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Michael Alter hands out Payday bars during the so-called "money days" at Skokie's SurePayroll Inc., deadline crunches that occur twice each month as the Internet firm processes $2.5 billion in pay checks for 10,000 small businesses.
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The snack doubles as a playful reminder to SurePayroll's 75 employees of their company's raison d'être.

Mr. Alter, 36, finally gets a shot at running the company he helped build into the nation's fifth-largest payroll processor when he becomes CEO of SurePayroll this week.

When he joined the startup as its fifth hire in 1999, SurePayroll's business plan was little more than an idea and a blank sheet of paper. The opportunity to build a company from the ground up was enticing, says Mr. Alter, since he'd spent much of the previous five years doling out advice to entrepreneurs as a consultant for McKinsey & Co.

"It was exhilarating," recalls Mr. Alter, who has served as vice-president of business development since he joined the company. "I was no longer making charts for a living. It was a chance to roll up my sleeves and create something from nothing."

The firm's three founders, Scott Wald, George Colis and Troy Henikoff, saw an untapped, potentially rich niche in automating the payrolls of the nation's small businesses.

Owners of companies with fewer than 100 employees had a choice of cutting checks and reporting taxes themselves, or phoning their biweekly payrolls to industry giants like New Jersey-based Automatic Data Processing Inc. (ADP) - a cumbersome process ADP has since automated.

"I just hated those calls," says Ken Gaebler, a SurePayroll customer who's a serial entrepreneur and president of Gaebler Ventures LLC, a Chicago-based Internet incubator. "Every Friday before payroll, you'd have to call into the payroll representative and read (the employee roster) to them line by line."

SurePayroll's offering, which is priced at 30% to 50% less than its competitors, takes just minutes to update on the computer screen. Mr. Alter says a company with 10 employees pays $950 per year for the service.

Like many other late-1990s entrepreneurs, SurePayroll's foun-ders and management team saw the nation's 10 million small employers as a potential gold mine for business services delivered via the Internet.

But SurePayroll succeeded where the vast majority of business-to-business companies failed, largely as a result of an early deal that Mr. Alter brokered with California's Wells Fargo & Co., the nation's leading small business lender at the time with 1.5 million customers.

Under the arrangement, Wells Fargo invested an undisclosed sum in SurePayroll. The Skokie company designed a private-label version of its payroll processing, altering its look, feel and customer service to match other Wells Fargo Web offerings. Mr. Alter won't say how much of SurePayroll's business comes through Wells Fargo.

SurePayroll doesn't disclose revenues or profits, but Mr. Alter says the company has more than doubled its customer base, to 10,000 from 4,500, over the past year by marketing its offering through other partners with a sizable small business clientele, including Chicago's LaSalle Bank N.A. and the American Dental Assn. and Bloomington-based State Farm Insurance Cos.

Mr. Alter, who holds an MBA from Harvard University and a bachelor's degree in economics from Northwestern University, anticipates similar results for 2004.

"We're going to do it the same way we've always done it, by adding a few new large channel partners and continuing to innovate a whole new series of (payroll) functions."

Copyright © 2003. Crain's Chicago Business.