Dear tanthalas39,
Sounds like you have a wonderful opportunity on your hands. First,
I’d like to say that I want to make sure you are satisfied with the
answer provided here; so, if you would like additional information or
clarifications, please let me know as soon as possible and I will do
my utmost to provide you with the best and most accurate information
possible. What follows is based on a combination of personal
experience, knowledge, and some Web searching, mostly for statistical
facts.
Let’s start with the major points of negotiation. They are as
follows, more or less in order of priority –
1) Salary
2) Bonus
3) Benefits
4) Equity / Profit Sharing
5) 401k
6) Reporting structure (i.e. who do you report to?)
7) Salary Review Plan
8) Signing Bonus
9) Relocation Expenses
10) Company Car (or allowance)
I’ve listed the previous nine points based on the priorities I would
assign to them. Your priorities may be different, and you should
rearrange these points as you see fit.
Salary
******
Let’s first deal with salary. You need to account for a number of
factors – cost of living, your current salary, the position you are
being offered, the risk you are taking, and your level of experience
(not necessarily in that order!)
There are lots of cost of living calculators on the Web. A good one
is provided by the American Association of Realtors at homefair.com –
http://www.homefair.com/homefair/calc/salcalc.html
Assuming you rent, the good news is that the cost of living is about
20% lower in Phoenix. So essentially, you could maintain your current
lifestyle in Phoenix with a salary of only $42,226 (if you own, the
news is much better – you need only $35,564 – I recommend that if you
make the move you buy a house!!) Not that I’m arguing you should take
a lower salary, not at all – but this is an important sanity check
because if it was the other way around then you’d have a base number
to start with. As it is, we can continue to work with the $50,000
number (if you run the calculator “in reverse” – turns out $50,000 in
Phoenix is equivalent to more than $70,000 in San Diego for a
homeowner!)
Except for your being 27 years old, I don’t know much of anything
about your personal experience – but it sounds like it’s more than
enough to qualify you for the job in the mind of this individual.
In terms of the risk you’re taking – there really is very little.
You’re very young. You’ll have to make the move to Phoenix, but it
already looks like that’s going to pay off nicely. You’ll receive at
least as much money as you’re making now, and you’ll be able to sock
some of it away due to standard of living differences (or, you could
up your standard of living). And, you may possibly get to share in
some profits.
The only other thing left to account for in terms of salary is exactly
that – salary. The question is, what is a fair salary (and what are
fair benefits) for the position you will be assuming?
The best salary calculator on the Web is run by the Wall Street
Journal. It’s based on real salary data. It can be accessed at –
http://salaryexpert.com/seco/index.cfm?Action=DisplayNAInput&CobrandID=95&area=360000
You can play with the calculator and retrieve data in addition to what
I will provide you here. Not being very familiar with either the
business or the exact position you will be taking up, I tried to nail
down something that could be considered equivalent. I was hoping for
a “General Manager” description, but that doesn’t exist. I opted for
“Business Development Manager” – note that if you go for anything at
director level or above, you’re in the 6-figure salary range that
typically is not something you’d see at your age. I think the
position description fairly well represents your initial
responsibilities in terms of activities, supervision (i.e. 4-5
employees), as well as revenue responsibility.
Business Development Managers in the Phoenix area make between $40,787
and $70,242, with an average of $58,652. On average, benefits should
account for 15.2% of salary.
Based on your experience and age and the perceived potential of this
opportunity, I’d ask for between $55k and $60k – however, the
aggressiveness with which I would negotiate the salary is strongly
dependent on the generosity of the profit sharing or equity component
of the offer.
Bonus
******
The next point I believe you should negotiate for is your annual bonus
– at a minimum, this should be a percentage of your salary that is
dependent on achieving some revenue or income benchmark. For example,
10% of your salary if you exceed $300,000 in sales in year I.
However, if you are offered a generous profit sharing plan, or equity
in the company – you may consider foregoing requesting a bonus if you
are not offered one, or you may negotiate for it “unaggressively.”
Benefits
*******
Next, you need to discuss benefits. You should expect to receive full
medical, dental and vision, as well as life insurance and disability
insurance. If you have a family, you may want to discuss your
employer covering some or all of their premiums as well. However,
keep your expectations reasonable. The 15% benchmark offered by WSJ
is a good number to keep in mind. You may also want to request a
fitness club membership, but you need to assess the character and
nature of the business owner – some individuals would be completely
turned off by such requests.
Equity and/or Profit Sharing
***********************
If you’re going to run the business unit for this guy and grow it at
the rate you specify – 16- to 20-fold (in how many years?) – you
definitely want a cut of the action, and this may turn out to be far
more lucrative in the long run than your salary (note: when Bill Gates
came courting Steve Ballmer at Stanford in 1981 or 1982, the story is
that they spent days negotiating his (then) $60,000 salary but only a
few minutes talking about equity…Ballmer is of course a billionaire
several times over today, and it’s not from saving up his salary…)
In negotiations, it’s always important to try and hold out until the
other guy makes an offer – in this case, it’s doubly important. You
should get a sense of what this guy has in mind. What’s reasonable?
Based on the size of the company, your experience, and the degree of
risk you are taking (essentially very little…) an equity stake ranging
from 2% to 5% would be reasonable. Unless this guy is extremely
generous, you’re likely to share in profits in proportion to
ownership, but you need to be explicit up front about taking profits
out of the business on a quarterly or annual basis. An alternative
would be to set up a bonus system as described above that is based on
either revenue or income goals, or some combination.
401k
******
You should also negotiate for a 401k plan if he doesn’t offer one. If
he does, you’ll get whatever plan he already has in place for the rest
of his employees; such plans need to be offered to all employees in an
equitable manner. If he doesn’t you can negotiate his participation
percentage. This, again, is dependent on his generosity. Some
employers match dollar for dollar, some provide the program but no
matching, some only match funds invested in company stock etc.
Reporting Structure
****************
I think this point could end up being critical. You mention that this
business is really part of another business. Who do you report to?
The manager of this other business, or the owner? Make sure to
explicitly define reporting relationships up front; they could have a
huge bearing on your future in the company. Reporting directly to the
owner will give you the advantage of being in constant touch with him;
it will also give you a certain degree of prestige and reputation in
the company, as well as across this guy’s other holdings.
Salary Review Plan
*****************
Negotiate for an annual salary review and try to define what salary
increases will be based on. If you don’t bring this up now, it will
be very difficult to bring up later!
Signing Bonus
*************
A signing bonus would be nice, but to a large extent this should be a
function of how well you’ve been doing with all of the other items on
the list. If the owner had been very generous up until now, my
intuition would be to forego the bonus (based on the facts of the
case). If he has not, play up the risk you’ll be taking in moving to
a new city where you don’t know anyone etc. etc.
Relocation Expenses
******************
These are pretty standard, definitely for a job at this level. At a
minimum, he should reimburse you for packing and moving expenses. In
larger companies, you’re also compensated for moving related expenses
such as hotels, meals etc. Of course he should cover your personal
travel expenses to Phoenix. If he does move you, consider having him
move your car as well so that you don’t have to put the mileage on it
(although it’s not that far…)
Company Car or Allowance
***********************
Use the 15% benefits benchmark as a guideline. A car will cost at
least $300/month or $3,600 annually – that’s between 6% and 7% of your
annual salary. If he’s already loaded you up with the rest of the
benefits, you may want to forego this. Otherwise, negotiate for it!
On to other issues –
Legal Consultation and Contracts
***************************
Pretty basic – first of all, everything should be explicit and in
writing. Don’t hang your hat on verbal promises (I have, and I got
screwed… L). You want a contract and you want everything you’ve
negotiated and discussed to be described in that contract. You also
want to make sure to receive a signed copy of said contract.
It would be excellent to have a contract or compensation lawyer review
the contract, but that may cost $250 to $500. If you have a lawyer
friend who could take a look that may work as well, as long as it’s
someone competent whom you trust. Personally, I’d pay a lawyer to
review the contract – but I wouldn’t tell your new employer about it.
Professional Consultation
**********************
If you’re seeking professional consultation beyond Google – and I
definitely recommend that you do - there are several options. You can
meet with a lawyer – best bet would be an employment lawyer who would
be able to cover all the points with you; a contract lawyer or a
compensation lawyer could also do the trick. Here’s a great article
on the advantages and disadvantages of seeking legal advice –
http://www.careerjournal.com/myc/legal/19980908-canter.html
The best way to get to a good lawyer is through word-of-mouth. Expect
to pay $250/hour and up for a good lawyer, and remember that you get
what you pay for – advice from a $100/hour lawyer is likely to be
worth 10% of what a $250 or $300 an hour lawyer will give you… So,
ask around locally and see whom people have worked with, and whom
they’ve been happy with. If you don’t know anyone who’s worked with
such a lawyer, you could try the yellow pages or the Web – I could
help with that if you’d like.
You could also try discussing your situation with a career coach, but
I don’t think that in this particular situation you’ll have much to
gain.
Summary
*********
What I’d recommend in your case, then, is to negotiate for a $55k to
$60k salary with a 2% to 5% equity stake and an annual bonus that is
tied to some performance benchmarks. I’d also negotiate for
more-or-less a standard benefits package, a 401k and relocation
expenses. Finally, make sure to set expectations as far as reporting
structure and salary reviews go.
I would run the paperwork by a lawyer prior to signing on. I’d also
do some serious due diligence on the individual as well as on his
various holdings – and definitely on the company you are considering
joining. Even though they’re private, you can use Dun & Bradstreet –
http://www.dunandbradstreet.com/local_home/local_home_US/
…in order to assess the financial fundamentals and character of the
company (credit status, vendor payment characteristics and so forth).
I hope this response adequately addresses your request. Please let me
know if you are in need of additional information concerning this
query.
Thanks,
ragingacademic
Additional Links:
Relevant career planning articles from WSJ.com
Negotiation Tips
http://www.careerjournal.com/salaries/negotiate/index.html
Hot Hiring Issues
http://www.careerjournal.com/salaries/hotissues/index.html |
