Worth It: How a Million-Dollar Pay Cut and a $70,000 Minimum Wage Revealed a Better Way of Doing Business
By Dan Price, published by Gravity Payments, Inc., April 2020
In a Nutshell: As the book’s subtitle states, an upstart entrepreneur takes the bold step to cut his salary in order to pay all of his employees $70,000 in annual pay.
Who’s it for? Management, business owners.
The supportive relationship between larger companies and their employees has taken some hits in the past 50 years. Gone are the days where employees were valued more than stockholder profits and the benefits of keeping your people onboard long-term exceeded viewing them as an expense line that could be cut.
Dan Price gained national exposure in 2015 when he announced that he was paying all of the employees at his company, Gravity Payments (Gravity), a minimum of $70,000 annually. To make this happen, Price reduced his $1 million salary to help make it all work. Price’s bold move was praised by supporters of a living wage and critiqued by pundits as a move bordering on Socialism. Business experts questioned if Gravity could sustain itself over the long haul.
Gravity provides merchant services for businesses that accept credit cards. In an industry that is prone for its confusing contracts and changing terms, some of these companies have been known to take advantage of their customers. Price was 19 when a café owner he knew was taking on large fees for credit card transactions. After studying some retail contracts, Price realized that he could build a company that could present a better system for businesses to work with.
With the help of his older brother, Price quickly built Gravity into a self-funded, 100+ employee company that was gaining traction. At this time Price was paid a salary well beyond $1 million a year and he reached an epiphany when he realized that some of his loyal employees were barely earning enough to make ends meet. He learned that one of his employees was moonlighting at McDonald’s and others were strapped financially. Addressing this lingering moral dilemma became the basis for Price bumping up all of his employees’ salaries to at least $70,000 per year over a three-year period.
In “Worth It” he points out bellwether events that took American business away from investing and valuing employees. In 1970, Economist Milton Freidman declared that the primary function of a corporation is performing well to increase its owner profits. Prior to this, companies would invest in employees with wages that stabilized their workforce and minimized employee turnover. Offshore competition and high-tech companies have also influenced this trend in the past few years.
Which leads directly to the concept of a living wage. Unlike publicly-traded companies that are beholden to stockholder performance, Gravity was and is now privately-owned. The choice to pay its employees $70,000 a year is essentially its decision alone and precludes it (theoretically) from public scrutiny.
If this were easy, Price wouldn’t have much of a story to tell. The question is, could these major hikes in salaries even work financially? Price’s older brother (and part owner) pushed back when the salary increases were proposed and eventually sued Price. Media critics labeled Price’s $70,000 mandate as a publicity stunt that would ruin Gravity’s bottom line. By most accounts the company has actually grown and profited significantly since 2015.
“Worth It” is a self-published dissertation that provides Dan Price the opportunity to set things straight. It’s also a bit of a trojan horse, but that’s okay because these personal details provide the back story as to how he arrived at the $70,000 pay grade decision. In the end, “Worth It” clarifies a message that treating your people well and making a profit are not mutually exclusive notions.
Chris Wendel is a business advisor with Northern Initiatives, a Community Development Financial institution (CDFI) based in Marquette, Mich. Northern Initiatives provides money and know-how to businesses throughout Michigan. Wendel lives and works in Traverse City and can be reached at firstname.lastname@example.org