Negotiation: Employee versus Entrepreneur / Freelancer
Whenever I give advice on negotiation it has always been for salaried employees. It occurred to me the other day that I’m in a sort of rare position of having negotiated for both sides multiple times in my life.
In both aspects, it really doesn’t differ that much:
Depending on what you are applying for, how much demand there is for the position and what you bring to the table, you either have a very strong position or a weak one and you know it.
If you’re in a field that is a niche, you can obviously expect to get the job pretty much right away as you’re most likely the only applicant with a sliver of those skills they need.
If you’re in an industry that prefers those who have knowledge of their processes beforehand, you may have an upper hand over someone else who may have some technical skills but none of the industry ones. An employer will weigh how long it takes to teach someone either industry processes or technical skills and hire the one with the least amount of ramp up time required.
SUPPLY & DEMAND
This one is a no-brainer.
Take for instance, marketing jobs. Out of school, there is a very high supply of students who want to go into marketing or advertising because they think it is fun, glamourous and exciting, not at all what it really is — studying rows and rows of statistics and crunching them with little to no creativity nor control.
As a result, there is a lot of choice for employers, especially the big conglomerates and lots for the smaller companies too.
Now if you look at investment banking jobs, there is a huge supply of white guys going into it with dreams of making $1 million dollar pay days in one shot, and living a wild, party life (again, not at ALL what reality is, where you basically live and shower at the office at the beck and call of the partners, only get to see the outside world and friends once or twice a year, if that.)
That said, if you were a woman applying to it? You’d be a shoo-in for them to try and bump their numbers up to show that they are equal employers, and have a good work life balance to attract the less gung-ho-about-having-no-life gender (women mostly), and if you were an ethnic minority AND a woman? OMG. You’d get all the interviews with all the banks and institutions, guaranteed.
This one is surprisingly important. How you dress, present yourself and talk, and whether or not you know multiple languages (e.g. Spanish or French) can be a huge bump in your profile.
I was hired within 10 minutes of my interview just from the fact that I spoke French and they liked my personality. Done.
PRETTY IS AS PRETTY DOES
I will say that as a side note if you are pretty (and you know if you are), you may run into a bit of a resistance with some people who think that pretty women can’t be smart especially in high-paying jobs and STEM careers.
If they happen to be your manager and you get the job, you can just prove them wrong by being a rockstar and knocking it out of the park. If you don’t get the job, you don’t want to work for them anyway.
Just don’t make it aggressively obvious and flaunt it with super tight, low cut, high heels, short dresses Sofia Vergara style. It just makes people not like you, I’m sorry to say, save that for the club and going out at night but rein it in for the daytime. You don’t need to be blatantly sexy 24/7, you already know you are.
SO WHAT IS THE DIFFERENCE BETWEEN SALARIED AND FREELANCER?
Money of course.
Salaried employees negotiate a yearly rate (generally without overtime paid which means you work those expected weekends to hit a deadline for free). They also negotiate one-time signing bonuses or expected yearly ones, vacation pay, telecommuting options, retirement, sick leave, parental leave, healthcare, vision and dental.
As a salaried employee I would say these points are the most important:
YOUR STARTING SALARY IS THE MOST IMPORTANT
Your first salary negotiated is the most important one. You will get the biggest salary raise of your CAREER with your first salary.
I was offered $50,000 and I held out for $65,000 (had used other companies’ starting salaries to bump it up), and effectively got a $15,000 raise over everyone else who accepted at $50,000.
This starting salary is also where you determine the base of where all of your bonuses (if any) and salary raises come from.
Get a $50K salary?
2% of that is $1000 but if your salary is $65K, 2% becomes $1300.
$300 may seem like peanuts for a whole year, but not only does every penny count, it does compound over time if it is a salary raise.
You’re now at $65,000 + $1300 = $66,300
Compared to: $50,000 + $1000 = $51,000
Then if you look at another 2% raise on top of that, your salary base just keeps snowballing to get bigger and bigger.
DON’T CONCENTRATE ONLY ON THE MONEY
Seriously. If their cap is $50,000 then ask for more vacation time, ask for a day to work from home (this is a lie if you’re in consulting by the way because you are never going to get a project in your own city as a junior).
Ask for whatever else they can give you to tip the scales in their favour, including a signing bonus.
NEVER ACCEPT BONUSES IN LIEU OF SALARY
This is one of the biggest mistakes of new fledgling negotiators. They settle for a $5000 signing bonus instead of pushing for it as a salary bump.
You should only accept signing bonuses as a LAST RESORT TO SQUEEZE MONEY OUT OF THEM.
Do not accept it readily and give in without fighting for a salary bump first.
One-time bonuses are just that — ONE TIME. If you stay, they disappear and you’re back to that salary you should have pushed up $5000 for.
YOU CAN COUNT ON THAT MONEY
You get a paycheque on a regular basis. That’s a good peace of mind that income flows in and you just need to budget and track your money properly.
As a freelancer I’d say these points are the most important (for me and my industry):
MAKE SURE THE WORK WEEK IS 40 HOURS
I’ve had clients where it was 20 hours a week or 35 hours a week (accounting for 1 hour lunches).
The problem with 20 hours a week on-site is you can’t really take another client unless you find one that is 20 hours a week to make up a full week.
Cobbling together a week sucks and commuting from one to another sucks even more.
START AT A HIGHER RATE THEN GIVE IN A LITTLE
You may negotiate fixed, hourly or weekly. Whatever it is, start at about 15% higher than what you really want, and give in to them.
The win-win in this is that you either get the full rate without negotiations (golden opportunity) and make more money to boot or you give a little to the other side (all part of good negotiation) and you get the rate you really wanted in the end anyway.
COMMUTING MAKES IT OR BREAKS IT FOR ME
What’s the commuting time?
This is the best for me, if I can find a contract where I don’t need to commute much, it is a client I WANT TO KEEP.
Commuting sucks the life out of you. I used to get so stressed on the highways that for the same rate or less, I’d have switched gladly to shave 1 hour off my commute each day.
Off-site allowed? SCORE.
I love working off-site, I can wake up and start working. I don’t need to dress, I can use my own kitchen, set my own lunch schedule.. And as long as I deliver (which I do), I’m a happy consultant and happy consultants deliver amazing work results.
Even for a lower rate than what I’m used to, I would TOTALLY take an off site gig and seriously consider it.
There are also some contracts where you’ll be able to work off site once in a while, maybe once a week. You can’t really know this ahead of time without looking like an opportunist but once you get in, you can suss out the situation with other consultants about what they allow and don’t allow as a general rule.
You also want to fit into their work culture if you want to stay long-term so you need to see how they work, and their behaviours towards working, whether they like consultants, and idle chatting (some clients are tolerant, others are not).
HOW MUCH CAN YOU EXPECT TO MAKE?
If you work on a variable fee like I do (by the hour), sometimes contracts are 2 weeks and not worth the hassle.
See, if they’re too cheap to pay for more than 2 weeks, they won’t keep you for the long-term which saves you the trouble of finding another contract & having downtime, and more than likely as you can’t achieve much in 2 weeks except set up your user ID, passes and laptop access, you won’t deliver anything and they will hate you, thinking you’re a charlatan scamming them.
Only you will know after about 5-10 years of experience how long a contract typically is and how much they generally pay.
After the contract, remember that you are done and there is no more money. You need to keep that in mind with your chosen contract as you will be turning down other contracts for this one. Is it worth it? This is the freelancer’s gamble as sometimes a bird in the hand is well worth two in the bush.
Also, if the contract ends before summer, you get it off!!!! Whee!!!!
You will also know generally within a month or three if you will be extended or not. My partner says I have a knack for subconsciously not getting myself extended on contracts with clients I hate. LOL Maybe.
YOU CANNOT COUNT ON THAT MONEY
Any contract can be cut short.
Extensions can be promised, then cancelled.
Brokers can renege on paying you and run off with your cash and just not pay you for the past time you’ve worked. If you are the trusting sort (which I am not), you will lose up to 3 months of pay, which HURTS.
A lot of crap can happen and you need to budget and track your money to even out your earnings so that you don’t feel the famine years as strongly (which means saving heavily in the feasting years).
IT IS ALL ABOUT THE BENJAMINS*
Anyway, the real difference between salaried / freelancers all boils down to money; from negotiating the rate or salary to being able to manage your money.
P.S. Here are some other posts I’ve written on the subject:
- How I negotiate as a freelancer (Ask Sherry)
- How much to charge as a freelancer
- Freelancers should treat themselves as a business
- Budgeting like a freelancer
- Negotiating early on for as little as $7000 can give you 8 more years of wealth
- How not to screw up a negotiation