In early March, as the coronavirus arrived in the United States and businesses began shutting down, our company started losing money fast. We’re a credit card processor that works primarily with small and midsize businesses such as restaurants, retails shops, and independent clinics, which means our revenue is directly tied to theirs. By the end of the month, we were down 55% from expectations and losing $30,000 a day.
Unless the economy turned around quickly or we did something drastic, we’d be out of business in four to five months. We cut all nonessential expenses but still had to make up an $800,000 a month shortfall. Facing similar realities, several of our competitors began raising fees and laying off employees, but we wanted to avoid that because it would have gone against our values as a company. Our mission has always been to help independent businesses compete. Raising prices on them when they were already hurting would have been a betrayal of that mission. Laying off staff would have also hurt our clients while simultaneously jeopardizing the welfare of our employees and their families.
An employee sacrifice
In this situation, most CEOs would make a top-down decision. But that’s not how we run our company. Instead, our COO and I turned to our employees for help. We held an all-company call followed by a series of smaller group calls in which we laid out the financial facts and asked for their suggestions. Many of them offered ideas about how to reduce expenses and increase revenue, but what blew me away the most was that several of them offered to take a temporary pay cut to help offset expenses. So many people expressed support for this idea, that we decided to move ahead with it. We sent a survey to every employee and asked them how much, if anything, they’d be willing to sacrifice for 30 days. We didn’t want to impose an across-the-board cut on anyone in case it would inadvertently put them in a bad financial position. The survey allowed everyone to do what they felt comfortable with while remaining anonymous.
In the end, 98% of our employees offered to take anywhere between a 10% and a 100% pay cut. Many of them said they were able to do this because, thanks in part to our $70,000 minimum wage, they’d been able to pay off debt and save money so they had a little bit of a cushion. I was so moved by their willingness to sacrifice for one another and our company that I cut my salary from $70,000 to $0 in solidarity. (In 2015, I cut my compensation package from $1.1 million to $70,000 to help pay for the $70,000 minimum wage. That, along with our standard employee benefits package, is the only income I receive from the company.) Together, these pay cuts helped buy us a few extra weeks of time to operate.
Why I’m not taking a paycheck
A few weeks ago, we were approved for a loan under the federal government’s Paycheck Protection Program. Thank to this, we are able to restore most of our employees’ pay to 100% for at least the next eight weeks. We also have other programs in place to help increase revenue, so when we exhaust those funds, we will revisit our balance sheet and decide where to go from there.
This loan would also allow me to restore my own pay, but I’ve decided to continue taking no salary until this crisis is behind us. As the full owner of a company that has benefited from many government and tax incentives for the past 16 years, I don’t think it’s appropriate for me to pay myself using taxpayer money. I have savings, and my expenses are minimal. Plus, I am far happier knowing that I’m doing my part to help save our company and thus our employees’ jobs. I get far more satisfaction from that than I do taking a paycheck.
The problem with CEOs
What upsets me is how so few other CEOs take this view. The irony is that owners of smaller companies, such as Joe Fugere at our client Tutta Bella Neapolitan Pizzeria in Seattle, have demonstrated more willingness to sacrifice for their people than CEOs with vastly more resources. Amazon’s sales are up 26% and Jeff Bezos’s net worth has increased by $32 billion so far this year, and yet Amazon announced it’s cutting the measly $2 per hour hazard pay it had offered to its warehouse workers and drivers, and it has refused to give them sick leave. Laurene Powell Jobs is laying off 20% of the staff of The Atlantic, which she owns, despite a net worth of $25.5 billion. Elon Musk, who has added $13 billion to his net worth just so far this year but has furloughed employees and cut pay, is fighting stay-at-home orders and threatening to move Tesla’s headquarters out of California if he can’t resume production. Imagine what a huge difference just these three individuals could make if they decided their employees’ well-being was more important than their stock price or personal wealth. Millions of small businesses, such as mine, are finding ways to treat their employees as well as possible right now—so why can’t billionaires?
When I originally announced Gravity’s $70,000 minimum wage five years ago, I assumed that, if we were successful, more companies would adopt similar policies. Our revenue tripled and our headcount doubled, but it wasn’t enough. Instead, inequality has only gotten worse. This pandemic has widened the already vast gulf between rich and poor in America—particularly between the big conglomerates with the resources to weather this storm and the small businesses with minimal resources that are struggling to stay afloat. Business leaders have a major opportunity to use their power and resources to make things better, and yet they’re consistently deciding to choose greed instead.
I fear we’ll emerge from this pandemic in a very different world—one where the little businesses are crushed by large corporations making unilateral decisions about one thing: how much money they can make.
But there’s a better way. Talk to your employees about how they’d handle this crisis if they were CEO. Their answers might surprise you—and help save your company.
Dan Price is the founder and CEO of Gravity Payments.