Saturday, August 1, 2015

Seattle CEO learns the hard way about minimum wage

I remember when this guy went public with his plan to pay everyone in his company a minimum of $70k, and I knew of no way to pull it off. I applaud him for his heart and for the courage to try it. Private enterprise enables you to use your capital in any way you choose, but apparently he didn't include his partner, and brother, in the decision making.

As a small business owner, I know that personnel costs are the greatest expense. You can't increase your expenses exponentially without totally changing your structure. You either have to dramatically lower costs elsewhere to pay for it, or you have to substantially increase your gross profits through higher sales or lower variable costs.

The bottom line is that personnel costs hold dramatic influence over the sustainability of a company. You can't wake up one day deciding you're going to be a philanthropist and triple the incomes of your lowest paid employees without negative consequences.

Apparently, if you do, you can be a short term hero, three months in this instance, but are destined to be a long term goat living in your garage, lol. Lesson learned.