Startups are known for having shoestring budgets, but the savviest of entrepreneurs will (hopefully!) reach a stage in their career where they are raking in the dough. That’s great for them, but what about their employees - including their entry-level employees?
Dan Price, the founder of Gravity Payments
, received the 2014 Established Entrepreneur award for his innovative approach to business, but his latest move might set the bar incredibly high for the competition. At just 30 years old, Price knows the “price” of great work and he’s happy to share the wealth.
At the credit card processing business Price established (the one that made him rich), he’s committed to making the minimum salary for every employee at least $70,000 in the next three years. He recently made the formal announcement cum promise to The New York Times, and Price says the idea struck him when he was reading about the link between happiness and employee productivity. Price references a study which pointed out that there are major happiness disparities between employees who make less than and over $70,000, which seems to be the magic number in 2015.
Finding the Money
How can Price afford such a massive overall pay raise in just three years? It’s pretty simple—he’s reducing his own salary of $1 million to $70,000, too. It’s also estimated that his company will bring in over $2 million in profits this year, so he’s earmarking up to 80 percent for employee raises and salaries. Right now, Price has 70 employees slated for a raise. According to the company’s marketing head, Ryan Pirkle, 30 employees will actually enjoy a doubling of their salary. At the moment, the average employee salary at Gravity is $48,000.
However, Price is quick to point out that even cutting his own salary so severely will probably not make many waves in his personal spending habits. As an avid snowboarder who loves to take care of the happy hour tab, he says his hobbies and habits are relatively simple. Since he’s already achieved his American Dream, he says it’s now time to give his employees a shot at it. Price says, “The market rate for me as a CEO compared to a regular person is ridiculous, it’s absurd.”
Several other companies have followed suite after reading this including the CEO of Due.com and Host. CEO John Rampton states that, "All employees deserve more and all employees should earn enough money to live a good live."
Little Company, Big Profits
Compared to other successful startups, especially in the tech field, Gravity is relatively small. Price notes that the size of his company definitely plays a role in his ability to increase “minimum wage” so drastically. However, he also says he alone made this decision and there was no pressure to do so from anyone else. Plus, he says he’s sure other entrepreneurs would follow suit if they could—he’s just fortunate to have achieved success with a relatively small company size.
Gravity was founded 11 years ago when Price was just 19. His goal? Get rid of the fees and wild goose chases small companies faced when dealing with credit card payments. Today, Gravity handles almost $10 billion in credit card transactions each year, and the yearly revenues hover around $150 million. They are also expanding by getting into loyalty programs, consulting, and reasonable loans.
Is Price changing the entrepreneurial game? Would you do the same in his shoes?
Edited by Stefania Viscusi