In a move poised to redefine the landscape of small business benefits, Gusto, the payroll and HR software powerhouse valued at $9.3 billion, has announced its acquisition of Guideline, a specialized provider of corporate retirement plans. While the financial terms of the deal remain undisclosed, the integration promises to streamline the process of offering comprehensive employee benefits for the often-overlooked small business sector.
San Francisco-based Gusto, initially known as ZenPayroll when founded in 2011, gained traction by simplifying payroll management for businesses. The company strategically rebranded in 2015, expanding its offerings to include health insurance and workers’ compensation, solidifying its position as a one-stop shop for HR solutions.
The acquisition builds upon an existing partnership: Gusto has offered 401(k) retirement plans through Guideline since 2016. However, Guideline’s reach extended beyond this exclusive partnership, providing its services through integrations with other payroll providers. Speaking with CNBC, Guideline CEO Kevin Busque assured that these integrations will remain intact post-acquisition, underscoring a commitment to serving a wide audience.
Both Gusto and Guideline have carved a niche catering specifically to the needs of small businesses, a segment often underserved by larger, more generic providers. The synergies between the two companies are evident: Gusto, with its comprehensive HR platform, combined with Guideline’s expertise in retirement planning, creates a compelling value proposition.
Guideline boasts over 400 employees and achieved a valuation of $1.15 billion in 2021. As of January, the company’s annualized revenue stood at $140 million. Gusto, with a workforce exceeding 2,800, reported annualized revenue surpassing $500 million in 2023, showcasing the scale and potential of the combined entity.
Gusto CEO Josh Reeves emphasized the company’s ambitious growth plans, aiming to onboard 150,000 new clients this year. “That’s a small number relative to the 6 million employers in the U.S., and we have work to do,” Reeves told CNBC. With a current customer base of over 400,000, primarily in the U.S., Gusto sees immense opportunity to expand its market share.
A key strategic driver behind the acquisition is the opportunity to cross-sell Guideline services to a larger pool of Gusto clients, eliminating revenue-sharing complexities. Moreover, Gusto intends to leverage Guideline’s expertise to capitalize on the growing trend of state-mandated employer-sponsored retirement plans, positioning itself as a leader in this evolving landscape, Reeves stated.
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