Negotiating job offers
by Josh Doody
You’ve been interviewing for a while and they’re ready to make you an offer. You really want this job, and you’re excited the interview phase is finally over and it’s time to negotiate.
You just need the details of the offer and then you’ll be ready to counter offer. So you hop on a call with the hiring manager, who describes the offer in detail.
Base salary - check.
Vacation time - check.
Signing bonus - check.
Equity - … huh? “Can you run that by me again?”
Equity - … “Um, ok. Thanks for the offer. I’d like to take a few days to think it over, if you don’t mind.”
You were all set to negotiate, but this equity thing doesn’t make any sense. What’s it worth? How do you negotiate something that you won’t even get until a few years from now?
And more importantly: Can you negotiate more equity shares instead of salary?
This is a big question that will be easier to answer as three smaller questions.
Let’s walk through a simple heuristic to help you decide if negotiating for more shares makes sense in your situation.
Learn more How do you plan your salary negotiation once you decide whether to negotiate equity?
If there’s not an equity component to your job offer, then shares probably aren’t in play. If your offer includes some equity component—stock options, Restricted Stock Units (RSUs) or other equity—then you probably can negotiate for more shares.
Assuming you can negotiate more shares, let’s dig into more interesting question: Should you negotiate more equity shares instead of salary?
First, you need to know if you can impute any sort of objective value on what they’re offering you. Here’s the key question: “How much are these shares worth today?”
If the answer to that question is, “Well, that depends on whether we go public and how many other investors we get, and what our valuation is for our next raise, and …” then that’s another way of saying, “We have no idea.” This will often be accompanied by statements like, “If we went public today, we estimate these options would be worth [big number].” It’s important to understand that they’re guessing.
To get a better sense of what I mean by “guessing”, play with the inputs on the TLDR Stock Options calculator and you’ll see what I mean.
In this case, I don’t recommend negotiating shares in lieu of pay. You’re better off negotiating for things on which you can impute a value—salary, vacation days, signing bonus, relocation stipend, etc.
On the other hand, if you are able to impute a value on the shares, then it might be worth negotiating for more. This is generally true for publicly traded companies where you can simply look at the current stock price and do some basic math to figure out what the shares are worth right now.
The most common way I see this is with RSUs, but there are lots of other flavors of shares and equity.
Even if you know what they’re worth today, that doesn’t mean you’ll know their value tomorrow, and it’s impossible to predict what they’ll be worth in four years. But at least you can get a baseline for negotiation.
The last thing to consider—and this is an important one—is whether you’ve exhausted all of your other negotiation options.
Even if you know the value of the shares being offered, they will carry some additional risk relative to your base salary, paid vacation time, signing bonus, etc. What if the market tanks? What if they go out of business before you can sell your shares? What if they’re acquired and the shares turn out to be less than anticipated?
Of course, your actual pay check may be susceptible to these risks in some ways, but at least you’ll probably get paid for the work you already did at the salary you negotiated. You may never get paid out for the shares you negotiate.
I recommend prioritizing the available negotiable options from “most valuable” to “least valuable”. This is purely subjective and is completely up to you. Here’s what your list might look like:
You can pay your mortgage or car payment with base salary or a signing bonus. You can impute a real value on paid vacation time. A relocation stipend will help you cover your moving expenses if you’re relocating for this job. But shares might or might not be worth something by the time you can access them, so I recommend putting them at the bottom of your list.
To make sure you get the best result in your negotiation, I recommend focusing on the top two or three things on your list. Starting with the most valuable things and work your way down.
In our example above, if you can’t negotiate base salary, signing bonus, paid vacation, relocation stipend or anything else more valuable than the shares you were offered, then might consider negotiating shares in lieu of pay.
I’ll wrap up by sharing the method I recommend that my coaching clients use to determine whether they should negotiate more shares in lieu of pay. If you answer “no” to any of these three questions, then you probably have better negotiation options aside from more shares:
I recommend negotiating more shares in lieu of pay as a last resort for my coaching clients. That might be a good strategy for you too.
I'm Josh Doody, a professional salary negotiation coach who helps Senior Software Engineers and Engineering Managers negotiate job offers from big tech companies. On average, Software Engineers and Engineering Managers improve their first-year compensation by $47,273 with my help.
Apply for a free 15-minute intro call to learn how I can help.