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Salary Negotiation: How to negotiate better than 99% of people

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Salary negotiation: how to negotiate better than the competition
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In college, I had the opportunity to teach a “Student-Initiated Course,” or basically a course on whatever I wanted. So I got together with two of my friends and we put together a course on religious studies.

Now, Stanford gave us incredible flexibility to teach essentially whatever we wanted…but the student instructors never got letter grades — it was always Pass/No Pass (everybody always passed), issued by the sponsoring professor.

Until we came along.

You see, I was never the smartest person in any school I attended. But I got pretty street smart over the years. And so I petitioned the sponsoring professor to let us teach the class for a letter grade. I negotiated with her and convinced her to let us recommend our own grades (!), back it up with evidence, and she would approve it.

We would basically write our own ticket!

One of my co-instructors was amazed that I convinced the sponsoring professor to agree. He signed the papers to enroll for a letter grade instantly.

But my other co-instructor hesitated.

To give you some context, this guy was a PhD student in Computer Science at Stanford and had previously attended IIT, one of the most competitive technical universities in the world.

“Dude,” I said, “what’s your problem? Sign the damn papers. We’re going to get an A+, guaranteed. Take it for a letter grade!”

“No, Ramit,” he said, “I don’t know about this. I cannot take the risk.”

“What the hell?”

“Well….if I don’t get an A+, it will bring my GPA down.”

I just stared at him. It actually took me 10 seconds to understand what he meant. And then I got it.

An “A” is a 4.0. An “A+” gives you 4.3.

The only way an “A” could bring his GPA down was if he already had over a 4.0 GPA — he was just too modest to say it.

I was speechless. How do you even respond to that? “Ok,” I mumbled. Ever mindful of the risk, he didn’t sign the papers — and ended up taking the class Pass/No Pass.

By the way, we got an A+. I never let him live it down. Sucker.

We’ve now entered Week 3 of my 30-day course on hustling.

This week, I’ll show you how to negotiate better than 99% of people.

Below, I have a video, case studies, and a new negotiation framework to use.

Bonus: I wrote a huge free guide to salary negotiation and getting paid what you’re worth that goes into even more detail on the strategies described here.

Thanks to the Craigslist Penis Effect — i.e., because Americans suck at negotiating — it will be easier than you think to improve your interviewing skills.

Within 48 hours, I’ll ask you to share your successful negotiation tactics with other IWT readers.

Let’s do it.

The power of negotiation

One of the reasons Americans loved Saturn cars was the “no-haggle” policy — which, to an Indian, is code for “let’s charge these suckers more because they’re afraid of negotiating.”

Have you ever seen one of your friends try to negotiate? It’s so sad it makes me want to cry. Imagine the most timid person getting the courage up to finally ask for something.

Timid weirdo: “Excuse me sir…do you think you might possibly maybe somehow discuss the salary with me? I am thinking –”

Hiring manager: “I’m sorry, it’s a set salary.”

Timid weirdo: “Okay” (head down, internally saying “I shouldn’t have even bothered”)

There is another way.

Here are just a few of the things you can negotiate:

  • Credit card APR
  • Salary (like my friend’s $8,000 salary negotiation)
  • Gym fee
  • Cable fee
  • Cellphone fee
  • Days off from work / work from home on Fridays
  • Complimentary room upgrade at hotels
  • Car insurance

Best of all, negotiation is a HUGE WIN.

Every successful salary negotiation is a cumulative benefit — and your salary will almost always continue to increase from there. If you negotiate a $5,000 salary increase for your first job, that single salary negotiation will be worth tens of thousands of dollars to you over your lifetime.

If you spend 30 minutes negotiating your cable bill, it’s worth hundreds of dollars. How many lattes would you have to give up to equal that?

This isn’t theoretical. Thousands of my students have used negotiation techniques in all areas of their lives to improve how much they make, how much they work, and how they live.

Let me show you some case studies.

Salary negotiation case study: The multi-thousand-dollar salary increase

I taught my friend how to negotiate an $8,000 increase in salary and a 50% boost in equity in 4 hours.

In this video, learn how to:

  • Negotiate with an experienced recruiter
  • Rebound after you undercut yourself
  • Why reading a salary negotiation book is not enough
  • Know when to be adversarial and when to be cooperative

Notice that she took the time to PRACTICE, something that’s absolutely crucial to salary negotiation. Negotiation is an area where books help a little — but then you need to do it to really learn and improve your skills.

 

Contract negotiation case study: Raising your rates

Note: This is not just about raising your freelance rates. You can apply this technique to areas like getting a salary increase.

In this video, you’ll learn:

  • The HUGE mistake I made when I asked for my first raise
  • How to seek out high value work AND make the time for it
  • The “solutions perspective” that leaves your clients ADDICTED to your service
  • An exact script to build in automatic raises in the future


Notice that I made every mistake in the book. We all make mistakes negotiating. I still get rejected all the time when I try to negotiate. But each time I do, I learn something and improve my skills for the next try.

 

3 readers who negotiated their way to success

Example 1: “This is almost 30k more than what I was making previously”

IWT reader Mark writes about how he negotiated a $30,000+ salary increase at a new job:

“Not sure if you still have time to read all the stories thanking you, but I’m thanking you for it anyway.

I’m doing a job search now, and I have been going through your stuff on negotiation.  I made the mistake early on (hard to avoid, actually) of giving out my previous salary; for one thing, I have had a lot of headhunters talking to me, and I didn’t realize this one was a recruiter (working on behalf of the company I’m being considered for).  For headhunters I don’t care as much because it’s in their interests to get me a higher salary.  But now of course I was worried about being boxed in.  This also made me realize I was a fool to not care about a raise at my last job, as you covered in one of your videos, since it negatively affects things going forward.

Fortunately he posed the question over email, which I think tilted things in my favor.

Him:

I just want to make sure you are interested in the position and get a good feel as to what your time frame for making a move is?   Also,  I know we discussed briefly but I was hoping to get more clarity on what you are looking for from a compensation standpoint?

Me:

As for compensation, I’m not sure I could quantify that without getting a feel for where my skill level fits in with some of the other consultants after meeting with them during the tech interview.  We had discussed the probable need for some training on the business side, but I’m basically looking to make market rates for a C# developer, so I’m sure your consultants are within that range.

Him:

From a compensation standpoint, we would probably be looking in the $100k + or – range.  It really depends on how the other interviews go.

This is almost 30k more than what I was making previously…he knows this.  But here’s the real coup-de-grace: I was going to be stupid and say something like 80-90k, but I shut up and put it back to him, and look what we’ve got.

Example 2: “I quoted $125/hour. They accepted.  Within 2 hours.”

IWT reader A.B. writes about how he negotiated his FIRST-ever consulting deal:

“[COMPANY NAME] approached me about hiring me as a consultant.  They want me to basically look at their programs, blogger outreach, creative, and copy and tell them what I think sucks from a blogger’s perspective.  They don’t want me to endorse them, just tell them what turns bloggers off.

They took me out to fancy dinner in Vegas (during BlogWorld), as I was skeptical of working with them.  They overcame some of the skepticism, but obviously wanted a quote.

As you may have guessed, I’ve never consulted with a company, nor had any idea what to quote them.  I assumed they wanted 5-10 hours-ish.

As I was sending them a quote, i struggled with what to quote (time & money) – I literally thought “What would Ramit do?”.  I would probably do it for $47/hour realistically right now, but knew that was way too low.  I ended up telling them my rates were $197/hour, but if they booked 40 hours (remember I thought they wanted 5-10) I would give them $125/hour.

They accepted.  Within 2 hours.

Which I know means I offered too low, haha, but I’m o.k. with that. Learning experience.  They think they want more like 60-80 and have sent me estimates that point to so, but are guarantee’ing 40, including paying for all expenses to fly me out to [LOCATION] in early November.

They’ve also indicated that they’d like to have an ongoing relationship after this initial 2-3 month period.

This $5,000-$10,000 is a great place to start for me (I haven’t advertised any consulting ever… they came to me).  Even though I could have gotten more (likely) I would have NEVER thought to push that high in hours or rate had it not been for your influence.

Next time I’ll quote double.  ;-)”

– A.B.

Example 3: “With a 12-month lease, that is a savings of $1800!”

IWT reader Sharon C. writes

“Hi Ramit,

I’ve been reading your blog for about 2-3 years now and I’ve learned a lot of useful tips over the years.  The biggest thing I learned so far is that you can negotiate a lot more things than you think you can (and don’t be afraid to ask)!  So the leasing office sent me a notice that I need to renew my lease for my apartment in San Jose, or they’d make me pay $50 more month-to-month (which is normal).

I was paying $1585 (up from $1515 about 1.5 years ago) and I’ve lived in the apartment for 3 years.  I heard that rent has been dropping in my area due to the economy, so I called up a few competing apartment complexes and asked them for their current price on a similar square footage apartment.  The average was about $1400 so I knew I was overpaying.

When I went to ask for a rent reduction, the office kept on insisting that I was already paying “market rate.”  I let them know that I was serious on leaving if they didn’t give me a lower rate.  I talked to a higher up manager and after about a week, she was able to give me a rate of $1435 which is $150 off my previous rent!  She stated that since we had lived there for 3 years she was able to give me the lower rate, which is the same rate as what the last tenants that moved in are paying.

With a 12-month lease, that is a savings of $1800!  It also saves us the trouble of moving out.  Thanks for your blog and all the work that you do!”

As you know, this month I’m focusing on hustling, or doing extraordinary work to achieve disproportionate results.

Negotiating is a key part of hustling. Not only does the behavior matter — knowing what to say, how to say it, when to NOT say something — but the mindset of “Yes, I can negotiate that!” is critical.

In fact, the powerful principles behind negotiation are critical to understand.

6 negotiation principles you can apply today

Here are 6 principles of negotiation you can apply today.

1. Know what you want. If you walk into a salary negotiation without a number, you’re at the mercy of an experienced hiring manager who will simply control the conversation. That’s what they do. When you know what you want, not only can you communicate that crisply to the other person, you can demonstrate why — and this forces you to prepare for the negotiation. In other words, you can’t just say, “I want to make $95,000!!!” You have to SHOW why you’re worth it. This single distinction can be worth thousands to you.

2. Know who you’re negotiating with. When someone negotiated with me, he kept offering things I didn’t care about, like “I can also do X for you, and Y, and Z.” But had he taken the time to find out what I REALLY wanted — reliability — he would have been able to offer specific examples like a weekly digest of what he’d accomplished and what he was working on the next week. And he could have charged me thousands for that peace of mind. Instead, I didn’t hire him.

3. Have a toolbox. Amateurs walk into a negotiation and just “wing it.” Top negotiators have a “toolbox” of options to use. If the other person doesn’t seem to care about vacation days, they press that lever. If the other person seems flexible on pay (which happens more than you’d imagine, like in the above example), a good negotiator will get a higher salary and trade something else. Creating a toolbox can be as simple as writing 2 columns on a piece of paper — “What THEY want” vs. “What I want” — but can get much more sophisticated.

4. Practice relentlessly. Most people will lose tens of thousands of dollars over their lifetimes due to their failure to practice negotiations. Actually, most people won’t negotiate at all. But even the people who negotiate rarely practice. It feels “weird.” Who would I practice with? What do I say?

Yet if you don’t practice with a qualified friend or colleague, why would you expect to get good results in a real negotiation with a competent adversary? Hiring managers do this all day. Hotel clerks have heard everything under the sun.

One of my favorite things to do is share the practice I’ve done in the form of scripts — like the negotiation scripts in my book. A lot of times, people are skeptical about the book until they try one of the scripts…then they realize, “Wow. This works.”

5. Have a fallback. There’s a classic psychological technique called the “Door in the Face” technique. It goes like this: “Hey Mike, would you donate $50 to the Save The Whale Foundation?” “Hell no.” “Ok, how about $5?” And donations increase dramatically.

If you’re negotiating, odds are you’ll fail. That’s fine — expect failure. Embrace it. Turn “failure expectation” into domination.

6. Don’t shoot your first basket in the NBA. I am trying to use more sports analogies to try to fool people into thinking I care at all about sports. As you can tell I have a long way to go.

Anyway, your first salary negotiation shouldn’t be against a hiring manager. Start off small — in a real-world environment — at your local farmer’s market. Try negotiating on Craigslist. By the time you get to the real negotiation, the one that matters, you’ll have several negotiations under your belt. The difference will likely be worth thousands.

The main MYTHS of negotiation are:

These are classics but I continue hearing them and it’s driving me nuts.

  • Myth: Negotiation has to be adversarial. This is a good excuse that people use to avoid negotiating. “I don’t want to be mean” or “He’s just a small-business owner.” First, an effective negotiator is rarely mean. Instead, they explore the situation and use words like, “We’re close, but we just need to find a good fit here” rather than “I hate you and please die…ps can you give me a deal.”
  • Myth: I need to read (and read, and read) about negotiation before I try it. Yes, you do need to get educated. But you’ll learn 100x more from practicing 5 negotiations than from reading yet another book or blog post about negotiation. Try searching Google for “How to negotiate salary” to see how terrible most of the advice is, anyway.
  • Myth: You can negotiate anything. I just got this email from a reader:

“I have a situation where there was an $150 application fee to apply for a membership to the YMCA. The application fee was paid and there were attempts to have it waived but they did not budge. Now the fee has been reduced and other attempts to get the application fee they paid back have not worked. Are there any tips/suggestions/script suggestions they could try to negotiate with them?”

My response:

“Sometimes you just have to eat the costs.”

You can’t negotiate everything. And you’re not entitled to a deal on everything. But pick your battles, because the right ones can save/generate tens of thousands of dollars for you.

  • Myth: Some people are born negotiators. I was bred to be a negotiator by my parents. For example, my mom would show me how to negotiate at department stores when I was a little kid. Then, visiting India, I saw the game taken to a whole new level. The point is, the people around you matter. Practice matters. Sure, none of us may ever be the world’s top negotiator…but we don’t have to. If we just become marginally better negotiators than we currently are, we can reap disproportionate rewards.

TO DO THIS WEEK

  1. Spend 30 minutes — but only 30 minutes — reading the case studies, scripts, and examples on this page: How to negotiate.
  2. Pick ONE of the following areas to negotiate:
    • Personal finance (credit card companies, cell phone bill, etc.)
    • Craigslist (Preferably your selling something, but buying is ok)
    • Farmers/Flea Market (See what crazy deal you can put together)
    • Your Job (Go for big wins, like a raise or tele-commuting)
    • Your Clients (raise your rates, or put together longer term contracts)
  3. Find a creative way to get it done BY WED NIGHT.
  4. Leave your results of the negotiation, AND THE SCRIPT YOU USED, in the comments section of this post with the heading “WEEK 3 RESULTS” by Wednesday at 11:59pm PST.

Note: Be respectful when you negotiate. Never take advantage of the other person and never get rude. Negotiation is a back-and-forth dance where you find a solution agreeable to both of you. You’ll see the collaborative way I approach negotiation in my examples. Please treat this exercise with respect.

Also note: Unless you’ve been planning to negotiate your salary for a long time, I would not encourage you to negotiate it in 48 hours. A successful salary negotiation takes longer than that, and I don’t want you to jeopardize your chances of success down the road.

With that said…

Think BIG. Bonus points to anyone who negotiates something incredible, like a free computer or a trip to Jamaica.

The person who gets the best results can choose between…

1) $200 of my favorite negotiation books shipped to your door or….
2) A 15-minute call with me to coach you on becoming a skilled negotiator

My favorite negotiating tool: The Briefcase Technique

The Briefcase Technique is an advanced negotiation strategy that has earned me tens of thousands of dollars in my own career, and many thousands more for my students. Hardly anyone is confident or prepared enough to use this during a negotiation, but after this 2 minute video, YOU will be.

Sign up below to learn what the Briefcase Technique is...

Sign up below to learn what the Briefcase Technique is, why it’s so effective and how to apply it to your next job or salary negotiation:

P.S. – If you want a head start with this week’s challenge, here’s a free chapter from my book on optimizing your credit cards, where you’ll find an exact script to use if you missed a payment or want to negotiate the APR: http://www.iwillteachyoutoberich.com/credit-card-perks/

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117 Comments

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  1. An excellent post Ramit. I have been negotiating with my partners for about 2 years and I managed to increase my payments with up to 300% percent. Until then I though you can only negotiate in the marketplace and not in every business. Though I’m glad I discovered it’s always possible to negotiate and I always do my best when signing the contracts.
    I think last year I’ve got 50 grand just from negotiating :)

  2. Excellent post, but you would get more respect from your readers if you didnt have this “sucker” and “weirdo” attitude. Anyone who is not “smart” like you should be treated with that kind of disrespect?

    • Andrew Carpenter Link to this comment

      He’s trying to eliminate the precept many Americans hold (limiting their willingness to negotiate) by changing your perception of yourself when negotiating (hence, calling individuals unwilling to negotiate wierdo’s a.k.a.unconventional). Also, what you don’t realize is that your simply projecting your own viewpoint on to others. Just because you lost respect for him when he called those unwilling to negotiate wierdos, doesn’t mean that anyone else lost respect for him. I sure didn’t, if anything I gained respect.

      AHC

  3. Awesome article Ramit. I’m going to negotiate the hell out of a gym membership by Wed, and I’ll get back to you when I win big.

    Regards,
    Stepan

    • Watch out! The gym’s new memeber people are seasoned negotiators!

      The key with negotiating a good deal on a membership is to be willing to walk out (or at least look that way). Don’t expect to work out the day you sign up. Don’t wear your workout clothes to the gym. …and worst of all don’t have a friend waiting for you!! Many people join a gym with a friend or join a certain gym b/c their friend is there. Whatever you do… don’t let them know that you’re planning to join this particular gym. You can do some research online to figure out what your gym’s rock bottom rates are, but don’t expect them to budge easily.

    • @ Stepan, you want a gym membership go to costco, the negotiating has been done for you. They have a 24hr fitness membership 2 yrs for $299, That comes out to about $12.50/month with no initiation fee. Average cost directly from 24hr is $29.99/month with a $50 initiation fee. This would be a savings of about $420. Please tell me where you can get a better deal than that (other that working out at home) and I will call you a true negotiator.
      Cheers,

    • Sometimes it’s not just about cost
      Sometimes it’s not just about cost
      Sometimes it’s not just about cost

      I said that 3 times because it’s that important — and oft-forgotten.

    • With gym memberships, I would be willing to pay more for a close gym that I really liked, because these factors will greatly determine if you actually go and get results from the gym. I feel travel time is very important in the gym I decide to use because the time wasted driving is time that I could allocate to bigger wins and earning more money.

  4. […] This post was mentioned on Twitter by Ramit Sethi, TheHappyRock, Erica Snyder, dmongan, Doug S and others. Doug S said: RT @ramit: How to negotiate better than 99% of people: http://bit.ly/hux859 […]

  5. A couple of stories from the other side of the negotiating table. At my previous job I had a brilliant job applicant right out of school. I offered him a salary, which was a bit low (he was after all, straight out of school). He countered and said “hire me on for 3 months at this low pay as a contractor. At end of the three months you can either fire me or we renegotiate pay”. He was right. Three months later I hired him full time at 10% higher than I initially offered. Lesson learned – part of negotiation is talking about time frames and proving value.

    Second story – This woman was relatively experienced. She came in, said “I want X dollars an hour but I’d be willing to settle for Y dollars”. Y was about 40% lower than X… Really? Never tell me what you’re willing to settle for. Why would I ever offer you anything above that?

  6. I have found that just asking in the first place will often yield results, even though I’m not as comfortable with the haggling part.

    @Eber: I disagree. When in a negotiation situation and feeling uncomfortable or about to cave, I’ll probably think to myself to quit being such a timid weirdo.

  7. Andrew Carpenter Link to this comment

    “You miss 100% of the shots you never take.”

    – Wayne Gretzky

  8. I’m really looking forward to this week.

    Obviously, I think practice is the biggest key. You can learn all you want, but you won’t know how to win the game unless you play it.

    Baker has a great example of playing the game here: http://manvsdebt.com/negotiation-tips-for-beginners-a-real-life-example-of-how-i-saved-150-with-just-a-few-questions/

    I thought you also made a great point about the myth of negotiation being adversarial. I find much better results if I’m cooperative rather than argumentative.

    That’s how I got to feed a White Tiger. (Full story here: http://www.freemoneyfinance.com/2011/01/5-steps-to-help-anyone-negotiate-for-things-money-cant-buy.html )

  9. Cool article.
    Just went through the video ‘Negotiate like an India’ and got a job interview in feb first week.

    2 dilemmas, 1) really want the job 2) I got the job interview at 9am this in mind mind tells me that others are interviewed after and I got be drowned at the end of the day.

    With substantial job cuts here in the UK I can only imagine that other competent interviewees will be attending. What do I do about the salary negotiation?

    The company actually mentioned a range of £5000 and my previous pay fell £2000 less then what is offered on the top end.

    I believe I did well during a phone interview and covering letter since I address ONLY the point that I saw standing out regards to the phone interview and the inclusion in the cover note which was Time Management of employees.

    It is a digital media company and they create web design, iphone & ipad apps, etc. I understand clearly their issues at hand regards to managing projects between clients and developers and the issues faced since I have personally been in this role.

    I believe that I am exceptional candidate for the role but at the same time think that I may not be enough. I hate that feeling.

    I will be prepared to answer the question when they ask about the ideal expectations of salary, however should I go for whatever is on offer just to get the job?

    I will kick myself since I know how demanding the role will be especially if they have never had a structure in place before for managing employees and I will be responsible for building this from scratch. It just means I will be working my butt off and giving more then expected.

    Honestly I do not mind, this is how I have excelled before and worked ‘beyond the call of duty’. Regardless should not one deserve to be paid for the effort they put in?

    So I am running a script in my mind as I type and will come back here once I have written it up

  10. Danny Rosenhaus Link to this comment

    When I was in college I was an intern for one company and another company shared the office space. I was asked to do some Excel work for them and they asked me how much I charged. I said $12 (good for me then) and the boss said, how about $20? Of course I accepted and he told me I needed to aim higher (or lower depending on whether you’re spending of getting). I was then able to negotiate $50 and $100 (this was part of a $300 reduction over the price of 3 people) off on two trips I took through a tour agency in the middle east (Cairo and Petra), that was $125 saved over 4 days, I was the only one who payed less on the other trip. And the only reason I payed less was because I said you got me a discount on the first trip, now I want one here, it worked. Negotiating brings a certain sense of pride that everyone appreciates.

*