I will talk a lot about ‘Big Wins’ on this blog: those key sources of income or cost cuts that must be front and centre of a Hustle Escape plan in order to make it a reality. And perhaps the most important of all these Big Wins is the maximisation of salary increases.
It’s unfortunate, but the harsh reality of the corporate world is that being brilliant at your job is no longer enough on its own to maximise these gains. Your approach to salary negotiations can therefore be the difference between hundreds of thousands of dollars of income over your working life.
That’s why I want to set out a few of the key principles I have adopted since I started my Hustle Escape. They’re not a silver bullet for guaranteed negotiation brilliance, but they have stood me in good stead as I have started to carve my path to early financial independence.
#1: ALWAYS negotiate
I cannot overstate the importance of this principle.
Most people find the very idea of salary negotiations awkward and uncomfortable. But this can act as a barrier to strong negotiation – or even lead to an absence of any negotiation at all. So if you are serious about achieving early financial independence (and you’re not blessed with a brilliant business idea to service these ambitions) there is only one serious course of action you can take.
GET OVER IT.
Because failing to get over this personal discomfort can be a hugely expensive mind-set. It can cost you thousands per year, and hundreds of thousands over your working life.
Trust me, I speak from harsh personal lessons of my own.
Back in the first few years of my career I was a bundle of personal discomfort, blissfully unaware of the long-term financial implications of my negotiating approach. I’d impose a range of inhibiting questions that ultimately prevented me from asking for more. How do I broach the subject? What should I ask for? What if I throw away the job opportunity by asking for too much?
Two years ago this attitude cost me a sizeable chunk of money. I received a good job offer in an exciting multinational business. Finally, after several years wanting to work for them, I had an offer tabled in front of me. And it was a good offer. It would give me a substantial pay rise from my role at the time.
So you guessed it, in my excitement at the pay rise and the opportunity, I accepted the first thing they offered.
I was delighted. My career was taking off and all the hard work was paying dividends.
But after a few months something interesting happened. As I carried on with my day-to-day work I stumbled across data that revealed something shocking. Amongst all of my peers, whom were doing equivalent-level jobs across the department, I was at the bottom of the financial pile. And it wasn’t a small gap. No, my peers were earning materially more than me every month.
I was furious – not with the business, but with myself. I had underestimated my market value and I had chickened out of negotiation. I had let my emotions get in the way of sensible, objective decision making. And I knew that because of my opening negotiation, it would be very difficult to catch up with my peers if I stayed in the business – that’s just how it is with internal negotiations.
From that day on I would always negotiate, without exception. And when my next external negotiation opportunity arrived, I negotiated an increase of nearly 40% in my gross salary.
That’s an example of how the wrong mind-set towards negotiation can set your retirement back years. Don’t let your social discomfort get in the way of your potential financial comfort. No matter what the offer on the table, always try to negotiate on salary. Indeed, in many businesses it is actually the expectation that you negotiate after receiving your first offer.
#2: Know your worth
So you now always negotiate. But you can’t go into a salary negotiation blind. You need to know what you’re really worth.
And that means having a good idea of what the market pays for your experiences and talents, and even being ready to make this evidential case in your negotiation.
Browse salary ranges on job search engines, read salary surveys for your industry and profession, and get an idea from friends and colleagues open enough to talk about money. Use all the resources at your disposal to get to a number that is a fair reflection of your ‘worth’ in the current market.
Once you have your target figure, set your ‘red line’: in other words, a figure below which you cannot accept a job. Of course, some people aren’t lucky enough to have the flexibility to set a high ‘red line’, so this will all depend on personal circumstances. But if your valuation is fair in the context of the current market, it’s likely a prospective employer that pays in line with that market with have scope to flex.
And remember that when it comes to negotiating you may need to substantiate your valuation beyond your market valuation. This might mean demonstrating the financial value you have created in a previous business and showing how you can create specific value in the prospective business.
#3: Don’t price yourself out
So you’ve received a great offer in line with your market value estimation, but then we always negotiate. Here is where it becomes critical that you do not price yourself out by asking for too much.
From your research of the market you will already have a good idea of the typical range of salaries for your level of experience and skills. So do not blow the deal by asking for something unrealistic that falls a long way outside this range.
Your counteroffer should be sensible and well-reasoned in the context of your prior research, and it should keep all options on the table. Do not deliver a counteroffer as an ultimatum and always remember the negotiation is a process.
If there is no flexibility on the core financial offering, you could try to ask for other non-financial extras, like education to strengthen your longer-term marketability or private healthcare enhancements. Again, do not push this too far. Always remember that if you want to work for this business you need to preserve a strong relationship with Human Resources and your potential future manager.
What if it’s a no?
Sometimes employers say no, but this isn’t a moment for panic. If you’ve stuck to the above principles you should be clear on what you are worth in the current market, what your red-line salary offer is, and when it is right for you to accept or decline a job offer.
This can be especially difficult if you’re in financially trying circumstances or if you don’t have other options on the table, but hopefully these principles provide a good framework for making a decision at that point.
Keep your eye on the prize. Getting the salary you merit in the current market is critical if you are serious about early financial independence. Stay focused on the end goal and be sure to assess the longer-term financial implications of any decision you take during negotiations.