A designer friend sat across the table from me. I took a sip of my wine, she crunched a pumpkin fry (remember this is California).
She said, “I finally found a start-up I like. ”
“Yeah? You like them? Want to see their faces every day?”
“They are great.”
“Product you believe in? Market you like?”
“So-so on product. But a cool market.”
“Market is more important anyhow. You may pivot, and make the product you love.” I shrugged. “Sounds great!”
“Yeah,” she said, and took another pumpkin fry.
“You don’t look happy”
“I am. But. They asked me for a number. I’m not sure how to answer.”
She sounded flummoxed. Like many, she had always taken it for granted that jobs that came with set salaries. At big companies there is often a range you can negotiate within, perhaps 90-120 for a mid-level designer. But start-ups are another matter. They often don’t have an idea of a range of what they should pay you. Many times the founder hasn’t managed, or managed people very different that you. They usually have no clue what you should be paid. More than with any other job negotiation, you have to set a number for them.
I’d been coaching my designer friend for a little while, through portfolio design and interviews. So we chatted on:
“Want me to walk you through it?” I said
“Please” she said.
“Okay, what’s your burn rate?”
She raised an eyebrow
“Sorry, start-up jargon. It’s how much it costs you to live. You know, rent, food…”
“With or without saving?”
“What makes you comfortable?”
“With.” She did some math in her head “4k a month.”
“Ok, so fully loaded– that means with insurance, taxes, etc — is a third over. So about 62. That’s your base. If they provide great insurance maybe you can peel down a bit, but you want that buffer… it’s easy to get the bottom number wrong.
If you get the bottom number wrong, you’ll end up having heartbreaking conversation where you need more and they can’t pay it. You want to find that out before you start working.”
“So I ask for 62?”
“No, that’s just the number you can negotiate down to, if you are just dying to work there. Next, you need to know your value. What you are worth in the market. Go check out some salary surveys, glassdoor, etc. Let’s pretend that’s 75K a year.”
“It’s about right I think.”
“So now you have a place to start the conversation. If this was a full-time job with an established company, you now know you wouldn’t take less than 75. But it’s a start-up. It’s about what they can afford, and what you can afford. So you are going to take the difference between your value on the market and what you need to live in a combination. This combination is usually called “the package” and includes stock options, insurance and other benefits like free food. Go talk to them, face to face. Let them know normally you’d seek a salary of 75, but you want to be part of the company…”
“… and that you believe in what they are doing. So ask them what they think they can do. If they have no clue, you can suggest the combination you’re comfortable with — say, 65 and the rest in stock. It’s possible they can only pay 50, but at least if they say that, you’ll know you can’t live with that.
As for stock, stock does have a set price, and they know how much they can give employees. And they should be willing to share that, especially since you are the third one there.”
That’s how I’d set my number.