centric and is very efficient."

    In addition to ADP, Paychex is competing with small businesses and local CPAs around the country. It also has Intuit nipping at its heels, trying to succeed at the payroll business by buying up payroll-processing companies. Other Paychex competitors include Fidelity and Ceridian.

    On top of that, Paychex has more obstacles to face, Trafton says. First, unemployment is up, which means fewer checks to process. Second, there are fewer new businesses starting up, and small businesses are Paychex’s sweet spot. Last, interest rates keep getting lower, which hits Paychex’s "float"--the interest it generates while it holds on to a company’s tax payments, waiting to send them to the IRS. In fact, says Trafton, "future upside [for the company’s business] is in the hands of the Paychex sales force, but probably more so in the hands of the Fed and its interest-rate policy."