Progressive Prerogative

Employee leasing industry executive Clint Burgess has an unshakeable confidence in a rebounding economy.

He needs it, given his aggressive approach to reshaping Progressive Employer Management Co. The firm is one of the Sarasota-Bradenton region's largest employee leasing firms, formally called professional employer organizations. Burgess was named president and chief operating officer in January of the firm, previously named Progressive Employer Services.

In his first six months, Burgess has hired four senior executives, opened at least five new offices, from Tampa to West Palm Beach and Dallas to Orlando, replaced computers for its 150 or so internal employees, and expanded the firm's lease on its 18,000-square-foot headquarters in southern Manatee County by 25%. All told, it's a multimillion-dollar outlay in people, technology and office space. “It's a big investment in the company,” Burgess says.

Progressive handles payroll, workers' compensation, employee benefits and human resource services for a variety of businesses, mostly companies with five to 25 employees. The firm had $74 million in revenues in 2013, up 8.8% from 2012, when it had $68 million.

Burgess says the firm's clients are “blue collar and gray collar, with a smattering of white collar.” That covers construction, hospitality and service sectors. Progressive's geographic targets stretch from Florida to the Carolinas to Texas, and most of the states in between. The firm, in total, oversees around 40,000 worksite employees — a figure Burgess would like to see hit 75,000 by 2019.

That figure isn't only a key internal goal. It also gives the firm the kind of heft and scalability to attract outside private equity and buyout firms. Most employee leasing companies charge clients fees on a per-employee basis.

Progressive's current majority owners, West Palm Beach-based Palm Beach Capital, first invested in the firm in 2004 and have since added to its stake multiple times. Several Gulf Coast PEO executives say a decade is an unusually long time to hold a firm in the industry. But the recession and connected drop in business at Progressive could have put investors in the unenviable position of chasing better valuations to improve their position. Palm Beach Capital officials didn't return calls seeking comment.

Timing might be on Progressive's side if its owners try to sell soon. Private equity money has begun to swirl around the industry in a big way, in unison with a rebound in the economy.

“Private equity looks at our industry as great cash flow,” says longtime employee leasing executive Vince DiPalermo, who co-founded Palmetto-based Remedy Employer Services in 2009. “It's been hot for a while.”

Burgess declined to comment on what Palm Beach Capital's plans are in terms of cashing out of Progressive, and if so, when. “Our goal isn't to be national in five years,” says Burgess, who reports directly to Palm Beach Capital executives. “But we intend to be a very big regional player.”

'Huge opportunity'
An executive with Tampa-based human resources consulting firm CoAdvantage for 13 years before joining Progressive, Burgess plans to get to that level partially through what he calls his dream team of senior executives. It's a group of well-known PEO industry leaders. Says Burgess: “There's a lot of buzz around us now.”

The list includes: Director of Risk Management Debra Hetzer, who previously worked for Lakewood Ranch-based PEO Gevity, which was bought by another PEO, TriNet, in 2009; Director of IT John Hale, who held leadership posts at TriNet for 15 years and ran the IT department at Venice-based drinkware firm Tervis from 2011-2013; CFO Peter Grabowski, who held the same post at Gevity for a decade, in addition to Sarasota-based Clockwork Home Services and Tampa-based AVI-SPL, a $600 million audio-visual technology firm; and Vice President of Sales Bob Scruggs, who held similar leadership positions at several employee leasing firms, including Gevity, Oasis Outsourcing and ADP Total Source.

Beyond leadership, the Progressive strategy to grow revenues and market share is twofold: First, offer current clients more products and services, with a focus on federal health care overhaul law consultation. Then go find more customers. To Burgess, the Affordable Care Act is a noose around entrepreneurs and business owners. “It makes planning hard because there is a lack of clarity,” says Burgess. “Every business owner says the same thing: “What does all this mean?”

That uncertainty, to Scruggs, is an opening for more business. “The law changes and flips on a daily basis,” Scruggs says. “People are looking for guidance. It's a huge opportunity for us and our industry.”

Other PEO executives on the Gulf Coast see the same openings.

DiPalermo, who co-founded Remedy Employer Services with fellow industry executive Eric Arfons, says the market is strong, both for perspective new clients and current clients hiring more people. DiPalermo and Arfons are also familiar with big PEOs and Progressive. The pair and some partners sold a previous employee leasing firm they founded, Sunwest, to Progressive in 2005. Sunwest managed 6,700 worksite employees who represented more than $190 million in revenues at the time of the sale.

DiPalermo says this time around he aims to keep his firm on the smaller side, to maintain personal touch with clients. Remedy currently has about 1,600 worksite employees and seeks to reach 5,000 within a few years. “We are right at a place we feel is appropriate,” DiPalermo says. “We want to be a niche firm.”

Customer focus
The opportunities Burgess, DiPalermo and others see in PEOs are also seen nationally. The industry surpassed $92 billion in revenues in 2012, according to the National Association of Professional Employer Organizations, and there are now about 700-900 PEOs in operation in all 50 states. (NAPEO considers gross revenues the total of its clients' payrolls and the fees PEOs charge each client for human resource activities.) The industry growth rate, says NAPEO, is also on the rise: Sector-wide revenues rose more than 10% in 2012, compared with less than 5% in 2010.

Progressive, much like the industry, has had several ups and downs since founder Steve Herrig launched the business in 1999 in Clearwater. The firm nearly collapsed in 2003 when the employee leasing market fell into a large slump. Several competitors shuttered, unable to get workers' compensation insurance.

Herrig invested more than $1 million of his own money to revive the business. The move paid off: Annual revenues grew 56% in the next three years, to $46.8 million in 2006. The Business Observer named Herrig Entrepreneur of the Year for the Sarasota-Manatee region in 2007.

But the growth track ran into the recession a few years later, and sales sagged. Herrig sold his ownership shares in the firm, and Michael Dris, a Tarpon Springs attorney and accountant, took over day-to-day leadership. Dris remains with Progressive in a consultant role, says Burgess, but he has no ownership stake in the company. Herrig has since been named a director at Sunz Insurance, a Sarasota-based workers' comp insurance firm that works mostly with PEOs and staffing companies.

That leaves Burgess to lead the mission at Progressive. Burgess helped coordinate a turnaround at CoAdvantage, where he worked from 2001 until late last year. That effort included a buyout and a reverse merger. Burgess oversaw 40 locations at TriNet/Gevity for seven years before CoAdvantge.

One of the key lessons Burgess learned at those jobs is to focus on customer service over customer growth. “I don't want to be all things to all businesses,” says Burgess. “We will be the best in our space.”

Executive Summary
Company. Progressive Employer Management Co. Industry. Human resources, employee leasing Key. Firm has hired five senior executives in the last six months.