Negotiation for nerds
Value yourself more, make more money
Negotiation is my passion. I grew up watching my dad try to haggle everything from our monthly internet bill to peanuts at the flea market. I am my father’s son, yet I took my talents to the Bay Area instead. Over my two years here, I’ve added more than half a million in value by helping my friends negotiate salaries, contracts, and Facebook marketplace purchases.
Closing deals is awesome but lots of people find it stressful. There’s often an air of winning and losing around it, but it’s more like a supermarket in my head. If a deal is agreed to, everyone gets what they need at a price they’re fine with. While you might not be overjoyed paying three dollars for avocados at Whole Foods, you do it because implicitly, you’ve calculated your life as better off with the avocados than with the $3 in your bank account. There’s no anxiety at the supermarket.
I definitely had more anxiety negotiating when I started out as a software engineer, but since then I’ve done a bunch of hiring at startups, and spent six months in tech sales. All that taught me some principles to get paid more, and even sometimes have the other side thank you for it.
Figure out what you’re really worth
In tech, at some point during the process, a recruiter will always ask:
“What are you looking for in terms of compensation for this role?”
Sometimes people start off with, “well at my last company I was making…”
Or they’ve done their research, looked at levels.fyi, and talked to some friends in similar roles, and say a more balanced range.
There’s nothing obviously wrong with either approach. You’ll likely get paid fairly this way. But if you want to get paid unfairly in the upward direction, stop trying to assess your own worth.
Instead, assess what you’re worth to who you’re trying to make a deal with.
Most people view themselves more negatively than the world does. You see 100% of yourself all the time, all your strengths and flaws, while seeing everyone as they present themselves. No one tries to present themselves badly, so you’re most often only going to see the good parts of everyone else.
Which means you, seeing both your good and bad and only everyone else’s good, think you’re worse than everyone else. You’re innately biased to the negative.
A better model is thinking about what the position you’re filling is worth to the company. If they hire you, how much money are they going to make? If they don’t, how much more are they going to spend to recruit someone else?
This works best after you already have an offer since you have more leverage. As in, the company has already put in significant recruiting resources into you, and thinks they’ll make more money off your contributions than they have to pay you. They’ve decided they’d rather have you than the money in their bank account.
The person in front of you is not thinking about any of this consciously, but they are really hoping you’ll say yes. It’s a drag trying to get someone else. They have every incentive to get you to accept, so even if you ask for a sum of money you think is egregious, 95% of the time they’re just going to present a counteroffer rather than stripping away the entire deal. This is the fundamental fear that drives people to ask for too little money. I’ve never seen it happen.
You can usually find out what you’re worth to the company in a few ways.
Look at revenue per employee. Six years ago, Google was said to make about $2.5 million per employee and that’s including the janitors. Tech companies are normally looking for a 5-10x multiple on their employees. But even if you ask for a million, and they make at least 2.5 mil off you, it’s not crazy for you to actually get that! Hiring you nets them 1.5 million dollars! You’re doing them a favour by joining.
Ask around. Friends at similar companies doing similar jobs with similar years of experience in similar locations are good comparisons, but remember most people are afraid of negotiating so their salaries might still be low. Usually no one balks if you ask for 1.5-1.7x an amount they’ve done before. 2x can be a little dicey because people can do that math quickly in their heads, and think “Why am I paying double?!” unless you clearly differentiate yourself.
Think about recruiter costs. Tech recruiters make about 140k/year + bonuses for hiring someone. People often do 3-7 rounds of interviews, often with people higher up at the company. Think about all the time that takes away from their job. Not just meeting with you, but talking about you, and the switching costs for hopping on a call. Now repeat that for every candidate they interview, and how long a recruiting cycle can take.
I often see roles open for 3-6 months at a time. When I was trying to hire, extending an offer to someone felt like a huge relief and we prayed they took it, cause recruiting is such a pain, and having extra help on the team is amazing. Think about how badly people want the process to end and how much it costs to recruit. No one’s gonna mind you asking for an extra $50k-$100k.
Bonus: If the position’s been open for a long time, they’re desperate. If they created it for you, same thing. Lever accordingly.
Take on this lens of valuing yourself based on how an employer judges your value and you’ll quickly see why job hopping is the best way to get paid more.
If you’re a happy employee with no complaints, you are worth what you’re paid. Why would anyone give you a raise to do exactly what you’ve been doing?
If you want to leave, suddenly you’re worth what your absence would cost the company, about 5-10x what you’re paid multiplied by the percent chance you actually leave.
If you have a competing offer, you’re worth at least that offer, but also the value of your absence * 100% because you’ve made it clear you’re not afraid to leave1.
Ask for more than what you want
A good white-collar negotiation feels like a win-win. Both sides get what they came for. It might feel odd to propose better terms for yourself, but again, this doesn’t detract from the other person. They’re allowed to say no! Therefore if they say yes, they must be satisfied with what they’re getting in return.
In tech, the recruiter is usually allocated a certain range, and is able to go to the top of the range at their discretion. They don’t lose any money for giving you more. They just have to be able to report that you asked for it.
If they ask why, feel free to give a reason. If they don’t, don’t. No need. Common valid reasons are relocation, family situations, or “looking for a step up”. They don’t care too much, often they just need to check a box.
Same thing when you’re buying something. I’ve had friends negotiate cheap leases for offices. They’ll mention the landlord said they don’t normally do this but they’re willing to make the exception just this once.
More likely than not, the landlord doesn’t have any alternatives, but wants to save face in front of the buyer. The only reason someone will give you a certain price is because they have convinced themselves the price is acceptable. No amount of smooth talking or sob stories can convince anyone of anything. They can only convince themselves. If someone says they’re making a special exception, they’re probably not, just that you’re still negotiating within their range.
The best way to know the price you’re getting is fair is to get rejected.
There’s no worse feeling in a negotiation than having your first offer accepted. That means you’ll never know what the actual best price was. Even when my friends get way more money than they could’ve imagined, they’re still upset if their first counter gets accepted.
Often people are suspicious when something’s too cheap that it’s not high quality. Confidently asking for a lot of money signals that you’re high quality. If you weren’t good, why would you ask for so much? Therefore you must be good.
Even if a price is within someone’s bounds, remember they also want the best price! Make their desire to end the negotiation stronger than their desire to eke out a few more dollars. This is why it’s best to negotiate with people whose own money isn’t on the line, or rich people. They value their time much more.
Glossary: Anchoring, Leverage and BATNA
Anchoring is when the first number tossed out sets the tone for the rest of the negotiation. AKA anchoring bias, because no one really knows how much stuff should cost and the entire monetary system is made up, the first number holds a lot of weight.
Sometimes, you’ll hear that you shouldn’t say a number first, or whoever speaks first in a negotiation loses. I think this is kind of dumb.
With anchoring bias in mind, I try to do 2 things:
Remember, it’s a bias. I do my own price estimation and center the conversation around that. The first number isn’t necessarily more relevant to the final price than any other terms proposed. I make my own bounds for what I consider an acceptable price point independently, before the first number is out there.
Throw out a number first to anchor high. Most people forget about cognitive biases even if they know they exist, so anchoring to something higher isn’t a bad strategy. The only possible downside is someone thinking it’s so ridiculous they walk away from the table, which rarely happens.
I’ve only ever done this at the electronics market in Shenzhen where they try to scam foreigners. After asking a bunch of vendors about the tech I’m trying to buy, I know who’s willing to play ball or not. Anyone who anchors too high is not. But I only do this because it’s a competitive marketplace and I have a good BATNA.
BATNA stands for Best Alternative To a Negotiated Agreement. As in, what you do if the current deal falls through. If every single stall is selling the same electronics, my best alternative is to go to any of the 20 others. Having a job offer from another company is a good BATNA for salary negotiation. Unemployment isn’t. Leverage comes from having a good BATNA.
Leverage is just how much sway you have over the other side. Multiple close competitors often means the sell side has leverage, as long as those sellers are accessible to the buyer.
There can be a million tech companies but not all of them are offering jobs to the labourer. If you’re the best in the world at something, or at least the best designer/coder that the person you’re negotiating with knows, you have much more leverage since you have no close substitutes. The reverse is also true: the employer has leverage if the economy is rough and no one’s hiring.
To get the best price you always want leverage, or try to conjure it up if you don’t have any right now. The best way to get VC funding is to have other VCs interested in you. Or make VCs think you don’t need their money. Your alternative is to just keep chugging along happily with the resources you have, so why would you need to take their money unless they offer you favourable terms? They want to invest in successful companies, but successful companies don’t need their money.
Years ago, when we were raising for my first startup, one VC was interested early so my CEO stopped taking meetings. That VC dilly-dallied to the point where we panicked, and realized we needed to take meetings again. We got a Tier 3 VC interested, which made another Tier 1 interested, who offered us a term sheet.
The next morning, the initially interested VC magically stopped dilly-dallying and offered us a term sheet2.
Also, to get those meetings in the first place, my CEO would always take meetings with VCs “just to chat”. When they asked if we were raising soon, he’d tell everyone we’re “fully heads down in building mode”.
Genuinely not needing something is the best way to get it at favourable terms. Always act from a place where you’re willing and able to walk away, and negotiations will go a lot more smoothly.
Useful tidbits
Don’t try to negotiate face-to-face. Or commit to numbers on a call. Whenever someone tries to get numbers out of you, mention you want to consult your partner/friend/brother/parents to plan a bit before responding, and that you’ll get back to them by a certain date. Face-to-face interactions are easy to fumble and forget all good negotiation practice, because certain people are just better at manipulation than others. The barrier of a screen takes away that advantage.
Respond quickly! Speed wins deals, and it’s contagious. If you reply slowly, the person on the other end will be tempted to do the same, and anything that feels sluggish makes our ADHD generation not want to do it.
When I did sales, I trained myself to have an instant response rate to everyone (even friends on iMessage). I’d respond to everything at most in 24 hours and it just gives you a reputation as a person who does things. It does not make you look desperate and needy, as long as you’re not saying desperate and needy things. If you’re really worried about looking desperate, making assertions rather than asking questions helps. “I’d be comfortable at a million dollars” vs. “Does a million dollars work?”
If someone tosses out a number initially that seems fair, there’s actually no need to negotiate. Negotiations are a way to get what’s fair, so don’t try to over-negotiate. Generally try to think that if you’re negotiating with someone once, you’ll likely negotiate with them again at some point in life, so it’s best to maintain that relationship if you’ve already got what you wanted.
There’s lots of little ways to make sure someone feels like they got a good deal. Saying “I usually never do this”, or throwing in a free extra, or showing comparisons to deals you’ve done before if this deal compares favourably. My rule is if you can do this truthfully, go for it, but don’t make it up if it’s not there.
Some good guides by others:
Now go forth and make more money!
Though no one will actually pay you that amount because at a certain point it’s more cost-effective to replace you, but you can see how you can be paid much more than you are if you’re valuable and a flight risk.
We took the sheet from the Tier 1 that came in last. We liked their conviction. Speed wins deals.
Damn good read. Appreciate you sharing the tips and mindset behind it.
graphic design is my passion