With so much at stake, good ideas are not enough. We need good data.
When Gravity Payment’s CEO Dan Price introduced a $70,000 starting wage for employees at his company in 2015, you can rest assured he drew more than a little criticism in the business world. In the nearly seven years since Price made one of the boldest moves we’ve seen to date, the company is not only still afloat – they’re thriving.
The number of staff has doubled while turnover has cut in half. Customer retention rates far exceed the industry average. Employee satisfaction is high, with employees now able to buy homes, pay down debt, and start families. His staff was so appreciative, in fact, that they came together to buy the man a Tesla.
Despite the costly increases and skepticism around the move, both revenues and profits continue to grow – due in part to increased productivity from his team and brand loyalty from his customers. In a world where the average CEO makes 300 times what the typical worker takes home, Dan Price joining his staff at $70K per year is in many ways humbling and inspiring. And people all over are responding accordingly.
So far, it appears that Gravity is a success story, showing what companies can achieve when they make the commitment to serve all their stakeholders well. For mission-driven entrepreneurs who are motivated to make the world better by the way they do business, this is great news.
But here’s the kicker: Price’s move – while it hit plenty of emotional cords – was also smart and well-thought out, based on and informed by real numbers. Among other key indicators, at the time of his announcement, Price knew:
- How many employees would be affected.
- How much the pay raises would cost over the three years they were phased in.
- What other changes (largely a huge cut to his own pay) would pay for it.
- How much revenue would need to increase to cover the new minimums moving forward.
Dan Price is not just a wide-eyed business owner with aspirations to do good work in the world. He’s also a smart businessman who, when faced with a BIG question – “What would it take to pay my people what they need to live well?” – took to his numbers to find a path forward.
The reality is that a similar move without appropriate planning and assessment could have been devastating. Too often, business owners get swept up in the idea without putting in the due diligence to make sure the plan is viable. Without a well-informed focus on the numbers themselves, lofty aspirations for huge impact can end up doing the opposite – putting great companies on the chopping block or out of business entirely.
Good ideas are not enough. Cash is King. Being keenly in touch with your real-time cash-flow not only brings clarity on your options, it can also help forge a path ahead where there isn’t one. And given how much good work there is still to be done in this world, it’s a really good time to get crackin’.
Sources
CBS News: Dan Price CEO on why giving all employees minimum salary of $70,000 still "works" six years later: "Our turnover rate was cut in half"
Business Insider: After this CEO raised his company's minimum wage to $70,000, he said the number of babies born to staff each year grew 10-fold and revenue soared
Photo Credit: New York Times
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