The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question, “How do you negotiate a raise at a startup?” is written by Damian Bradfield, president of WeTransfer.
Embedded in the question here are three important words: negotiate, raise, and startup.
In this context, the word “negotiate” should mean “bring about a discussion” as opposed to “make a deal or bargain.” If an employee believes she should make a deal with her manager, there are deeper problems at her particular workplace.
I remember vividly the first time I was offered a pay raise. I was working at the highly respected advertising agency Delaney Lund Knox Warren. I loved working there. I respected my higher-ups.
Each year, employees were given an annual review. I was called in for my review and told I was punching above my weight. Accordingly, I would receive a great pay raise: 5%. I politely thanked the partner, walked away, and slumped at my desk, livid.
I counted to 30, walked back into the office, and announced the decision was scandalous. I told them that I was worth a lot more, and if they didn’t value me, I’d resign. I was delivering on every level. They knew my capabilities. They were taking liberties. I was worked up because I was worth a whole lot more. I knew it. I believed they knew it.
Later that day, I was offered 15%.
Later that evening, I told my girlfriend. An “arrogant fool” was how she described me. In hindsight, she was right. I played a high-risk game. I might well have had to resign. I created a make-or-break scenario.
There’s a better strategy than make-or-break. If you’re looking for a pay raise, prove you’re doing the job that demands a higher salary. If you can offer this proof and you’re already covering the responsibilities of this job, it’s nearly impossible for someone to say no.
The next word in the question is “raise.”
I’m not sure it’s about raising your salary. It’s about raising your game.
If you prove you’re doing the job that demands more money, you should earn more. What’s the reality of the situation? Either you generate more income now, or you bring in more business than your better-paid colleagues. It’s simple. You should earn more.
One of my first bosses told me: “When I pay you at the end of the month, don’t say, ‘Thanks.’” He believed he wasn’t giving me a gift. He was giving me what I earned, fair and square. His approach was somewhat brutal, but it does contain truth.
Business should be a mutual effort. You put in the time and effort for the greater good of the business. The business recompenses you for your time. If you are putting in a greater effort, producing more, making more impact, and fulfilling your goals, then it’s fair to assume that after a certain period of time, you should be rewarded—if the company can afford it.
But—and this is important—if you’re working in a new startup, a company that is cash-flow poor, time-strapped, and five years old or younger, it’s tough. You’ll be permanently required to put in overtime and extra effort. You’ll need to over-perform. It’s likely you won’t be able to simply ask for a pay raise. The cash isn’t there.
This must be clear from the start. You shouldn’t be at a young, brash startup for the salary. In this situation, money takes a backseat. Exposure is important, as well as energy, riding the steep learning curve, gaining access, enjoying the diversity, having fun, and—hopefully, eventually—gaining equity. If these facets of the job are not rewarding enough, get out. If you didn’t get equity, remedy that fact. Quick. If you’re more worried about short-term cash flow, there’s another solution: Apply to an investment bank instead. They’re usually hiring.
Finally, there’s that controversial word “startup.” What is a startup? Is it a company that has been around for less than five years? A company that offers a product or service not available elsewhere? Does it simply refer to a fledgling business of any kind? Or is it one that has chosen to forego stability in return for rapid growth?
A startup is probably all of the above. The word startup is capacious enough to include many definitions. Unfortunately, for some, it’s simply a label. Even worse, for others, it’s little more than an excuse.
Companies often call themselves startups to raise money, skimp on employee payments, or negotiate at lower rates. But at a certain point, a startup is no longer a startup. If a company is still calling itself a startup when it has 900 employees, has IPO’d, and rented out offices in seven countries, it¹s like the company is a rouse. It’s not making a profit.
If you’re working for a startup that is having problems getting up, forego the money. Get out. No raise is worth it. For a while, it’s great to work six days a week, 14 hours a day in return for FIFA competitions and a few rounds of table tennis. But if the startup is not showing signs of actually starting, of actually getting up, then there is little hope of you gaining sufficient reward for your efforts. Asking for a raise at one of these organizations would be nothing but a stopgap. You’re better off moving on.