In April, Dan Price made waves when he announced that everyone at his financial services startup would receive a minimum salary of $70,000. The Gravity Payments CEO took a big pay cut to finance the move, exchanging his $1 million salary for the minimum.
Three months later, initial goodwill for the experiment seemed to dissipate. The New York Times reported in July that clients had dropped Gravity, wary that the salary hike would spill over onto their fees. Some just disagreed with the raises on principle. Two of Price's employees quit, and his brother filed a lawsuit against him.
It looks like things are beginning to stabilize at the Seattle-based firm, though Price told The Huffington Post that he's still facing a rocky road.
In April, Dan Price made waves when he announced that everyone at his financial services startup would receive a minimum salary of $70,000. The Gravity Payments CEO took a big pay cut to finance the move, exchanging his $1 million salary for the minimum.
Three months later, initial goodwill for the experiment seemed to dissipate. The New York Times reported in July that clients had dropped Gravity, wary that the salary hike would spill over onto their fees. Some just disagreed with the raises on principle. Two of Price's employees quit, and his brother filed a lawsuit against him.
It looks like things are beginning to stabilize at the Seattle-based firm, though Price told The Huffington Post that he's still facing a rocky road.
In a new interview with Inc, he said Gravity's profits have doubled, and customer retention increased to 95 percent in the second quarter from 91 percent.
Under the CEO's plan, salaries will reach $70,000 within three years, at a cost of $1.8 million to the company. Most of this will be supplied by Price's own salary cut.
Raises have already kicked in, with the minimum pay hitting $50,000 in the plan's first phase, Inc reported. The average salary at Gravity was $48,000 before the raises, the Times reported earlier this year.
Meanwhile, Price is committed to avoiding layoffs and price hikes. He has also raised $3 million by selling his stocks, transferring everything out of his retirement accounts and mortgaging his two homes. He's invested it all in Gravity, according to Inc.
The unexpected lawsuit, however, could rack up around $1 million in legal fees, which may put the company in an even tighter spot if the salary hikes should fail, Price told HuffPost.
"We've been largely debt-free, and we've been pretty conservative in how we run our business so we can do these exciting things," Price said. "But we lost that margin of error, and we're working hard to recapture it."
Unsurprisingly, all this has taken a bit of a toll on Price's own life. "Six months ago, I had a pretty good work-life balance," he said. "I was working 60 hours a week, but I'm pretty low-maintenance. I had leisure time, I was snowboarding, surfing, hiking." Price now averages about 80 hours a week.
If his vision for better pay is realized, it sets the bar pretty high for other business owners.
Wages across the United States have stagnated, with the median American household earning $53,657 last year -- that's a two percent drop since 2009. The past year has seen the expansion of the $15 minimum wage movement, as New York state and Los Angeles have joined the call to increase workers' pay.
The pay gap between workers and CEOs, however, is stratospheric: At major companies like CVS and Chipotle, CEOs earn more than a thousand times that of an average worker.
“There’s greater inequality today than there’s been since the Great Recession,” Price told HuffPost in April. “I’d been thinking about this stuff and just thought, ‘It’s time. I can’t go another day without doing something about this.’”
News of Gravity's salary bump has naturally piqued some interest among other small business owners. "There's a partnership mentality from business owners and workers hearing this message," Price said. "They can see that this is good for business and for people. It doesn't matter whose fault it is, but what does matter is, 'How do we partner together and solve this?'"
One of Gravity's new clients saved $20,000 in the year after it switched over from a rival payment processing company. The client, Washington-based Pop's Pizza and Pasta, gave all of those savings to its hourly workers, Price said.
Price just landed a book deal with Viking, an imprint of Penguin Random House, that will focus on his recent work at Gravity. "I want to tell my story honestly and unfiltered, the good, the bad, the ugly and everything in between," Price said. "Everybody's an entrepreneur and can be innovative. It'll be something that helps people to be more autonomous and be able to follow their own conscience."