TII #005: Get Paid What You're Worth
TII #005: Get Paid What You're Worth
How to successfully negotiate a higher compensation as a freelancer or employee.
Reading time: 3.5 minutes
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In December 2022 I negotiated the equivalent of a 20% increase in compensation for my 100% remote freelancing gig in addition to a further 10% contingent on securing a client.
I have been in a working agreement with this company for just under a year before this.
It was time to renegotiate.
The whole ordeal was done with one email and one video chat. Completely remote.
Here are a few lessons you can apply to negotiate a better working agreement for your own freelance business, contracting agreement, or permanent job.
Communication rules
First off, I’d like to establish a few rules for the communication:
Respect the hierarchy: I directly contacted the CEO, as he was my primary contact. However, it’s important to respect the hierarchy if there is one. Given you should be in a working relationship with the company for a while to ask for more compensation, I assume you know who to contact.
Be polite & professional: I don’t think this needs any explanation. Avoid the “buddy” talk and stay on topic.
Be appreciative: This shows you value the other side. It’s crucial to highlight your appreciation for the opportunity, the team, or whatever you like about the company and people you work with. This will set the tone for the negotiation.
Be direct: You can start with the normal amount of “politeness”, but I recommend getting to the point ASAP.
That’s it.
Here is an example of what your email intro could look like:
Let’s move on to the blueprint for your next compensation increase.
Know the market
It’s vital to know what your current position is worth to the company, but also what it's worth to the rest of the market.
Armed with this information, you can determine your leverage or rather how much you can ask for.
Here are some example questions you should be able to answer:
What’s the normal salary of comparable employees in this field in the company’s location (yes, location still matters even if you are remote)
What’s the current demand of your position? -> Is it an employee’s market or not?
Are you willing to terminate the current agreement if you don’t get what you want?
What’s your worth to the company? E.g. how replaceable are you?
Do you have other offers/options/clients?
The answers should give you a rough idea on how to determine where you stand.
You want to be less dependable on them than they are on you.
Prepare the pitch
1) Show your worth
You want to make it as clear as possible how much you are worth to the company.
This works best with specific examples of your achievements. Focus on things satisfying the following requirements:
Saved money
Made money (e.g.: sales, project acquisition, etc.)
Saved time (e.g.: improved process to save 30 min for each employee per day)
Brought something to completion (e.g.: project, MVP, etc.)
To give you an idea, here are three examples of my achievements:
Saved $28,200 in development costs for an over-engineered hardware solution proposed by an independent contractor by implementing it myself
Significant contribution to the R&D application document for a $500,000 tax rebate, which was granted
Development of a remotely managed IoT infrastructure MVP including automated configuration
Specific works best. Bar none.
Again, be specific.
Use numbers with importance to the person making the decision.
2) Make it easy to say yes
Money is great.
But, not everything needs to be compensated with money.
Companies often have a certain budget for specific things like HR, R&D and so on, which is limited. This means benefits are in many cases easier to negotiate.
If possible, consider adding something to your pitch that is worth as much as money to you.
For entrepreneurs this is often time. It’s not unlikely you can ask for a reduction in hours for the same compensation.
For example, instead of asking for a 10% raise you can ask for a 10% reduction in hours at the same pay. This obviously only works if you are working fixed hours, but you get the point.
Whatever it is, money, time, extra benefits, etc.
Have a clear vision of what you want before you approach the other party.
3) Anchor high
You have the advantage of setting the tone for the negotiation.
Keep in mind, your anchor should be high, but reasonable.
The more leverage you have the more you can ask for.
For example, ask for a 20% percent increase in pay even if you would be happy with 15% percent.
Ask for a bit more than you actually want, but be cautious.
Asking for way too much may upset the other party and ruin the negotiation before it even started.
It’s vital to know the market and your worth to the company. Be reasonable.
TL;DR:
In short:
Approach the other party with respect
Show your appreciation for the company and team
Be direct and get to the point. Ditch the buddy talk.
Know the market to determine your leverage
Prepare your pitch beforehand
List tangible achievements (money made, money saved, time saved, completed X)
Present your ask (money, time, or other benefits)
Consider other benefits besides money
Anchor high, but be reasonable
I hope this article was helpful.
Cheers.