Closing the personal value gap: negotiating an offer
It’s probably no surprise, but a lot of people are leaving money on the table when they accept job offers. If you aren’t negotiating, or at least trying to negotiate, this is definitely the case for you. Getting a call from a hiring manager with details of an offer can be one of the most exciting things in a career, a major letdown if it’s an underwhelming offer, and an extreme stressor if you’re not comfortable with negotiating. I’m here with tips on the way I like to negotiate offers, and how I think about entering these sorts of tricky bits of the job search process.
Step 1: Know your own worth
If you don’t know how much you’re worth, you’re never going to be able to effectively negotiate. Understanding market rates for the role you’re doing (or more importantly, the role you want) is critical to ensuring that you’re not leaving money on the table. There are lots of ways to get this information:
Ask your friends who are in similar roles (and similar stages of their career): I realize this might be an awkward conversation, and it can be way more awkward if it turns out your friends are paid a lot more than you are, but I’m a big believer in promoting transparency around compensation, and removing the stigma of talking about compensation. It’s highly valuable information. You need to remember that you’re looking to compare apples-to-apples, so if you’re a junior Software Engineer with 2 years of experience, comparing your salary or equity package to someone with 5-10 years of experience is not like-for-like.
Check out compensation comparison websites: There’s a bunch of these out there like levels.fyi, Glassdoor, LinkedIn is even starting to provide compensation data in some places. Sometimes you can also get good indicators off anonymous sites like Blind.
Talk to an agency recruiter: Recruiters at agencies often see high volumes of candidates, and opportunities. They’ll generally have a pretty good idea of what you might fetch on an open market, and often have access to compensation research that can provide a lot of additional context.
Go out and get some offers: A really good way to get some high-fidelity signal is to actually get offers, and see where they come in. Most companies won’t make outrageously undermarket offers, so you can use that to triangulate, but this is a high-effort, high-risk way of getting your answers.
The reason you need to know your own worth is because the most effective way to negotiate is to come with data, prepared to back up why you think you’re worth a particular amount. It’s also helpful to understand where you might want to land with an offer, and can help to identify good anchor points to get you there.
Step 2: Plan your cash/equity strategy
Most startup job offers have two knobs: salary and equity. Depending on your life situation, you may value one more than the other. For example, if you have a mortgage and kids and a stay-at-home partner, and your last company didn’t happen to IPO, you might be cash-poor, and care a lot about optimizing for salary. Or, if you’ve had some wins with the startup equity lottery, maybe you’re looking to roll the dice again, and really care about optimizing for equity. You might be somewhere in the middle. All of these are perfectly valid ways to try to optimize your compensation, and the right answer for you is not the right answer for everybody. It’s an extremely personal decision made based on your personal risk profile.
It is worth knowing that a lot of companies, especially the earlier stage you go, will be willing to dial back salary in favor of equity, or vice versa. Earlier stage companies may actually want you to skew more towards equity, because it’s cheaper for them to give, and they want people to be bought in for the long-haul, rather than very salary-oriented, which could be perceived as short-sighted. It’s a little bit hard to know how every company will value a share versus a dollar of salary, but it never hurts to ask. I think a good way of rationalizing the like-for-like value is to take the preferred price of a share and translate it into salary dollars. So if you want 5000 more shares, and the preferred share price is $3, plan to ask for a salary reduction of $15,000.
The cash situation gets a lot more complicated if you happen to be on the sales side of the house, as well, since you’re likely going to be pre-negotiating some expectations around quota and commission rates (though nothing is set in stone until you’ve got a signed comp plan, obviously).
It’s also worth knowing that different roles will get varying levels of equity offered. Engineers often are equity-heavy compensation packages. Sales is typically very cash-heavy, with small equity. The more you’re tied to revenue numbers, the likelier your package will skew towards cash, and the more technical you are, the more equity you are likely to get. Not hard and fast rules, but these are kind of typical realities. So if you’re a salesperson, don’t go expecting to get the same equity package that your engineering friend got. It’s unlikely to happen.
Step 3: Get some offers that you actually want
Once you’ve got a plan of action, it’s time to actually get yourself to a stage where you can start negotiating. One of the best ways you can set yourself up for a successful negotiation is to have multiple offers. It gives you some perspective around how different companies will value your skills and potential contributions, and gives you a mechanism to force urgency and provide a clear bar for a company to meet. No company wants their offer used as a bargaining chip, but the reality is that it’s an extremely useful tool.
I will caution that I believe it is a very bad idea to negotiate with more than one company. I never start negotiating unless I’m prepared to accept an offer if the company meets what I’ve asked for. While I am comfortable playing offers off of each other to try to bid up the company I want to join, I will generally not try to play both sides to create a bidding war between two companies. I think it’s in bad taste, and generally will leave both companies with a bad taste in their mouth about you.
Now that we’ve got some offers we want, it’s time to actually enter the negotiation.
What to do if they ask you how much you want to be paid
This is likely to happen, and it’ll often happen on a first call with a recruiter, or later in the interview process (probably still with a recruiter), but at some point, if the company wants to hire you, you’ll likely get asked what you’re looking for in terms of compensation. I generally use this as an opportunity to communicate my cash/equity strategy from step 2: “I really value equity, and so prefer equity-heavy offers.”
I will never respond directly to the question: “What salary are you looking for?” If you provide a number there, you’re anchoring a negotiation, and if they meet the number you say here, they may shut down future negotiation steps with that fact. You’re in a much stronger negotiating position if you deflect the question. For example, you could respond by asking: “What is the compensation range for this position?” A recruiter is required to provide this information if you ask for it (at least in California), and you can choose to just say “Yeah, my desired comp is in that range” or whatever.
I’ve also been in situations where I was expecting to take a paycut (because I was switching roles, and moving from sales into product management), and in those situations I did actually provide an anchor, because I knew I would be anchoring very high. In that case, I didn’t provide a desired comp number, but I said: “this is what I make now.”
That said, I generally think it’s better to let the company give a number first.
Poker face
When you get an offer, it’s likely that you’ll get a call from a hiring manager with the offer details. Good hiring managers will want to do this over the phone, because they want to hear your reactions, and try to figure out whether it’s a good offer in your eyes or not. My recommendation is to be gracious, and express excitement about the offer, but keep a poker face, and say that you need to digest the information, and have a conversation with your partner, your mentors, whoever. Get the information, and get off the phone, so you can strategize further. The more emotion you show, the more information you provide to the person on the other side, and the weaker your negotiating position can become.
Don’t ask, don’t get
Assuming you have an offer from a company you want to join, you’re ready to start the negotiation process. The first rule of negotiating an offer is that if you don’t ask for a thing, you won’t get the thing. If you never negotiate, you are absolutely leaving money on the table.
If an offer you want comes in lower than you were hoping, and you’ve got other higher offers from other companies, it’s easy to communicate that information. “I’m really excited about this offer, but it came in lower than some of my other offers. For example, I have this offer at $X.” Usually you’re asking the company to match an offer. Obviously, if you want your comp above all the offers you have, you might just have to throw out a number, but be prepared to be told “No.” It’s a lot harder to say no, when they know you have a legitimate alternative at the price point you’re asking for.
Signing bonuses are also a thing, when it comes to cash compensation. If they aren’t willing to meet your salary request, or if you have additional costs associated with leaving a company (like costs to exercise vested options), it’s extremely reasonable to ask for a signing bonus. When I’ve taken paycuts, I’ve often gotten signing bonuses to make me whole in year one, and allows my salary scale down in year two, so it doesn’t feel like such a sudden change, and gives me time to adjust my spending behaviors. Keep in mind, though that signing bonuses almost always have a 6-month or 12-month clawback, meaning if you don’t last for at least a year, you’ll have to pay it back in full.
Communicate your value
If you’re asking for more money or more equity, you’re going to need to tell the company why you think you deserve it. The data that you’ve gathered in researching your market value, the other offers you’ve received, and your sales pitch on yourself are how you communicate that.
As an anecdote around this, when I moved from pre-sales into product management, I made a pretty big leap, and changed companies and roles at the same time. I knew that moving from a GTM function into a product role would force me to take a paycut, but I didn’t really know how much of a paycut, and I didn’t really want to swallow a super bitter pill.
I did a number of things to de-risk this for myself:
I worked really hard on crystallizing a strong pitch on why my experience made me ideal for a product role (this is partially just important for getting interviews and offers to begin with).
I aimed for companies where my domain expertise would still be relevant, and my sales experience would bring differentiating value to the product team.
I generally tried to have my first interaction with the company be through the hiring manager (I reached out to a lot of hiring managers via LinkedIn, or asked friends to connect me to people), so that I bypassed the standard recruiter entry point.
When I was asked about my compensation expectations, I shared my current comp, and explained that I was prepared to take a paycut, but that this was the starting bar.
I had both pre-sales and product offers. When I would communicate with a hiring manager who was asking me about compensation expectations (not as a part of a negotiation), I could say that I had competing offers, and could then provide compensation details that I was getting from a pre-sales role, without explicitly stating that it was for a different role. If I was asked, I wouldn’t lie, but I would omit that information unless it was explicitly requested. This eventually resulted in me getting an offer for a product role that was arguably way above market rates, and I was able to use that offer to take the role I wanted to a much higher compensation bar.
I’m very explicit in stating throughout the process that I won’t start negotiating unless I’m ready to take an offer. I make this very clear, so that the hiring manager knows that if I’m negotiating, I will accept if they come up to where I’ve asked them to go.
Sign the offer!
If they haven’t quite met what you’ve asked for you, can definitely defer, and say that you need to think it through. Generally, you can get away with one good round of negotiation, but past that, it’s going to be tricky to move the needle further. Trying to put a company through multiple rounds of negotiation will just make them angry, and if you push too hard, you risk an offer being rescinded. Generally, I think it’s better to quit while you’re ahead.
That all said, if you’ve asked for what you want, and they meet your requests, you should be ready to accept.