The Art of Negotiation in a Downturn
Yes, you should negotiate
“Should I even negotiate in this down market?”
I got this question from a paid subscriber a few weeks back. And I was a bit incredulous: of course you should! I thought it was a flash-in-the-pan, just one person being cautious.
Then… another one of you asked! And another.
At first, I didn’t get it. But as more folks asked, the more it began to make sense to me. With getting a job being so hard in this market, most of you just don’t want to mess that part up.
The first reader, for instance, was laid off for the first time in their career. They were used to being a top performer. Many of you are in the same situation.
I understand your thinking, but I have to disagree. There are four important things negotiating gets you:
Shows you’re a negotiator: Negotiating shows that you’re someone who will negotiate on behalf of the company once you’re in the role.
Perception of being in demand: Negotiating shows you have an abundance mentality and aren’t just grasping for this job.
Seniority: Negotiating helps you come in with a more senior aperture.
Higher base: Negotiating puts you at a higher base for future raises.
Of course, there are some real downsides of negotiation if you do it badly:
Rescind: Negotiating can cause them to take back the job offer.
Inflated Expectations: Negotiating can cause them to expect more of you than you can deliver.
Negativity: Negotiating can drive them to have a negative opinion of you once you start.
The key here is: if you negotiate badly. If you negotiate the right way, you don’t need to experience any of these outcomes.
Testing It Out
So, as more of you reached about these issues, I decided to partner with 10 of you to confirm these beliefs. And it worked pretty well. Over the past few months:
One reader get $60K more in per year comp
Another reader negotiated twice as much PTO leave
Six readers had their raise requests accepted first ask
One reader hit a brick wall and didn’t get a higher offer, but leveraged it for a raise at their current company
The final reader doubled their equity grant, that is worth roughly $1M/year if the company IPOs
After all that work testing out these strategies in the real-world of today’s down-market, I’m ready to share with you all 👇
Today’s Piece
I’ve put all the systems and techniques into the ultimate guide to negotiating in this downturn. We’ll cover:
The negotiation begins well before the offer stage
The dimensions of an offer worth negotiating
Assessing your negotiating power
Planning your ask
Sending your ask
Negotiating to meet your conditions
The most common pitfalls candidates make
An example candidate going through all the steps
I’ll also share real-life tales of the 10 negotiations we worked through - plus all the negotiations I’ve had in my life.
This should help you earn dramatically more in the next negotiation. That $10-60K will easily pay back this newsletter subscription 100x.
This piece is 9,700+ words of pure tactics, no fluff. You’ll want to bookmark it.
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The negotiation begins well before the offer stage
Negotiation isn't a single event that happens after you receive an offer. It's a process that begins the moment you interact with a potential employer. Your actions, words, and the impression you create all set the stage for the offer negotiation.
By recognizing and optimizing these early interactions, you can significantly enhance your position when the time comes to discuss the terms of your offer.
Action 1: Crush the whole application process before offer
From your application to your interviews, every step is an opportunity to present yourself as a strong candidate that a company will be willing to make extra concessions for. Here are a few things candidates tend to miss out on:
How quickly you respond: Set the tone for yourself as someone who communicates promptly and professionally.
The extra work that you do: As I highlighted in How to Win at Interviews, you want to do extra work to stand out. Develop a work product that shows you are the candidate they need, not just want.
The level you present yourself: Many people get the job, but just barely, and get down-leveled. This squashes most of your negotiating leverage. Avoid this. Seem senior.
Action 2: Set the right compensation frame early
The thing you don’t want to do is scare them away with your compensation expectations. Don’t just give out your numbers at the beginning.
Instead, set the tone that you’re an experienced job-seeker:
When they ask you what you’re paid, ask them for their range: They’ll ask, in many cases, “What are your compensation expectations.” You can say, “I was actually interested to understand the range for this role.”
If they don’t discuss the range, bring up the range: If they don’t ask, bring it up. I recommend the first phone chat itself. “I’m incredibly excited about what I’ve heard. I wanted to ask; What is your total compensation range breakdown for this role?”
If they won’t share the range, ask if a range makes sense: Sometimes, they’ll be coy and not respond. Follow up with the same question, “I’d like to make sure this is worth everyone’s time. What do others at this level make?”
Do all of this while expressing your great interest in the role: When you don’t have an offer in hand, getting the offer is still your priority. Never come off as aggressive or not as interested as another candidate. The most interested candidate often wins.
Action 3: Get a sense of their compensation philosophy early
Try to gauge the company's compensation philosophy during the early stages. This can provide valuable insights that will shape your negotiation strategy.
Are they a startup that leans heavily on equity?
Do they tout a high base salary as their main attraction?
Or perhaps they emphasize a holistic compensation package including bonuses, benefits, and growth opportunities.
This can be a significant hint towards where they might be more flexible when it comes to negotiations.
The dimensions of an offer worth negotiating
Now that we’ve got the pre-offer stuff out of the way, let’s get into the offers themselves.
There are at least 7 areas worth considering in every single negotiation:
Your base
Your bonus
Your equity
Your budget
Your signing bonus
Your paid time off (PTO)
Your career growth plan
You should weigh what’s most important to you, but that’s the ranking I recommend. Here’s why.
Insight 1: Prioritize base compensation first
You should prioritize your base salary. I know this is a hot take. Why base over bonus, equity, or signing bonus? It’s because of the time period we’re in.
→ Bonus is highly dependent on how well you do at the company. And even if you’ve been a high performer your whole life, a new company and job could present challenges you can’t predict at the time of offer.
In addition, poor company performance could shrink the size of the bonus pool. That’s can often be completely out of your control. And it’s not hard to imagine, given the economy is brutal right now for tech company growth.
→ Equity can easily go in directions you can’t control. For instance, everyone who was granted technology stock in 2021 has seen a precipitous decline in the value of such stock (me included).
And if you think you can predict that this is a “low point in the tech stock market,” don’t delude yourself. No one but the top 1% of hedge fund investors can time the market.
As a result, I recommend you consider equity as worth a small fraction of its paper value. The rules of thumb I use are about 60% for FAANG, 40% for a Mid-cap, 30% for a Small-cap, 20% for growth stage, and 10% for seed stage.
As a result: The place where equity makes the most sense is FAANG. Let’s say you go for 50% higher stock. Even if you value it at 60%, that’s 30% more money. It’s extremely hard to get 30% higher salary. But 50% more equity isn’t unheard of. So that’s the optimal strategy. It always comes down to knowing your specific situation.
FAANG is barely hiring right now, so this probably doesn’t apply to you.
→ Signing bonus is a one-time expense. The power of a career in tech is the compounding you experience. Tech salaries have outpaced inflation for the past 35 years. You want to ride that train all the way up by getting the compensation into your total package.
What you’ll find is that signing bonus is always the thing companies are easiest to move on for this exact reason. You shouldn’t value it too highly.
Insight 2: Don’t forget about things outside total compensation (TC)
If you are coming in as a leader, you must negotiate your budget for headcount expansion and growth. This is a vital part to your success. You should be able to fire under-performers relatively quickly as well.
But even if you are coming in as an individual contributor (IC), consider negotiating on things like: your learning & development budget, your days off, your counterparts in vital partner functions, your phone bill etc.
Even your career growth plan is worth negotiating! Meet with your boss and set the expectation that you want to get promoted to a big next role fast. This helps get you off on the right track even before you start.
Another sneaky item that is worth negotiating is your cross-functional peers. If you’re a PM without a dedicated engineering manager, for instance, a dedicated counterpart can greatly contribute to your success. That dedicated EM is something worthy to negotiate for.
Insight 3: PTO is a great thing to negotiate
Too many people write off PTO. I found this is most common for people coming from an unlimited time off workplace and going to a place with limited PTO.
Here’s the thing: you should value each PTO day at your total compensation.
So, let’s say your TC is $350K, and you have 12 PTO days plus 12 company holidays. That means you have 260-24=236 work days, and you earn $350K/236=$1,483 per day. If you can negotiate 3 more PTO days, you’ve earned yourself $5K!
There’s much more to wealth than money. Time is not just money, time is wealth. Each day in this world we don’t live to the fullest is one more we’ve lost.
But I’m a work-driven person?! I don’t want to take the PTO,” some of you are saying.
When you leave companies that have restricted PTO, they generally pay out those days (if they don’t, negotiate for that.) So you’ll actually earn those days back in cash later. So from a money point of view, PTO still makes sense.
Assessing your negotiating power
Okay, so we’ve gotten the offer understanding out of the way. How much power do you actually have to negotiate?
Ranking scorecard
Negotiating power varies based on a ton of factors, so I’ve created a negotiating scorecard to help you identify what you can do based on that scorecard.
Go through these 25 questions and calculate your negotiating power.
Personal characteristics:
Do you have more than 10 years of experience? +5
Would you be fine if they rescinded the offer? +25
Do you need this job (e.g. you were laid off)? -50
Was your last full-time thing school? -20
Are you currently in a full-time job? +5
Job search characteristics:
Have you found the market easy? +10
Have you found the market tough? -10
Do you have more than one job offer? +40
Are you in other interview processes that are going well? +5
Is this your top choice job that you are currently in a process with? -20
Offer characteristics:
Is this offer at a higher seniority than your last gig? -10
Is this offer a bump from what you were previously earning? -10
Is this offer already at the high end of their range? -10
Is this offer at the high end of your market range? -20
Is this offer at the low-end of the market range? +10
Job characteristics:
Is this a people manager role? +15
Is this a director+ role? +15
Is this a c-suite role? +15
Have they been looking to fill this role for more than 3 months? +25
Have they been looking to fill this role for more than 6 months? +50
Company characteristics:
Are you earning more than the median worker at the company? +5
Is this a startup with a wide range of titles and people at various seniority levels? +25
Is this an old-school stodgy company that has been around a while? -25
Is the company doing financially well? +5
Is the company in dire financial straits? -10
Just reading the directional impact of some of these things should help you out. Moreover, based on your score, here’s what you, specifically, should do:
Looking for an example? Jump to the bottom of the article.
If: Less than 10
<10% of people
You do not want to negotiate at all. You fall into that group of people who need this job and don’t have much leverage. This is a very small group - no one in my group I worked with did.
You landed in this category because you need this job. At this point, you should carefully question why you want to negotiate.
Is it really worth potentially losing the job? Probably not.
Sign and do a great job. Then, get a raise.
If: 10-50
40-50% of people
Negotiate lightly. The good news is that you have some leverage. You can definitely make a data-based ask.
Your strategy should be to make a small ask that they can accept. If they don’t accept, you should be willing to sign and move on. You don’t need to go duking it out for multiple rounds.
If: 50-80
20-30% of people
Negotiate with vigor. You are in a position to negotiate. You definitely have room to make this offer better.
You should come up with a carefully sized ask that is based on data. Then, stick to it for a round of negotiation (if they don’t meet it).
You have market power and it’d be a shame for you not to use it.
If: 80+
<10% of people
Shoot for the moon. If you are lucky to have scored very well in the scorecard, this negotiation is heavily tilted in your favor.
→ You shouldn’t be shy about making a big ask and following up after the first round with a second round.
→ You can also probably push the timelines. You can do things like call them your last allotted day with your ask to amp up the pressure. You can also go 2-3 rounds of negotiations.
→ You should still act very professional and excited about the particular offer. Don’t let your negotiating power get to your head. People like to negotiate with people who are likely to accept, not people who are using them as a negotiation chip for another job.
Planning your ask
Now that you’ve gotten a sense of your type of ask based on the scorecard, it’s time to plan your ask. Here’s the vital research you need to do and where to do it.
Step 1 - Find the data
The first and most important thing you need to do is dig into the right compensation data.
There’s a couple amazing places for data that didn’t exist a few years ago:
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