How To Negotiate Your Ideal Salary

Negotiating a salary can be nerve racking and scary, but it’s an important part of managing your career. The best time to negotiate salary is when the offer is made. Your new employer has gone through the screening process and picked you and they want to bring you on board. You have all the leverage! They don’t want to go to a different candidate or start over. They have selected you and now they need to bring you in. It sounds obvious, but I’ve actually known a few people that didn’t negotiate well or decided they would ask for more money later on after they had proven themselves and it didn’t turn out well for them.

I was asked to present a workshop at my church for jobseekers, and this post is what I’ve prepared. I hope it helps you in your next salary negotiation. So here is Salary Negotiations 101, according to me!

Know What You Are Worth

This sounds obvious, but its critical. You need to know what you are worth to the organization. There are two parts to this. You must be aware of what you can command on the open market, which you can discover by looking at sites such as Salary.com. You’ll get a range for your job title and location. It’s also a good idea to look at job boards and see what other companies are offering. TheLadders has a neat feature that shows you what other candidates are making that have applied to the same job. If you look at the graphic below, you’ll see that 106 candidates applied for this job and this particular person is making $180k+. There’s also a graph, so you can see where other people fall.

You can also talk to other people in the industry and ask them what a particular job is worth. Do your research so you know what the job should pay.

The second part of this is more difficult, and that’s to determine what the job is probably worth to the company. Is the company going to bill out the position? Are they in desperate need? Are they looking to move into a new area? If yes, then your position will be worth more to them. They will be willing to pay a little more to get the right person that can solve their problem. I accepted a job several years ago for a company that was moving into the DC area, so they were looking for someone to help grow their business. I knew they were willing to pay more for that role. I was able to negotiate about a $25,000 increase from my current job because I knew they needed me and were willing to pay more for me to take a chance on them. I also had a friend of mine interview for a company that was trying to fill a role on a government contract and they were behind because the first candidate they selected had pulled out when they offered it to him. So they were behind by a couple weeks and my friend was able to get an additional $10,000 a year. It’s harder to figure out what the company needs, but it’s very valuable if you can.

Think About Compensation Holistically

Companies use the term “Total Compensation” to describe all the ways they compensate their employees, such as health benefits, retirement benefits, and other perks of the job. You need to do the same thing, only focus only on those parts that are valuable to you. Even though a company may tout their “discount program”, if you don’t use it, it’s not valuable to you. Make a list of the benefits that are important to you and prioritize them. This will help you to see where you can negotiate and how you should be compensated if one of your priorities isn’t available.

Here’s my personal “Total Compensation” list in priority order:

  1. Salary
  2. 401k match percentage
  3. Time off
  4. All other benefits (including health)

You may include education reimbursement in your “Total Compensation”. I don’t because I have already completed my MBA and won’t be going back to school ever again. So education reimbursement is not valuable to me anymore. It was a few years ago, but not now. I put 401k match as #2 on my list because I max out my 401k contribution every year, so the match is worth an additional $4,000-$6,000 per year. Time off is the next most important to me because I want to be able to go on vacation with my wife every year and be able to do some things. I lump health benefits in the last position because I can get health coverage through my wife’s employer for about $70 a month, so whether or not my employer offers health insurance doesn’t matter to me. Especially if they have plans that are expensive. I was offered a job once where the cost for the employee only was over $200 a month. So to get those benefits would cost me $130 more a month than going onto my wife’s plan.

Thinking holistically also allows you to negotiate the things that are important to you and give in on things that aren’t. I had a co-worker once that put the health benefits almost as important as salary and negotiated a higher salary to pay for the health benefits that he wanted. I would give in on health benefits and negotiate on the 401k. Regardless, figure out what is important to you.

Know What Can’t Be Negotiated…and What Can

Here’s where thinking about your “Total Compensation” comes in handy. Many parts of the compensation package can’t be negotiated. For example, the 401k match is set for all employees. So if you are negotiating with an employer who doesn’t offer a match, you’re not going to get him to move on that. But you can then use that as leverage to get more money. Here’s how:

Express that the 401k plan is important to you. Since they don’t have a match, it will cost you some money to get the same level of benefit. You would have to contribute an additional $5,000 to savings to get the level that you want. So ask for an additional $5,000 in salary to make up for the lack of 401k match. You’ll get it.

Another possibility is to negotiate a signing bonus. I was choosing between two companies a couple of years ago and they were very close in total compensation. I told the one I wanted to work for that I wanted a $5,000 signing bonus and they gave it to me. A signing bonus is a one-time payment, so companies can often give one and it doesn’t affect their payroll.

Plan Your Approach

A negotiation can be simple or complex, so it’s important that you have a plan for getting what you want. Also, every negotiation is different. It’s critical that you make a plan for each negotiation so you can get to where you want. Do you know who will make the decision? Are you dealing with that person personally? Or does someone have to “take it up the chain”. All that makes a difference. Think it through and then plan your negotiation accordingly.

I was negotiating with a recruiter for a position that I wanted. I knew that he wasn’t the one to make the decision on salary, especially if I asked for more than he could “authorize”. So I sat down and wrote out an email outlining what I wanted and crafted it very clearly and succinctly, knowing that he would immediately forward it to the decision maker. I sent him the email, then called him two minutes later, probably while he was still reading the email. I went over again what I wanted and he told me his boss would call me back. He did a short while later and we settled on a salary that was $10,000 more per year than what had been offered previously.

Leverage “Other Opportunities”

It’s all about leverage.  In a negotiation, you want to be desirable so the other side will pay more to get you.  The easiest way to do this is to play the “other offers” or “other opportunities” card.  If you are fortunate to have two or more offers, then it’s easy.  You tell the one you want to work for that you have another offer and tell them what it is and what you want from them.  Now they know that in order to get you to come to work, they have to up their offer to you.  You are desirable.

I always have other offers, even if I don’t.  If the company thinks you might not take their offer because you have something else, they will negotiate more willingly to get you to commit.  Be prepared to outline the other offer and communicate what you like and what you don’t.  You can’t say you have an outrageous offer or they won’t believe you and then you’ll lose your leverage.

In the example above, I had been interviewing at another company and we had gotten close enough that they had outlined their compensation to me, so I had real numbers from them.  I put those numbers into my email and informed the recruiter that I had another offer that was more money and closer to my home than what they were offering.  It was only about $5,000 different, so it was very close, but enough to give me ammunition to get more. 

On the downside, I bought a car last summer in which I lost the leverage and had the “other offers” pulled on me.  I looked at the car and it was beautiful, with low miles, well cared for, and super clean.  It was exactly what I was looking for.  Of course I wanted the car!  But I told the owner I needed to think it over that night and I’d give him a call a little later on that evening.  He had someone else show up and low ball him.  So he told that person that I had first dibs on the car and called me.  Said he had another offer and did I want the car.  Of course I did!  And my leverage was gone.  So I paid his asking price for the car.  He wouldn’t have taken less because he could have played us both against each other at that point and he’d get what he wanted.  Turns out the other guy called him the next day begging to buy the car, but by then we had an agreement in place and were meeting to consummate the sale.

Express That You Want to Work There

This is sort of a soft close. I tell the company that I want to work for them. I’m going to negotiate solely with them and if we can get to an agreement, then I’ll turn down the other offers. By using this tactic, I make it a positive transaction. I want the job! I just need a few things to get there. You change the negotiation from a confrontation into a compromise. When you express that you want the job, you put the focus onto cleaning up the details rather than having them try to guess whether you are using them as leverage. Companies have gotten weary of people using them to get more from someone else, so they often won’t even negotiate with you unless they feel confident that you’ll take the job.

I even give them a reason. I want this job because it does this for me. I am excited by the challenge of working on that project or with that team or for that client. Then they know you aren’t blowing smoke. Always have a good reason for why you want to work for them. I even ask that as an interview question: “Why do you want this job, besides the paycheck?” So by expressing your desire to work for them, and backing that up with legitimate reasons, you solidify in their mind that you are the right candidate and the salary negotiations go smoother.

Communicate Clearly

What do you say when the decision maker asks you “What do you need to make this work?” Are you ready? Do you have it figured out and can you clearly express what you need? In asking for more money, can you clearly explain why you are worth the extra money? Communication is extremely important. If you can’t communicate clearly what you want and why, you probably won’t get it.

Don’t Bring Up Why You Need The Money

This is a mistake I see people make all the time. I need $125,000 a year because I have a kid in college. So what! I have a kid in college too. And soon to be on a mission. And an expensive wife. And an addiction to expensive cars. And a big mortgage. None of it matters! The minute you tell someone why you need the money, you’ve lost them. It’s almost contrary thinking, but you almost have to believe that you don’t need the job and you don’t need the money. Then you can ask for what you want with confidence that you’ll get it.

Don’t Take It Personally

This is hard to do, because we often assign self-worth to our worth as a provider. When an employer offers you less money than you want, it’s easy to think they don’t value you as a person too. Of course they don’t, but that doesn’t mean it should affect you and the negotiations. Everyone has a job to do. Their job is to get you to take the job for as little as possible while still keeping you happy so they can make a larger profit. Your job is to get what you are worth. Stay focused on that and don’t take a lower offer personally.

Be Confident, Be Bold

THE MOST IMPORTANT ASPECT OF SALARY NEGOTIATIONS! OR ANY NEGOTIATION! You have to be confident! Be confident in your ability to get what you want. Be confident in asking for it. Don’t beat around the bush or hem and haw. I need $150,000 a year to make me happy! Boom, Done! You can’t give me $150,000? Then fine, I’ll take $145,000 a $5,000 signing bonus and I’ll get a raise in a year! Gathering all the information and having a plan will help you to be more confident. You might need to practice some to make it more natural. Confidence can be hard, especially if you are down. I googled “how to be confident” and found this post, “25 Killer Actions to Boost Your Self-Confidence”. I like the points he makes. If you aren’t confident, work at it to get confident. Be confident, be bold!

I have watched coworkers ask for more money as a raise or salary and been turned down. Every time, it’s because they weren’t confident. They asked almost as a favor, if it isn’t too much trouble. Make no mistake, your employer is buying you and if they think they can get you for less money, then they will. Don’t give them an out. Don’t let them marginalize your request. Demand to be taken seriously. Be confident, be bold.

One last story to illustrate how it all comes together. Several years ago I was working as a contractor for a large company. I was in a prominent position and I was the only one that could do the job. After about a year, they told me I had to convert to a full-time employee if I wanted to stay working there. I met with them several times and we discussed salary and benefits. I knew what other people were asking for and I knew what the market was paying. I figured out I was worth about $120k a year. I told them I would convert, that I enjoyed working for them and wanted to continue. I told them that I was realistic and wasn’t going to ask for an astronomical amount or threaten not to convert. I communicated clearly and told them I wanted $120k a year and I was good to go. Several days later the negotiator dropped by my cube and magnanimously delivered my offer letter to me. “I think you’ll be really pleased!” is what he said to me, then went back to his desk. When I opened the offer, it was $105,000 a year, definitely not what I had been expecting and not what I would accept.

I walked down to his cube and dropped the letter on his desk. I told him I couldn’t work for this and that this offer was completely unacceptable. I then walked out of the office and went home! Didn’t even answer my phone for a couple hours. They absolutely panicked! I had my bosses boss calling me that evening to smooth things out and see what they needed to do. I told him that the offer was unacceptable and that they would have to do much better if they wanted to keep me.

That afternoon when I got home, my mother-in-law called and I told her I had been offered $105,000 a year and had flat turned it down! She was stunned! I heard her gulp on the phone and she asked me in a pleading voice “can you call them back?”

And that’s the difference. I had enough confidence to tell them to go pound sand and my mother-in-law was scared to death I had blown a job that pays $105,000 a year. A few days later we reached an agreement and I got $117,000 a year. So I made an extra $12,000 by rejecting them outright. I think that was well worth it.

In fact, I think I have made about an extra $50,000 in my career from negotiating higher salaries. That’s not bad for a little extra work and being confident enough to ask for it. Be confident, be bold!