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 Mark Achler, lecturer at Northwestern's Kellogg School of Management and managing director of MATH Venture Partners.
When you join a startup, it’s a bargain from the very beginning. By definition, startups are extremely tight on resources—especially cash. But weekly ramen and low paychecks get old pretty quickly. So how do you negotiate a raise in a world where cash is at a premium?
If you are an employee, you are going into a startup with eyes wide open. You know they likely can’t pay you what you’re actually worth, but what they can offer is access to exciting new skills, career development, and management advancement on steroids. If you are a founder, then your equity is the ticket to dream fulfillment.
If you are risk averse, then you have no business being in a startup. Get out now. Personally, I have an insane tolerance for risk. I’ve always been willing to bet on myself, and it drives my wife crazy. She would have much preferred if I had the same job with a predictable salary for my entire career. Know thyself.
Speaking as an investor and board member, I want startup employees to be lean and hungry, but not so stressed and anxious about money that it affects their job performance. It’s incredibly important that both the startup founders and employees have an explicit conversation about what defines success and when would be an appropriate time to earn a raise.
There are two primary reasons to talk about a raise:
Startups are not going to pay market salaries, but that doesn’t mean you have to starve. Assuming the startup has VC backing, then it’s important that you are earning enough to cover your basic living needs. We want you healthy and sleeping in a safe environment so you are bright and alert and fully focused on the task at hand.
When you start a new job, you should have well-defined goals and objectives and a clear timetable (in writing) for when you’re going to have an annual review. You should also be meeting with your boss on a regular basis. A good working relationship with your boss, or board if you’re the founder, is based on openness and transparency. If you’re struggling financially and need assistance, a good boss will want to know. Speak up.
It’s important to set clear and measurable, objective goals before you start a job, with a clear and well-defined path to recognition and reward when you achieve your objectives. Reward can certainly be a raise, but in a cash-strapped environment, reward can also be a title bump, or even equity.
The time to ask for a raise or title bump is at your annual or six-month review. Or, if you’re really crushing it and make significant and material results for the company, ask for it at that moment. But keep in mind that you don’t necessarily deserve a raise just because you held on and clocked a year off the calendar. This isn’t your father’s company, after all. You won't always get a raise on your work anniversary.
At the end of the day, if you don’t advocate for yourself, no one else will. It’s okay to ask. The deal is straightforward in a startup: If you bust your behind and deliver the goods, then the company needs to respond in kind. But you have to ask.