Tech Negotiation Upgrade: become a better negotiator. 10 Creative strategies, 10 practice scenarios, and 10 helpful tips anyone can learn.
Most people have had to negotiate a compensation package less than ten times in their entire lives…. and many of them have had to negotiate less than three. No wonder, when it comes to negotiating a job offer, most people feel stressed, awkward, and uncomfortable.
I put together this guide for them. For Operators who excel in their craft, but who want/need help.
Laying the foundation
But, before we begin… here are a couple of key points I want you to keep in mind when it comes to negotiating a compensation package with a prospective employer, person, team, etc:
You will feel it’s ok to negotiate when you feel prepared to negotiate. Prepare. How? By reading this post.
Compromise is important in your marriage/relationship. It’s just as important in negotiating with an employer. If you’re a stubborn prick… you’ll get dumped. If you throw out ultimatums… you’ll get dumped. If you only care about yourself… you’ll get dumped. And the same in reverse. Would you want to marry someone who always had their way? Probably not… so don’t be a prick, and don’t let them be a prick to you. Every budget… every range… every “no” can be stretched, shortened, pulled, and twisted in a world where an offer is comprised of 20+ things. In a relationship, there are, in fact, 20+ things.
Understand the intent of the questions. Every question that is asked to/of you has intent. Remember that. People don’t just ask questions randomly to see how you’ll react. They are looking for information. Information that will help them make a decision and understand your motivations/thoughts. So, as an example, with regards to the above question, a fair question to ask back to the interviewer/boss / People Ops leader is: “Just so I understand where that question is coming from… are you asking me if I’m excited about this offer? Because if so, I can tell you that I absolutely am. After learning more about the company’s vision, team, culture, and role, I can see myself excelling here.” OR, you could respond with: “Just so I understand where that question is coming from, are you looking to move quickly towards an offer? I’m still early in my timeline of evaluating opportunities, but I also am smart enough to know that if I get a great offer from a company I love, I’d be foolish not to join.” Try to obtain as much info from the other side as possible. Understand intent. It will allow you to keep your cool, feel more comfortable in the negotiation, and uncover more information throughout the process to help you. Always be thinking (and responding in your own way): “I wonder why he/she is asking me this.”
As Professor Deepak Malhotra says: “Make the other side believe that you deserve it. It's not enough that you believe that you deserve it," says Malhotra. "It has to be believable and justifiable to them." And, it also has to be digestible enough for that person to take back to their team and gain support for your asks. Everyone on earth thinks they are special. But remember… in a marketplace of all special people vying over the same opportunity/job/role… you may not be so special after all.
Try not to give numbers first. You’ve heard this before, and while I like to play contrarian, for this I do agree with the old sage masters. Data has shown that the person who answers this question typically receives less in a negotiation. There will be times in which a company will say you have to give a number in order to continue in the process. In that case, use the tactic later in this post to help you, anchor, on salary, bonus, and equity ranges, supported by market data. Guess who has the best market data in Boston? This guy. Ask.
There are many points you can negotiate in an offer. Do not negotiate an offer piece by piece, but instead come back to the table with all levers at once. 85-90% of hiring managers do not make their best offer first. Know this. Go back with all requests together, and then work through all deal points with the other person. Here’s one example of why that is important: If the person negotiating on behalf of the company ever asks you what salary you’re looking for, and you answer (ex: $125,500), you have now provided an anchor to which he/she can come back to later in the negotiation. Ex: “Hi Ryan, you originally said $125,500 is the salary that would work, but now you’re asking for $140k.” Instead, come to the table with asks across salary, equity, bonus (and more) and work through all points together. Maybe you want to push harder on equity. Maybe you want to push harder on performance compensation tied to sales. Etc. Come with all levers to pull.
Make them like you even more than prior to the negotiation. This goes without saying, but I’ve seen a number of negotiations go poorly and ruin the relationship. This is partly why I encourage my Operators to allow me to negotiate with the employer for them. Most people have only ever negotiated compensation 1, 2, or 3 times in their entire lives. Let someone more experienced help you, or do what you’re doing now and read posts / watch YouTube videos / listen to podcasts to help you. At the end of the day, everyone should have MORE respect for you and like you more after a negotiation because they should be impressed with how you handled it. There will be many negotiations within the four walls (or four digital walls) of the office and HOW you negotiate is just as important as what the final numbers show.
Never lie. Little lies become big lies. Big lies turn into trouble. “But Ryan, what if a company asks me if I have other offers… or if I’m talking to other companies? Won’t that show my hand?” No. There are ways around being asked tough questions, and it ain’t lying.
I could go on for days, but instead, let’s move on to the next topic.
Remember an offer expands far beyond salary, bonus, and equity
Comp is not just salary, bonus, and equity. There’s a lot more to it, and prepared candidates should know the answers to their most important questions. I’ve included a list below to remind you that the list is long.
Salary
Bonus
Equity
Title / Ownership: I place far less value on the title than on ownership. Have a firm understanding of what you own, and what you do not. Understand the goals, KPIs, and responsibilities they would like you to own. Understand how those responsibilities may change (partly coming from them, and partly coming from you). Understand how big the team is and how they see it scaling. If you’re being hired to manage a team of two people and the expectation is you’ll grow that team to 200 people… that’s a BIG responsibility, and (one would expect) a big comp package. Information you can gather on the goals you’ll be expected to hit and the team you’ll be expected to grow can help you in a negotiation.
Benefits: What % of Health, Dental, and Vision plan does the company cover? If you’re on your wife’s company plan, you can use this information in case they deny you an increase in base salary. You’re saving the company money, and so there’s a potential to leverage that.
Location: Work from home? Fully remote?
Other benefits: Do they have:
Coaching support: Dedicated 1x1 coaches or group coaching
A paid work-from-home setup and/or paid access to public coworking space sponsored by the company
The commuter benefit towards the T, parking, gas, etc
Childcare services / additional support for parents
Caregiving support for others in the family beyond children (your elderly, sick family members, etc)
Education and training programs
Gym membership reimbursement
Mental health programs
Vacation/holidays / sick leave: Ask what their policy is. Not every company has an unlimited vacation.
Parental leave: How many months? Is it equal for moms and dads?
Commissions / Kickers (for sales people / AM’s / Customer Service)
401k:
Do they have one?
Do they match? If so, what’s the matching?
Retention grants: Opportunity to receive retention grants? Do they have a planned retention grant structure (after two years you’ll receive a 15% bump, and then every year after as well?)
Sign-on bonus/spot bonus: Is there potential here? If they aren’t willing to increase your base salary by $X, could you get that $X in a sign-on bonus instead so as not to screw up the company’s salary bands?
Annual cost of living increases/inflation annual increase: Do they do that?
Severance package: Can you get any sort of guarantee? Ex: 2 months guaranteed if let go. For sales leaders, in particular, this is becoming more mainstream… 6 months.
Promotional paths: Is there a fast-track path from one title to the next and projected salary, bonus, and equity increase?
Length of service/player options: Can you agree to a specific length of term up front? If I stay for 5 years, is there a player option to sign for an additional year? This is something I am pioneering.
Good salary questions to ask the People Ops / HR team member
What is the salary range or pay band for the position?
Instead of asking “what does this role pay?”… ask for the band. And ask them to explain what skillset level/responsibilities differ from the bottom of the band to the top. (Note: Most people will have a hard time explaining this… because it IS hard to explain. Unproperly trained managers and People Ops members will not explain this well. That ultimately helps you because it allows you to drive the conversation).
Does the organization ever pay higher than the starting salary range?
This is particularly useful to hear because if a company ever says that they do/have, it’s another negotiating tactical point for you to leverage.
What is the average salary increase? How often are increases given?
You want to set an expectation that at a minimum you’ll likely receive x% a year (normally between 3%-5%). And you want to get a better understanding of performance review increases. Some companies have a set pool of capital to pull from not just for bonuses but as it relates to how they think about salary increases. Some companies don’t raise salaries at all unless asked directly by employees (this is really shitty and typically a sign of a shit company). Know this going in.
How long has the position been open?
If the role has been open for a while, that typically gives you more leverage. Ex: If they’ve been looking for a Head of Product for six months and haven’t found it… and if they think you are the one… ya… you get it.
What is included in the benefits package?
There’s been an explosion of benefits recently. Ask.
Equity questions to always ask
Fully Diluted Basis Share Count: How many shares are there on a fully diluted basis? This will give you the denominator number of your equation to know what % of the company you own. If you’re being granted 10,000 stock options and there are 10,000,000 shares on a fully diluted basis, you would own 10,000/10,000,000 = 0.10% of the total company.
Class of Stock: What's the class of stock? Does everyone in the company have the same class of stock? The majority of the time, the stock will be issued as ISO’s (Incentive Stock Options). Do they allow you to purchase your stock options on day one? This can have beneficial tax implications for down the road (but it also impacts your taxes in the calendar year you exercise, so read up).
Strike Price: What is the current strike price? Your stock options strike price is usually equal to the FMV of the company’s stock on the day the option is granted. Another word for strike price is “exercise price.” It’s the price you’ll have to pay to exercise your shares.
The value of the stock today (ask what the last 409a valuation valued your shares at): I like to ask this question to ensure that the answer to #3 above (Strike Price) is equal to #4 (the value at the 409a valuation). It’s someone of a “gotcha,” but I like to ask it to ensure everyone is crystal clear on the price. What was the board's last common stock appraisal and the current valuation (this is a 409a valuation)? This is a very important question to ask. If you have been offered 10,000 stock options and the value of the stock is $5… then you have $50,000 in stock value today. If you have a four-year vest, then that means that at today’s stock price you have $12,500 in value. If you assume the company will 5x over the next four years, that means you’ll have $250k in stock (provided no additional rounds of funding that will dilute the company, no warrants, etc). The reality is that most tech companies today will raise additional money as they continue to scale, and so that $250k will be lower… but you get the idea.
Vesting schedule: What is the vesting schedule? Most companies have a “one-year cliff, four-year vest vested monthly” meaning you’ll receive 25% of your stock options on your one-year anniversary of working at the company (the “one-year cliff” part), and then you’ll vest monthly the remaining 75% over three years. But ask to make sure because some companies do 5 years vests, and some companies (like Amazon) don’t evenly distribute the equity by period.
Acceleration: Is it a single trigger or double trigger acceleration? The majority of companies will have double trigger acceleration written into their stockholders’ agreement and it is a rare day in hell these get changed for one employee (unless you were basically a new CEO coming into the business).
Unvested shares post-acquisition / IPO: What will happen to the remaining unvested shares if the company is acquired? This is almost always up to the board (“board discretion”) and the acquiring company, and you will not have the ability to change this. But as an executive, again, it’s another point to know when it comes to negotiation.
Scenarios
Here are a few common scenarios: the question asked of you and what your response could/should be:
Scenario: You are in the first interview with a company. The interviewer asks “What type of salary are you looking for?” You can say: “Before we talk salary I’d like to learn about the position and share with you how I can add value to your organization.” You can also say: “Salary ranges for my role vary so much based on the level of responsibility, can you talk to me more about the goals and expectations of this role?” You can also be very direct: “How are you thinking about budgeting this role?” Or, use the below…
Scenario: If you are put in the situation of starting off the process and throwing out the first number, make sure (1) You site objective data based on your research, (2) It’s a range, and (3) The bottom of the range is slightly higher than the minimum amount you believe you would accept. This leaves room for negotiation. You always will need to support your answer. This can be a combination of the following:
Example: “My research indicates that the typical salary range for this position is $_______ to $_______. I feel that, in light of my _______ (qualifications, education, experience, accomplishments), I would be qualified for a salary between $_______ and $_______ (citing a dollar estimate that is a tighter range within the original range).”
Market Data: Research on what the market is paying (from your agent, Built in Boston, Payscale, and the Venture Capital Firm study of startups which takes into account the stage of company, title, geographic location, and investment raised). I have the most accurate compensation data in Boston because it comes directly from Operators I know and is not averages of averages (average companies… average people).
Your experience: Reiterate your direct experience.
Your special/unique skills: Reiterate the specialized skills that make YOU particularly valuable.
REMEMBER. There is value beyond “skillset” and how well you’ll do in the role. A company may get much more value than just the day-to-day role.
Example: When Ryan Durkin goes to a team he brings Product Management expertise, he also will bring 20+ people to a company by his own network.
Example: Hiring a particularly high-profile person can make a company look like a “winning team” and drastically improve employer branding.
We’ve demonstrated that a particular player will increase the RSN ratings.
Advertisement sponsorship.
Franchise value.
Or now that you’re viewed as a “winning team.”
And what that means to a retail space and merchandising. Knowing you’re going to have this type of team for a 4-7 year window.
Winning answers to sweeten the story: Put your money where your mouth is.
Example: New hires: Speak to the number of new hires you’re going to attract to the business who want to work with you. One negotiation tactic I like to use: “I’ll give up $20k of my base pay if I don’t source at least 2 employees for the business over the next 12 months.”
Scenario: If the employer starts off the process: If the interviewer says… "The salary range for this position is $42,000 to $47,000, is that what you were expecting?" Tell the interviewer that it does come near what you were expecting, and then offer a range that places the top of the employer's range into the bottom of your range, by stating: “I was thinking in terms of $47,000 to $52,000).” Be sure that the range you were thinking about is consistent with what you learned about the market rate for that position. Never say, "I need at least ___ dollars." Leverage your sources like Built in Boston, VC study, etc. It needs to be objective, not subjective.
Scenario: A hiring manager offers you a starting salary of $70,000. Your research indicates that salaries for similar positions have a salary range between $70,000 and $90,000. “I’m very excited to receive an offer, and I really want to be part of your team. I’m a bit disappointed in the salary. My research indicates that $70,000 is a more typical salary for someone new to this type of position. Given my seven years of experience, I consider myself someone closer to the midpoint of the salary range. Is there room to negotiate?”
Scenario: You have two competing offers. You’d like to work for this company, but the other position offers a higher salary. “I have a very generous offer from another company, but I’d prefer to work here. However, I just can’t ignore the differences in the packages. If you could put together a similar package, I would be very interested in your offer.”
Scenario: If the employer starts off the process by stating an offer that is unacceptable: While keeping your outlook for resolution positive, you will need to immediately communicate the reasons you feel that the offer is unacceptable. State specifically what is lacking in the offer - be succinct. Is it the amount? The insurance coverage? Business travel? You could say something like: “I am very interested in working for this company; however, at this point I am not able to accept this offer because ________. OR “If you were able to _______ (give a proposed solution), I would be very happy to accept the position.”
Scenario: An offer has been extended to you, but it is too low. When you push back you are told that standard company policy is they cannot go above that range.
You: “So, if I understand you correctly, no one has ever been paid above the fixed salary band at the company.
Them: “Except in very rare circumstances.”
Once they admit an exception has been made, you may be able to negotiate the same for yourself. Or you may be able to negotiate that they pick up your COBRA payments for the three-month period.
Good additional read on salary scenario negotiation.
Creative negotiation strategies
Competition: If you are talking to other companies, always, always, always mention that. If you are not… get talking to other companies. You lose all negotiation power if you’re not talking to more than one company. Also, if a company asks you what other companies you are talking to, do not name them. It doesn’t help you to name them (the majority of the time). However, you can mention the industry. “I’m talking to two other companies in the eCommerce space. One is local. One is remote. Both are around your stage.”
Give a range: If asked what your salary expectations are, always give a range (with your bottom floor as the lower range). Leverage available data resources (Built in Boston, PayScale, VC compensation guide, and your recruiter (who knows the supply/demand of the market)).
The “open-book method.” You literally show a copy of your W2. You then see what they can do. Will tell you a lot about their negotiating strategy. This typically will not maximize salary returns but builds massive loyalty right off the bat. If the opportunity is “the big one,” this method works well.
Offering to cut base pay: The easiest way I’ve seen to get someone interested in hiring you is to offer to work for 20-40% less pay. Period. 90% of people aren’t willing to make that sacrifice…. And in a really tough economy like the Covid times… 90% of that 90% is going to be shit out of luck and unemployed for a potentially long, long time. If you’re used to getting paid $150k base… offer to be paid $115k base. Can’t make that work? Yaaaa….. In a bad economy… you may have to.
Offer to sacrifice dollars for equity: Either 1 for 1 or 2 for 1. Example: If a role was previously set to $130k base + 10,000 shares valued at $1… tell them you’ll take $90k + 40,000 more shares for a total of 50,000 shares.
Cutting expenses:
If your significant other’s health plan can cover yours, tell the employer that you don’t need benefits, and instead, to keep that $5k for the company annually. This will typically cost a company ~$5k a year… over four years, that’s $20k.
Tell him/her you don’t want/need a commuter benefit or other benefits that cost money.
Being really audacious: Throw down a challenge.
If you really, really want the job, throw, tell the CEO that when it comes to bonus, you want the bonus to be binary for you… if you hit all goals you’ll get the bonus, and if you don’t, you’ll give up 100% of it. And then agree to set those goals as being super, super aggressive (almost to the point that the CEO doesn’t think you’ll be able to hit them). If you hit them, great, you’ve got $ and have impressed her/him. If you don’t hit the goals, he/she wins on the $, but you still are respected for throwing down the challenge.
Delaying hires by taking on more load: If you’re going to be managing people, tell the CEO that you’ll take on so much load in the first few months, that you will not need to hire 1, 2, or 3 of the hires for up to two months each… saving the company up to $50-$100k right off the bat. Example: If you are being hired on January 1st as the Head of Marketing to then hire a team of three Marketing team members by March 1st, tell the CEO you’ll take on so much of the load that you won’t need to hire those people until May 1st. If each Marketing hire gets $8k per month, and you can delay the hires for two months, that is $48k in savings in salary + $2,500 in health benefits… so $50k savings in total. Boom.
There is one last thing I’ll say, and it is something I learned from my best friend: “You will never be disappointed in yourself if you optimize for learning.” This is one rule I now live by and has not served me wrong. Optimize for learning until the day you die. You will never look back on your life at age 150 (when I plan on dying) and say to yourself that you wish you had made that additional $15k when you were 33 years old. Optimizing for learning optimizes for growth. And you will be far happier you grew and empowered your mind far more than any $. I know it’s hard… but in life, you cannot control every situation. Sometimes, you have to let the universe take over. And I’ve found optimizing for learning is part of that universe for me.
I hope this post has been helpful. I could go on for days, but I guess that’s what other blog posts are for.
Go get em.