Facts: No one likes to negotiate. Or I should say, no one likes to admit they like to negotiate. It sound sleazy, swindling and cheap. I never thought of myself as a negotiator until I reframed the way I thought about it. Since I was 5 years old, I’ve had a knack for trading. I’d trade sleeping in my parents bed for cleaning up my toys (true story), and if you have a child, you understand how negotiating actually comes naturally to us. I kept trading things through high school leadership, into association leadership into Head of Business Development for a B2B startup. It wasn’t until I read Stuart Diamond’s ‘Getting More’ by the advice of a Wharton School grad, that I realized what I was doing my whole life: trading values–a core negotiating principle. I tell all my girlfriends to read this book. Once you do, you’ll actually want to practice your newfound skills.
Since then, I’ve made it an intentional practice to negotiate when I want more. I’m not excessive, but I do it when it really counts, like during salary negotiations. I’ve given a lot of women friends advice on negotiating their salary, and recently helped a friend negotiate a 25% increase from her starting offer (she is obviously awesome and deserved it). It doesn’t always work out that way, but I was happy to know that my collected advice works for other people besides myself. Here are my 3 basic principles to follow:
1. Get into the numbers
Add 10% more (at least)
Know that every employer is doing their job by getting more for their money. They might actively benefit by giving you the lower end of a salary range. This seems obvious, and I use the word might, because there’s no such thing as a free lunch, for long. Salary negotiation is your job to ensure you aren’t walking into a role feeling undervalued or disgruntled–because that isn’t sustainable and won’t benefit you or the company in the long haul. Unless your role is commission based, you’ll likely maintain that salary for the next 12 months, so be sure you’re happy where you are. So we know the employer will likely be holding back some cards. Here is my rule of thumb. When you’re asked about salary requirement, take the number you really want, add 10%, and you have your answer. There is a good likelihood they will come back with an offer or 5-10% less, landing on what you really wanted in the first place. Do this and the gap between what you really want and what they offer will be much less to negotiate toward.
I touch on this later in the article, but my experience tells me you aren’t going to have several chances to counter offer-1 to 2 at most, so this is an opportunity to really think about what you need to feel whole and what your ‘walk away’ number is.
Let’s revisit the first sentence in this paragraph “every employer is doing their job by getting more for their money”-it’s a business. With that in mind, they will expect you to negotiate.
Approaching a counter offer can feel uncomfortable. It feels much less so, when you have data. Gather data that supports what the market believes your time and expertise is worth.
Presenting this information lends validity to your request, because there are facts which support it’s justified. Sites like Glassdoor.com and Indeed.com are great for getting an idea of salary range for your role and your experience level while factoring in things like company size, company revenue or funding stage and similar jobs in your location–this is called ‘market rate’. You should present relevant examples only. Irrelevant examples will create holes in your argument and might reduce how compelling your stance is overall.
I’ve learned a bit about stock options as a part of overall compensation in the last few years. I’m not a financial advisor, but I have helped friends better understand the value of stock options when they are tied into employment contracts. Here are a few basic terms I had to understand the first time I was offered options. Warning: a mini dictionary lies ahead. If you’re not into learning about this stuff, skip to principle #2.
Options: Options are like building blocks in a company’s house. They are valuable in order to construct a house, but don’t necessarily have value until value is placed on it, such as when a home is listed on the market. The more valuable the house, the more valuable the bricks that make it up. A company, especially a new one, can grant options to employees as incentive to work hard and grow the company’s value and sometimes to compensate for a lower salary due to the early stage of the company. The earlier the employee, or the more impact provided, the more options granted.
Exercise: This is when you purchase your options. Your options are not ‘given’ to you, you have to buy them.
Strike price: The price you buy your options is called a ‘strike price’ and it’s dictated at the time you signed your stock agreement. Typically, the earlier employee, the lower the strike price–that is a benefit of joining a company when they a higher degree of uncertainty, you’re trading higher risk for higher reward. If your strike price is $1, and the company goes public at $40 per share, you just made a 40x return. If you owned 50,000 shares, your stock is now valued at $2 million.
Vesting period: This is different at every company but the standard structure is a 4 year cliff. You gain (or vest) 25% of your options after 1 year, then vest month-by-month after that. You can only exercise what you’ve vested.
Liquidating event: This is when the stock receives a ‘real’ monetary value in the market and can be converted to cash when sold or taken off the market. A company’s stock turns liquid in an initial public offering (IPO), a merger or an acquisition. If the company is acquired, your vested and exercised stock will either be paid out by the buyer or else absorbed into the buyer’s stock at a 1:1 ratio.
Valuation: This is how much the company is believed to be worth, and is a figure that’s determined upon investment, capital or private. Ever seen Shark Tank when the contestants offer a portion of ownership for money (20% for $100,000)? That tells you the company’s assumed valuation ($500,000). This matters to you because it tells you what your stock might be worth. Take the valuation ($500K) minus stock the company doesn’t own (like the 20% from investors) that leaves $400,000. Say there are 100,000 shares outstanding, divide $400K by 100K shares, which say each of your options is worth $4. Multiply this number by your shares and you’ll learn how options could add to the overall compensation an employer is offering you. Bare in mind this isn’t guaranteed income that will come quick, or at all, depending on the company and it’s stage.
Dig into the company and understand what they are worth, so you understand better what your options are worth or could be worth. As an option to negotiating salary, you could ask for an increase in options. This shows your belief in the company and could also pay off big in the future.
2. Frame it right
At every point in your interview process and even into negotiations, you should continue letting the company know how excited you are to bring them value. While you hopefully love your soon-to-be job, the company is still tuned into WIIFM (What’s In It For Me) and you must play to that in order to tactfully negotiate salary. If you are already employed but seeking a raise, outline and quantify all the great things you’ve done for the company. Numbers are difficult to argue, so there’s potential so use them to your advantage on why X value you created, warrants X raise–and you foresee even larger growth ahead. You’re excited to take the company to new heights, you look forward to continuously growing with the company and want to feel fairly compensated for your performance. Always frame what you want, into terms that will make them want to say yes–because it benefits them. And of course–be great at what you do.
Assume the best
The company should want to make you happy. Walk into negotiations assuming they wouldn’t want you to take a job where you felt underpaid, which could damage motivation and cause future underperformance. Understand that by digging into all scenarios of a job and an offer letter, you are ensuring you are the best fit for each other and that neither of you will need to be repeating the process in 6 months. I like to think of this as ensuring each side is ‘whole’ on the offer, a win-lose, is a lose for all. Any employer should understand that and want the best for you, as long as you’ve framed it as being best for them, too.
A win-lose, is a lose for all.
Make it a conversation
Contrary to what you’ve heard about providing solutions, not problems–you don’t need to come in with all the answers. You do need to avoid nagging and making this all about you. Once you frame your concerns correctly, and use data to validate an asking price or counter offer, you might be surprised about what they will suggest. Be ready to share the things that matter to you, monetary and non-monetary, and be ready to trade. Back to trading values, negotiation is not about one person getting and one losing–it’s about trading items of unequal value. You might want a higher salary to factor in commuting and dog walking costs. If they aren’t able to increase your salary, perhaps they’ll let you work from home a 3 days a week or maybe there is a commuter benefit. Come ready with data to support the number you’re asking for, be gracious and be flexible. Again, you don’t want either party to feel wronged.
3. It’s not all numbers
Room to grow
I’ve talked a lot about numbers and salary but I want to highlight that a job’s value shouldn’t be determined solely on money. Money give us freedom and the means to impact causes we care about, and that is very important, but not everything. Think about what else would help you grow your career in the longer term–mentorship, the ability to switch competencies, the chance to lead a team or a promotion in title. Your next job may not be perfect, but it should be a few stepping stones toward your ultimate goal.
If you know you’re seeking to grow within the company, make a point during the interview process to ask about potential for growth (but acknowledge you’re focused on the job you’re being hired for) and for examples of people who have moved teams or been promoted. If this is important to the company, they’ll love to share their success stories.
Development & Perks
Digging further into growth opportunities, see if there are opportunities to develop yourself beyond team or title changes. Can and will your leader mentor you? What are your teammates background, can you learn from them? This might be baked into your role (I must be hungry), but some companies will pay for you to attend conferences, educational seminars and networking events to develop your skills. Does your role involve public speaking? Professional coaching would be a great development opportunity. These most certainly can be seen as additional value to your overall compensation because they provide substantial value to you as a person, that you don’t have to pay for.
As for perks, factor in other things that are important to you, whether that’s work from home flexibility, free meals or commuter benefits. On the flip side of that, understand when you are being underpaid (below market rate) and a company is compensating with free beer and an annual company retreat. These perks might range from useless to nice-to-have to significantly impacting your budget. Know what’s valuable to you and don’t let things that aren’t important to you, dictate your negotiation stance.
Lastly, you have to feel happy and ‘whole’ about your decision. A big part of that equation could be who you work with–do you like the people you’re about to spend 40-60+ hours a week with? Just as employers like to ask behavioral questions of their interviewee (“tell me about a time when”), you should do the same. Understand what your boss has done in difficult situations when her team wasn’t pulling weight. Dig into the ‘why’ during your interview process, take note of what’s not said, and above all trust your gut.
After you’ve researched market rate, asked a lot of questions, had open conversations, and counter offered at least once–you should have enough data to make an informed choice. In my experience, you don’t have multiple opportunities to counter offer and you’ve got to trust their word on what they come back to you with. If they meet your counter and nothing sends you red flags, you should take it. If they almost meet your counter, explore trading items of unequal value. If you still don’t feel whole after all is said and done, consider this might not be the right fit and consider if you’re willing to walk away. To keep a positive professional reputation, try to avoid pushing for terms then renegotiating OR pushing for terms (which are met) then walking away.
In the end, know that negotiation is a very valuable skill. If done right, you will not only end up with a bump in salary that could make all the difference in your big picture life goals, but you will also impress your employer. An employee who can hold their ground and persuade with respect and tact is a secret weapon that any employer would love to have on their team-wouldn’t you?
I’d love to know what you think, if you have any questions and if these are working for you–or not! I love seeing people rewarded for hard work and having guts. Negotiating can feel uncomfortable, but remember that greatness lies outside your comfort zone–now go ask for what you’re worth!