It’s no secret that underselling yourself has financial consequences — but you may not realize just how high the price can be. Not negotiating your salary could dock hundreds of thousands from your lifetime earnings, according to analysis by Salary.com. And it’s just as easy to undercharge as a freelancer, or set prices too low at your small business.
If you’re underpaid, it’s time to make a change. Read on for savvy tips to move toward a better income, whether you’re a full-time employee, freelance worker, or small-business owner.
If You’re a Full-Time Employee
Do Your Research
For at least six months, keep a record of all your accomplishments as they occur. “People tend to remember the home runs, but forget their daily results, such as a meeting that got the company a new client, improving the cycle time, or finding a way to trim costs,” says Lee E. Mitchell, author of Get More Money on Your Next Job … in Any Economy. This list will not only give you fodder to present to your employer, but it will also boost your confidence going into the negotiation process.
Brag Up Your Achievements
At the same time, it’s important to make sure your boss knows about your hits as they happen. To toot your horn without seeming boastful, couch it as though you simply wanted to keep her in the loop.
Send her a quick email saying something like, “Just to bring you up to date, I met with McKinsey and they’ve agreed to sign on for another year.” Or email all the key people involved in a successful project that you were a part of, and praise them for their fantastic work. “This subtly proves that you also did a great job, and because you’re giving the credit to others, it reflects that you’re a skilled manager,” Mitchell says. Plus, it builds goodwill with the rest of your team — a win-win.
Know Your Worth
Figuring out your market value is critical to negotiating, and that means checking out Salary.com and Glassdoor.com, joining professional organizations, and ratcheting up your networking. Especially critical is having an “active, up-to-date online presence” — like a LinkedIn account — so recruiters can easily contact you, Mitchell says. When they do reach out, meet with them, even if you’re not interested in the job. You’ll get a better sense of your value, and knowing that other people want you is incentive for your boss to step it up.
Ask When You Have Leverage
Once you’ve done the legwork, the timing of when you make the ask is crucial. If you’re under market and doing good work, you should ask for a raise if:
You have another offer, or your employer is afraid you might start job hunting. Sometimes, people are underpaid because their supervisor knows they love their job and won’t quit, Mitchell says. But your boss should know that you might leave for the right opportunity.
You’ve done something particularly outstanding, like significantly increasing earnings.
The company critically needs you — say, you’re in charge of a major project at a crucial point and it would be difficult to replace you.
Talk the Talk
When you book a meeting with your boss, say that you’d like to talk to her about a personal matter instead of mentioning the raise. This way you won’t give her time to gather excuses, Mitchell says: “You want to hit her cold so you’ll get an honest response.”
Your goal should be to suggest you might be forced to leave if you don’t get a raise, without actually saying so out loud. But don’t outright threaten to quit: “People will have an emotional reaction that can lead them to go against their best interests,” Mitchell says.
This is where the art of subtlety comes in. If you have another job prospect on the table, say, “I got another offer. I didn’t go out and seek it — they came to me — and I’d rather stay here, but they’re offering $X. Can you do anything to help?” Keep in mind that your boss will have to use her own clout to go to bat for you with her higher-up, so asking for her help rather than flat-out demanding more money is more likely to get her on your side.
Should she ask whether you’re prepared to quit, tell her, “I don’t want to, but it has awakened to me the fact that I’m 20 percent below market.” Then explain the evidence you’ve collected over the past six months, showing why you’re valuable to the team.
If you’re asking for a raise because you’ve just done something wow-worthy or the company would be in a vulnerable position without you, begin with something along the lines of, “Looking at my salary, I’m under market. I really think I should be getting a raise. I’ve made $X for the company. Can you help?” To avoid getting low-balled, name a specific number you’re aiming for, like 10 or 20 percent more.
If your boss says she’d love to but it’s not the right time, don’t let her off the hook. Follow up and press her to give you a specific date. “If she’s hedging, and you sense that you’re not likely to get a raise in the near future, that reveals a lot about what she thinks of you,” Mitchell says. Translation: It’s probably time to start looking elsewhere.
If You’re a Freelancer or Small-Business Owner
Calculate Your Specific Market Value
Making more money if you work for yourself is murkier territory. “You need to know the market and sell your value before you talk price,” Mitchell says. “There is always someone who will do the job for less, so you have to show clients what’s unique about the skills you bring to the table.” Just like a salaried employee, you need to figure out the going rate for your goods or services. You can get a sense of the market by joining a professional alliance, or just by talking to people you know in the same field.
Then begin keeping a list of everything you’ve accomplished for your clients, from drawing more traffic to their site if you’re an SEO consultant to consistently coming in under budget if you run a catering business. In order to make a strong case for hiking your rates, you have to understand and believe in your value.
Notify Your Clients You’re Raising Your Rates
Once you’ve got a good idea what you’re worth, call clients to let them know your fees are going up. (Hint: The beginning of the year is a natural time to do this — and don’t call it a raise, but a change of rates.) “Start by going through some of the things you’ve achieved,” Mitchell says. “Your point person might have to go to their boss for approval, so you want to arm them with information they can use to advocate for you.” Then, in a matter-of-fact tone, tell them that the market has gone up, so you’re raising rates for everyone as of January first.
What if you get a no? Ask if they’ll revisit their rates in the future. “If you still want to keep working with them, say, ‘I’m happy to take on your next project, but I’m in the middle of resetting my business to work with a smaller group of more selective clients, so I’ll have to let you know about my availability in the future,’” says G. Richard Shell, author of Bargaining for Advantage and director of the Wharton Executive Negotiation Workshop. “Sometimes it’s a matter of awakening people to the fact that they won’t be able to get the best service for the price they’re willing to pay.”
Repackage Your Services
Try bundling to justify a steeper rate. “For example, if you’re an interior decorator, tell clients that in addition to the standard design project, you’re now including two free site visits per year, to consult on how to spruce up their home for the season,” Shell says. If you have a snowplow company, explain that shoveling the walkway will now be part and parcel of the new, higher price.
Rebrand Your Business
Reframe your business model to be more specialized, like becoming a wedding cake designer instead of a general pastry chef. Or a life coach focused on helping recent college grads figure out their next steps. “This gives the impression that you provide something out of the ordinary,” Shell says. “And when you become known for an area of expertise, it allows you to charge more.” Before long, you’ll hopefully be pulling in a salary that reflects what you’re truly worth.
Hike Your Prices — Without Warning
An alternate way to go about it is to simply give yourself a 10 percent raise on your next invoice (unless it goes against your contract, which may state that you won’t raise rates without mutual confirmation). Depending on the client, they may not even notice it. And if they do question you, explain that it’s your new standard rate, but since they didn’t know, it won’t take effect until their next bill. “If they don’t catch on until months later, you can just tell them, ‘Well, that’s what I was paid last time,’” Shell says. “You’ve now set a precedent.”