Salary Negotiation: How to negotiate better than 99% of people
January 24th, 2011 - 114 Comments
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.
- In Week 1, I covered how to automate successful scripts into your life, including successfully interviewing at top organizations/companies/universities
- In Week 2, I covered the psychology of persuasion, including getting raises, changing your behavior (like going to the gym and automating money), and changing others’ behavior
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.
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
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.
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?
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.
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. ;-)”
Example 3: “With a 12-month lease, that is a savings of $1800!”
IWT reader Sharon C. writes
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?”
“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
- Spend 30 minutes — but only 30 minutes — reading the case studies, scripts, and examples on this page: How to negotiate.
- 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)
- Find a creative way to get it done BY WED NIGHT.
- 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, 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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