Tips for getting a big raise at a small company?
September 25, 2012 2:21 PM Subscribe
Negotiating a large raise at a small company? Can it be done? And other related questions inside.
I understand the basics of salary negotiation and have read materials like I Will Teach You to be Rich blog and others but what I am particularly interested in is how to pull this off at a smaller company. I enjoy my work and work/life balance and would like to stay here, but I am worried about falling behind with 5% raises for the rest of my life from an entry level base.
I have worked at a small (but stable and growing) consultant in a high cost of living city for 5 years and have always accepted in the neighborhood of a 5% raise and 5% bonus from my boss, who is the owner and sole decision maker on financial issues.
After some research both online and directly with other people in my field, I am confident I am being paid in the bottom 20% of earners for my experience level, responsibilities and location and I would like to achieve a substantially higher pay raise during my upcoming review period (20-25%). This raise, while significant as a percentage, would still only put me barely at the median of my peer pay level. I can accept that, but I can't accept being towards the bottom, especially when I feel I am the key employee here.
Here are my specific questions:
1. My boss will likely be surprised with the amount I am requesting and likely hasn't budgeted for it. What tactics can I use to achieve my desired raise while still maintaining a good relationship with him going forward? I would really like to ensure a win-win feeling as I have to work with this person on a daily basis.
2. If I can't achieve the full amount what else should I consider asking for? Equity in the company? Business development opportunities? How does one negotiate for these type of things? I am not particularly interested in "flexibility" benefits at this point, such as work from home as a replacement, and want to keep the conversation focused on money. If I can see a clear long-term path towards a higher pay day, then accepting less right now may be more palatable to me.
3. Does it make sense to bring cost of living concerns into it at any point? If so, how? i.e. my salary on the face of it is decent, but relative to the cost of housing/rents here it is quite low and I have no real hope of owning my own place at this rate. This is my problem not his, but it is a huge concern for me. Does trying to clue him in to my personal concerns, when we have a good relationship, make sense or keep it strictly bottom-line focused?
Any and all advice is welcome. This is my first time negotiating and I'm a bit nervous, even though I do feel confident asking for what I want here is reasonable. Thanks.
I understand the basics of salary negotiation and have read materials like I Will Teach You to be Rich blog and others but what I am particularly interested in is how to pull this off at a smaller company. I enjoy my work and work/life balance and would like to stay here, but I am worried about falling behind with 5% raises for the rest of my life from an entry level base.
I have worked at a small (but stable and growing) consultant in a high cost of living city for 5 years and have always accepted in the neighborhood of a 5% raise and 5% bonus from my boss, who is the owner and sole decision maker on financial issues.
After some research both online and directly with other people in my field, I am confident I am being paid in the bottom 20% of earners for my experience level, responsibilities and location and I would like to achieve a substantially higher pay raise during my upcoming review period (20-25%). This raise, while significant as a percentage, would still only put me barely at the median of my peer pay level. I can accept that, but I can't accept being towards the bottom, especially when I feel I am the key employee here.
Here are my specific questions:
1. My boss will likely be surprised with the amount I am requesting and likely hasn't budgeted for it. What tactics can I use to achieve my desired raise while still maintaining a good relationship with him going forward? I would really like to ensure a win-win feeling as I have to work with this person on a daily basis.
2. If I can't achieve the full amount what else should I consider asking for? Equity in the company? Business development opportunities? How does one negotiate for these type of things? I am not particularly interested in "flexibility" benefits at this point, such as work from home as a replacement, and want to keep the conversation focused on money. If I can see a clear long-term path towards a higher pay day, then accepting less right now may be more palatable to me.
3. Does it make sense to bring cost of living concerns into it at any point? If so, how? i.e. my salary on the face of it is decent, but relative to the cost of housing/rents here it is quite low and I have no real hope of owning my own place at this rate. This is my problem not his, but it is a huge concern for me. Does trying to clue him in to my personal concerns, when we have a good relationship, make sense or keep it strictly bottom-line focused?
Any and all advice is welcome. This is my first time negotiating and I'm a bit nervous, even though I do feel confident asking for what I want here is reasonable. Thanks.
Is it at all possible that you can get another offer for a similar position elsewhere? I think the request would have more force behind it if you present it as something like "X offered me Y amount to do a similar job, I'd prefer to stay, so long as I was compensated fairly." That way, you've shown him what your objective market value is, he gets an opportunity to match it, and you have something to fall back on if he declines.
posted by subtle-t at 2:31 PM on September 25, 2012 [1 favorite]
posted by subtle-t at 2:31 PM on September 25, 2012 [1 favorite]
Best answer: You shouldn't think of this like a raise. You should think of it like getting a new job, one that just happens to be at the same company. Basically, the easiest, most straightforward thing to do is get a competing offer and tell your boss, "I'd love to stay; I'd even work for X% less than this other offer!" (assuming that this is reasonable).
Leave cost of living and the fact that you "feel" underpaid out of it. SHOW him that you're underpaid by finding your market rate (i.e., what someone else will pay you).
posted by supercres at 2:33 PM on September 25, 2012 [1 favorite]
Leave cost of living and the fact that you "feel" underpaid out of it. SHOW him that you're underpaid by finding your market rate (i.e., what someone else will pay you).
posted by supercres at 2:33 PM on September 25, 2012 [1 favorite]
Best answer: I own a small consulting firm. From the owner's perspective, it definitely comes down to budgeting to make sure margins are held intact, to make sure we can continue to bill out consistently in order to pay our bills and pay competitively and to hope we can hold on to our real talent as long as possible.
Some talent we're unwilling to jump through significant hoops to keep. Some talent is much more valuable to us. Even still, a great deal of our decision making depends on the recent history with regards to consistency: have my teams been fully booked and stayed that way? Are they completing their work on time and generating the revenue expected? Or am I having to cover for slips in schedule or other problems? Or am I paying them even though no work is coming our way?
I think that what you probably want to do is explain to him that you think that your salary is inconsistent with your expectations based on your research. You like the boss. You like the company. You want to work there still, but you want to work with him to bring you in line with something more reasonable.
I think you're better positioned if you approach it as a path you'd like to be on: "In doing my research, and based on what I bring to the organization, I think that I'm being underpaid by a fair amount. In my research, a reasonable salary would be closer to X, and I'd like to see what we can do to get me there at some point over the next three to six months."
That will give him time to consider and budget accordingly, if it's in the cards for you. Barring that, you can certainly ask for equity or more aggressive profit sharing or bonuses, but equity is tricky. I've owned my business for 9 years with my partner. I've nearly killed myself and nearly gone bankrupt and assumed insane amounts of tax debt and other problems and risks and loaned the business money to make payroll and foregone payroll after payroll and blood/sweat/tears/the whole nine yards. So it's not an easy thing for me to chunk up parts of it without feeling like that entire ordeal to this point is worth a great deal. Profit sharing or bonuses, I'm much more willing to give because they're contained and they're based on the success of the business. (That is, they're only a "liability" if we're doing well, rather than an unfunded mandate such as a raise without the extra revenue and inbound work to account for it.)
Cost of living is definitely a consideration, but only insofar as you use it for a basis of comparison for your salaries. If you're in Seattle, NY, DC, or SF for instance, your cost of living is going to be significantly higher than Detroit, Phoenix, etc. Significantly higher. But I wouldn't frame it entirely around cost of living. This is more of a question of how you think you should be valued, what you bring to the organization, and your willingness to keep working with them and helping them build their organization.
You can definitely suggest that you take on alternate or more advanced repsonsibilities, branch out to things like biz dev, or other things like that if it makes strategic sense for your organization to do so. For me, it wouldn't make sense for my developers to go get us more business since we're already full-up on our schedule. I just need them coding. But your mileage will vary and depends greatly on how much more you can take on and still maintain life/work balance. I wouldn't push this angle too hard without having an appropriate idea of what you're looking to do because you don't want to frame it as "I'll work harder and do these other jobs for more money" as much as "I think I'm underpaid for the job I'm already doing".
Approach it with respect, give a reasonable time frame so that you can work up to it with the owner and don't make it like an ultimatum. Seek balance and something that, as you say, is more win-win and less adversarial "I'm looking if you can't make this happen for me." That's an unpleasant position for the owner to be in and he'll probably be keeping an eye on you and a lookout for your replacement if he thinks that what he gives you isn't strong enough to keep you from looking, and now perceives you as a flight risk.
But respectful, well-spoken, and with your own internal accounting of the business's health is a good approach. If you guys are slow and things are rough, it's not going to happen and it's going to be a rough conversation either way. Consider that too.
posted by disillusioned at 2:35 PM on September 25, 2012 [8 favorites]
Some talent we're unwilling to jump through significant hoops to keep. Some talent is much more valuable to us. Even still, a great deal of our decision making depends on the recent history with regards to consistency: have my teams been fully booked and stayed that way? Are they completing their work on time and generating the revenue expected? Or am I having to cover for slips in schedule or other problems? Or am I paying them even though no work is coming our way?
I think that what you probably want to do is explain to him that you think that your salary is inconsistent with your expectations based on your research. You like the boss. You like the company. You want to work there still, but you want to work with him to bring you in line with something more reasonable.
I think you're better positioned if you approach it as a path you'd like to be on: "In doing my research, and based on what I bring to the organization, I think that I'm being underpaid by a fair amount. In my research, a reasonable salary would be closer to X, and I'd like to see what we can do to get me there at some point over the next three to six months."
That will give him time to consider and budget accordingly, if it's in the cards for you. Barring that, you can certainly ask for equity or more aggressive profit sharing or bonuses, but equity is tricky. I've owned my business for 9 years with my partner. I've nearly killed myself and nearly gone bankrupt and assumed insane amounts of tax debt and other problems and risks and loaned the business money to make payroll and foregone payroll after payroll and blood/sweat/tears/the whole nine yards. So it's not an easy thing for me to chunk up parts of it without feeling like that entire ordeal to this point is worth a great deal. Profit sharing or bonuses, I'm much more willing to give because they're contained and they're based on the success of the business. (That is, they're only a "liability" if we're doing well, rather than an unfunded mandate such as a raise without the extra revenue and inbound work to account for it.)
Cost of living is definitely a consideration, but only insofar as you use it for a basis of comparison for your salaries. If you're in Seattle, NY, DC, or SF for instance, your cost of living is going to be significantly higher than Detroit, Phoenix, etc. Significantly higher. But I wouldn't frame it entirely around cost of living. This is more of a question of how you think you should be valued, what you bring to the organization, and your willingness to keep working with them and helping them build their organization.
You can definitely suggest that you take on alternate or more advanced repsonsibilities, branch out to things like biz dev, or other things like that if it makes strategic sense for your organization to do so. For me, it wouldn't make sense for my developers to go get us more business since we're already full-up on our schedule. I just need them coding. But your mileage will vary and depends greatly on how much more you can take on and still maintain life/work balance. I wouldn't push this angle too hard without having an appropriate idea of what you're looking to do because you don't want to frame it as "I'll work harder and do these other jobs for more money" as much as "I think I'm underpaid for the job I'm already doing".
Approach it with respect, give a reasonable time frame so that you can work up to it with the owner and don't make it like an ultimatum. Seek balance and something that, as you say, is more win-win and less adversarial "I'm looking if you can't make this happen for me." That's an unpleasant position for the owner to be in and he'll probably be keeping an eye on you and a lookout for your replacement if he thinks that what he gives you isn't strong enough to keep you from looking, and now perceives you as a flight risk.
But respectful, well-spoken, and with your own internal accounting of the business's health is a good approach. If you guys are slow and things are rough, it's not going to happen and it's going to be a rough conversation either way. Consider that too.
posted by disillusioned at 2:35 PM on September 25, 2012 [8 favorites]
Best answer: I'm a former business owner and have negotiated some raises with the company I sold out to. Are you aware of what income you're bringing in, and whether that income is growing? For example if your services are billing out 250,000 as of last year and you're on track for $350,000 this year, that's $100,000 more gross revenue, obviously. Now, that's not all profit, nor can he pay you all of the profit that revenue generated, but it's your starting point for talking. Every industry is different, so I can't tell you what % of revenues or profits are reasonable, but if you've been there a while you can probably figure out about what your work is contributing to his bottom line.
Another factor is - how hard would you be to replace? Consulting work is generally fairly personal and presumably based on some expertise that's fairly rare (at least relative to the demand), so that's another factor. But if he can replace you easily, that's a limiting factor.
Your research about where you stack up in the industry is good, and something you should bring to the table. It's a way to signal the likelihood that you could find a better job (at least as far as pay is concerned), without telling him that you're actively looking.
I'd do some homework along these lines and lay the cards out on the table. If you are achieving growth, then he's getting the benefit of that in his budget and can afford to pay you some.
If you're topped out and not growing, but you've got a large book of business that you service for him, then it's a similar conversation, but you have to make more of a case about how you need to catch up with others in your profession. If you think there's an honest budget issue for him, perhaps negotiate for stepped increases over the next couple of years. Or you may have to accept that you are where you are unless and until you can generate more revenue.
Be prepared for a spiel about how tough it is for him and his business. Even high-earners can sometimes really turn it on. Only you can determine how real it is, and only you can determine how willing you are to start looking elsewhere to earn more money if he keeps it up, because that's your real leverage.
posted by randomkeystrike at 2:43 PM on September 25, 2012 [1 favorite]
Another factor is - how hard would you be to replace? Consulting work is generally fairly personal and presumably based on some expertise that's fairly rare (at least relative to the demand), so that's another factor. But if he can replace you easily, that's a limiting factor.
Your research about where you stack up in the industry is good, and something you should bring to the table. It's a way to signal the likelihood that you could find a better job (at least as far as pay is concerned), without telling him that you're actively looking.
I'd do some homework along these lines and lay the cards out on the table. If you are achieving growth, then he's getting the benefit of that in his budget and can afford to pay you some.
If you're topped out and not growing, but you've got a large book of business that you service for him, then it's a similar conversation, but you have to make more of a case about how you need to catch up with others in your profession. If you think there's an honest budget issue for him, perhaps negotiate for stepped increases over the next couple of years. Or you may have to accept that you are where you are unless and until you can generate more revenue.
Be prepared for a spiel about how tough it is for him and his business. Even high-earners can sometimes really turn it on. Only you can determine how real it is, and only you can determine how willing you are to start looking elsewhere to earn more money if he keeps it up, because that's your real leverage.
posted by randomkeystrike at 2:43 PM on September 25, 2012 [1 favorite]
p.s. I would keep the discussion about salary. I agree with disillusioned, equity buy-ins and the like are not something most closely-held businesses want to do.
posted by randomkeystrike at 2:44 PM on September 25, 2012 [1 favorite]
posted by randomkeystrike at 2:44 PM on September 25, 2012 [1 favorite]
A lot of good advice above, but I just wanted to chime in on #3 -- never bring your cost of living into a discussion of a raise. You can do it indirectly by pointing out that other people at your level of responsibility in your same metropolitan area (or a similar one) make X amount more, so that's what you're looking for.
posted by Etrigan at 3:01 PM on September 25, 2012
posted by Etrigan at 3:01 PM on September 25, 2012
Best answer: Both disillusioned and randomkeystrike have some VERY good advice upthread. Your research should include any information about what others in your position are being paid (i.e., what it would cost the boss to replace you, even though you don't phrase it that way), as well as a look at the revenue you're bringing which, ostensibly, has grown and will continue to grow.
Contrary to other advice, DO NOT seek a job offer and expect to use it as leverage. It will piss off your boss and you can expect one of two things: 1) he will simply say good-by, in which case you've gained a better salary, but lost the opportunity to continue working at a place where (presumably) you've enjoyed being for the last five years; or 2) he will smile and accede to your threat for as long as it takes him to find your replacement.
You have spent some time thinking about this, and you're eager for a resolution. As disillusioned suggests, however, you now have to give the boss some time to think about it as well.
posted by John Borrowman at 3:12 PM on September 25, 2012
Contrary to other advice, DO NOT seek a job offer and expect to use it as leverage. It will piss off your boss and you can expect one of two things: 1) he will simply say good-by, in which case you've gained a better salary, but lost the opportunity to continue working at a place where (presumably) you've enjoyed being for the last five years; or 2) he will smile and accede to your threat for as long as it takes him to find your replacement.
You have spent some time thinking about this, and you're eager for a resolution. As disillusioned suggests, however, you now have to give the boss some time to think about it as well.
posted by John Borrowman at 3:12 PM on September 25, 2012
Best answer: You should be able to quantify the amount of billable work you do in a day and its value to the company in direct profit. While all employees in your position may be putting in their 8 hours/day if you are producing higher profits for the company based on your 8 hours that should be highlighted in your reviews and should be rewarded accordingly. If this isn't being recorded by your manager, then you should keep track of your work and present it quarterly or bi-annually.
posted by JJ86 at 3:27 PM on September 25, 2012
posted by JJ86 at 3:27 PM on September 25, 2012
You may also want to consider asking for a much larger contribution to your retirement account. There are some very basic SEP programs that require almost no administration hassle for the company and could also help the company with its tax bill at year end. That may be an easier negotiation point as it's a tax benefit to your employer and doesn't come with extra costs like increased payroll taxes.
It also helps to have thought through whether you're ready to walk for an increased salary that could come with a less agreeable work/life balance. If the negotiation doesn't go well, you may be faced with that choice and you should be prepared. This is especially true if your position is easy to fill.
posted by quince at 5:13 PM on September 25, 2012
It also helps to have thought through whether you're ready to walk for an increased salary that could come with a less agreeable work/life balance. If the negotiation doesn't go well, you may be faced with that choice and you should be prepared. This is especially true if your position is easy to fill.
posted by quince at 5:13 PM on September 25, 2012
You have two options.
First, I agree with Ruthless Bunny - Generally you'll only ever get more than a token increase by moving somewhere else.
Second, you can try asking not so much for a "raise" (even though you really just want that), but rather, a new "position". It doesn't really need to exist, except as a title that will give the owner an easy face-saving out to giving in to your demands without looking weak. You work as the only IT guy in your shop? How about making you "director of IT" (at $40k a year more)?
Otherwise... Consider your chances as slim to none.
posted by pla at 5:57 PM on September 25, 2012
First, I agree with Ruthless Bunny - Generally you'll only ever get more than a token increase by moving somewhere else.
Second, you can try asking not so much for a "raise" (even though you really just want that), but rather, a new "position". It doesn't really need to exist, except as a title that will give the owner an easy face-saving out to giving in to your demands without looking weak. You work as the only IT guy in your shop? How about making you "director of IT" (at $40k a year more)?
Otherwise... Consider your chances as slim to none.
posted by pla at 5:57 PM on September 25, 2012
Best answer: I once negotiated a 15% raise at a small-ish company (just under 200 people). It helped that I had a rock-solid list of recent accomplishments and lots of complimentary emails from people in other departments. I was also voluntarily working 60-hour weeks. I don't recommend killing yourself working a ton of extra hours - I kind of fell into it and regretted it - but I guess it helped, or at least it made me very visible to upper management.
Like others have said, avoid the term "raise" if you can. Focus on the way your role has grown, and updating your job title to better reflect the work that you're already doing and the responsibilities that you already have (in addition to new work and responsibilities that you will take on in the near future). The nice thing about small companies is that salary scales and job titles usually aren't set in stone.
Don't bring up cost of living. Your salary should reflect what you're bringing to the company, and should be competitive enough to keep you from leaving. As I'm sure you're aware, this will tip off your boss that you're looking for more money - and you may end up having to leave to get the increase you're looking for. I've also done that, and it was hard to go, but I knew I would never get what I was looking for at that company.
I recommend taking a look at Ask a Manager; she often addresses salary issues.
posted by neushoorn at 1:23 AM on September 26, 2012 [1 favorite]
Like others have said, avoid the term "raise" if you can. Focus on the way your role has grown, and updating your job title to better reflect the work that you're already doing and the responsibilities that you already have (in addition to new work and responsibilities that you will take on in the near future). The nice thing about small companies is that salary scales and job titles usually aren't set in stone.
Don't bring up cost of living. Your salary should reflect what you're bringing to the company, and should be competitive enough to keep you from leaving. As I'm sure you're aware, this will tip off your boss that you're looking for more money - and you may end up having to leave to get the increase you're looking for. I've also done that, and it was hard to go, but I knew I would never get what I was looking for at that company.
I recommend taking a look at Ask a Manager; she often addresses salary issues.
posted by neushoorn at 1:23 AM on September 26, 2012 [1 favorite]
Response by poster: Great advice everyone! Thanks so much.
posted by the foreground at 3:21 AM on September 26, 2012
posted by the foreground at 3:21 AM on September 26, 2012
This thread is closed to new comments.
I doubt very seriously that you'll get equity in the company and it's cheeky to ask for it.
Husbunny is in a similar situation. We accept that he's paid shit, and we move on, because that's what his company will pay and he doesn't want a more demanding job. Last year they gave him a 20% raise to make up for 5 years of NO raise. We can live with that.
I would have a generic discussion about your compensation with your boss. Mention that you'd like to be more in line with how others in your position are compensated and throw some numbers out there. Don't look at percentages, merely present annual salaries. If you can get evidence from Glass Door or industry sources, include those.
Don't give an ultimatum, don't cry poverty. Your boss may say, "Hey, this is what we can afford and that's that." If so, you have a decision to make.
I would not hurt to update your resume and scare up a recruiter.
posted by Ruthless Bunny at 2:30 PM on September 25, 2012 [1 favorite]