Revenue, Profits Double After CEO Took 90% Pay Cut To Set $70K Minimum Wage

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In April, Dan Price, CEO of the credit card payment processor Gravity Payments, announced that he will raise minimum salary for his 120-member staff to at least $70,000 a year. It was said that the raises will be phased in three years — with a current $50,000 minimum wage this year and $10,000 increases in 2016 and 2017. 31-year-old Dan cut his own salary by 90% – from $1.1 million $70,000 – to fund his groundbreaking move intended to motivate his employees to provide top-notch service, eventually making Gravity successful.

Skeptics didn’t think this model could work. Entrepreneur wrote that Dan acted impulsively and incentivized the wrong employee behavior. Steve Tobak went on to predict that Dan’s generosity will ultimately bankrupt the company and bring everyone on the street.

The move sparked not just a media firestorm, but also a lawsuit from Price’s brother and co-founder Lucas, claiming that the pay raise violated his rights as a minority shareholder. He also claimed that Dan had previously paid himself “excessive compensation” and asked the court to order Dan to buy Lucas’s 30% share of Gravity “at fair value” or dissolve the firm.

Six months later he has proved everyone wrong.

Before April’s announcement, the company reached $150 million in revenue, $2.2 million in profit, and had a 15% annual growth rate on $7 billion in customer transactions. Gravity’s revenue is now growing at double the rate before the raises began and profits have also doubled since then. Two employees left the Seattle-based payment processor, and so have a few clients. But the company’s customer retention rate rose from 91 to 95%%, which is 37 points better than the national average. Two weeks after he dropped the wage bomb, Gravity Payments was flooded with 4,500 resumes and new customer inquiries jumped from 30 a month to 2,000 a month.

He told Inc.com that he sold all his stocks, emptied his retirement accounts, and mortgaged his two properties – including a $1.2 million home with a view of Puget Sound – and poured the $3 million he raised into Gravity – funded in part by Dan’s savings, credit card debt, and student loans (diverted to fund his venture).

“Most people live paycheck to paycheck. So how come I need 10 years of living expenses set aside and you don’t? That doesn’t make any sense. Having to depend on modest pay is not a bad thing. It will help me stay focused… I don’t care if I have to stop paying myself or I have to work 20 hours a day. I’m going to do it,” he said vowing not to fire employees, raise prices, or cut executive pay further to make it all work.

Dan hiked his employees’ pay after he read a study about happiness, which concluded that additional income up until a salary of $75,000 a year can make a significant difference in a person’s emotional well-being.

“I’m being criticized a lot for the short term sacrifice that I’m making. People are poking fun at me, or saying, ‘look at this guy, he’s going to fail or he’s failing,’ but I think we can actually take pride in that sacrifice. The road has been bumpy, the challenges have been big, but our resolve is more than I ever could have imagined, and I’m thrilled that we’re taking on this challenge,” a convinced Dan told CNN.


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35 COMMENTS

  1. Good people can still make money. its so bad that “predictions” are even based off of cheap skating your people, and being a nazi to your people. Early America has MORE than proven this to be wrong, when men were proud of what they did and our country had real power, and was backed by a dollar with POWER.

        • Everyone was a slave in this country at 1 point or another no one is a slave now are they moron so people can stfu i have allot of ancestors that were slaves i have native american,white and black in my blood line people need to stfu about it No ones a god dam slave now

          • Jack, you asked for this:
            – Sentences begin with a capital letter
            – English requires a capital letter as it is the name of a language
            – “ya” is not a real word. The word you were looking for is ‘you’
            Next time you wish to comment on someone’s grammar, please ensure yours is correct.

  2. Good for you – I worked almost all my career for attorneys as a paralegal while being a single mom with no help from the ex. The most I ever made in salary, while raising my children, was $38,000 exempt wages while working 12-16 hour days. Do you know what I received for retirement/pension? Zero. I have nothing for retirement and not too far off from that now with nothing to show for all the blood, sweat and tears. All I will have is SS and that just sux. Good for this guy who actually cares about his employees. I am happy his company is growing due to his kindness and fairness. He will end up with more than he had before because of that care and fairness. Wish I had worked for him. I would not be in this predicament now.

    • They support that this is an interesting topic that brings light to what others have not noticed or have ridiculed.

      • Actually allot of people noticed it but they can’t do anything about it because they work to take care of themselves and family’s they don’t own there own business and if they did it would probably change there mind why would people do this if greed takes over

  3. Having your value recognized in a way that allows you to have a great work life and not worry about your future when you can’t work anymore is not socialism, capitalism or Marxism. It a basic human need which also alleviates the strain on the state system that will have to cope with a huge aging population.

  4. That’s a smart man, and I think all these multi million dollar companies need to do this…..put plain and simple you might have founded the company and run the run and think that you deserve more than anyone, but the truth is that as your company expands you have to have workers, without the workers your company will fall, you should always make sure your workers are happy you need them more than they need you, they can find another job, yes you can find other workers but who is to say they will be as good as the one you had, the happier your workers are the better they perform, and the better your business does, anyone who is smart about business and cares about business knows this.

  5. Where is the hype coming from? That is not the only corp paying or even sharing its net results with its employees…. Is it because it is US american or why? And, fellows, forget about terms you do not understand such as socialism or comunism, we do not need them to fix the world and 250 years of failed ideologies of any type or direction is enough!

  6. I’ve seen so many companies owned and run by idiots who thought greed would be an advantage to them. Most of those companies are now in liquidation.
    You pay peanuts, you get monkeys.

    I think Dan took the right step.

  7. This is the problem. People read an article like this and automatically believe it because they read it online. If you pea brains would do a little more research you would discover that his company is actually failing, and he has had to empty his savings and mortgage his properties to keep it alive. No one doubts his generosity or intentions but this is a horrible business model and anyone without air between their ears can tell you that. This is a socialistic model of business and as everyone knows socialism doesn’t work, and if you don’t believe me look at any example you please. I would encourage you to look up the economics professor at Texas Tech who implemented something similar to this in his classroom. You have a huge problem when people are to quick to let their emotions cloud good judgment. No one is encouraging employer abuse or exploitation but please just think before you open your mouth or post ridiculously uneducated garbage on the Internet. Have a nice day.

    • sorry dude, you really should either put some proof up here or STFU. Everything I seem to find does not show a failing company, but I may not have seen everything. So please be a nice guy and post some links.

      But the real stupidity of your post is when you say socialism does not work. Of course it does not work when the people in the current system dont want it to succeed as they lose their cash cows. When you look at the future, the worst thing for civilization is capitalism because the majority suffer while the minority rake in the $$$. Capitalism is basically slavery.

      And finally, an economics prof trying something similar in his classroom is hardly something to compare real life with. It is a classroom where there is no real chance of failure, while Dan has hundreds of employees that count on him doing the right things for the company.

      Just think before you open your mouth or post ridiculously uneducated garbage on the Internet. Have a nice day.

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