How would you negotiate an offer?

newaccounter's picture
Rank: Chimp | 9

How would you negotiate if you are in my situation.

I am expecting to sign a contract with a small investment banking boutique and I am afraid that they are going to lowball me.

All feedback would be appreciated

Quick Guide: negotiating an investment banking salary

Negotiating an investment banking salary and offer can be difficult. But working hard to break into the industry just to receive a low ball offer is equally challenging.

Here are a couple of key points for negotiating your offer.

  • Determine if you're liked
    • Determine if the person sitting across from the table likes you. This helps gauge the amount of social/political capital you have to work with.
  • Create a "because"
    • You need an x % increase in your base salary because.... Make sure you have sound justification for asking for what you want. Talk about why it is need not a desire
  • You want to work for them
    • The person across the table from you does not want to negotiate with a candidate you will renege on an offer. Make it clear that you want to work with and for them.
  • Limitations
    • Consider their limitations on improving your offer and what they might be.
  • Tell the truth
    • You may get some hard questions that you cant prepare for. Tell the truth. Evading and lying will only make the situation unwinnable.
  • Put it in perspective
    • Is this your only offer? Will making a sacrifice in short term pay benefit your career in the long term? Zoom out and put it in perspective.

from certified user @TNA

Tread softly with the negotiations. There are probably a hundred people on this board who would gladly replace you for the same salary.

If they give you a figure where you honestly cannot live on just say so, but don't try to bump it up just for a little more cash because they could simply say good bye.

Are you being paid fairly?

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Comments (26)

Jan 16, 2010

Tread softly with the negotiations. There are probably a hundred people on this board who would gladly replace you for the same salary. If they give you a figure where you honestly cannot live on just say so, but don't try to bump it up just for a little more cash because they could simply say good bye. Boutique firms are going to pay less than MM of BB firms anyway. Just the nature of the beast.

Jan 16, 2010

I am looking at an analyst position out of college.

Jan 16, 2010

Ya, people have asked about negotiations in other threads and the consensus is it doesn't happen that much. I am sure VP (maybe associates) can negotiate a little, but it is pretty uncommon at the analyst level. Like I said, if it is really too little to live off of then be honest and tell them. Otherwise you might have to forfeit the position.

Jan 16, 2010

I think it would be helpful if you could tell us what your compensation is like. Living in New York is certainly not cheap but there are alternatives, such as New Jersey and Brooklyn. Some parts of Manhattan can come at pretty reasonable prices as well (Upper West and etc.)

Is this the only option you have right now? If I were you, I would just take the job without negotiating much. I personally know of a friend who got his contract rescinded because he was trying to play hardball with the bank.

With that said, it's not too hard to do some number crunching and get a preliminary budget for yourself. You would be in a much better position for negotiating if you know how much you actually need to work and live in New York. "Private Equity" sub-forum may not be the most appropriate place for this thread. I suggest you ask around in other sub-forums like "Investment Banking" or "Monkey Around."

Best of luck to you.

"Whenever I'm about to do something, I think, 'Would an idiot do that?' And if they would, I do NOT do that thing."
-Dwight Schrute, "The Office"-

Jan 16, 2010

Thank you for your feedback. I have already done the number crunching for myself, but I guess just wanted to hear people's opinion on how much they need per year to live in the city waiting for a bonus without being completely miserable.

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Jan 16, 2010

IF you gave us a ballpark for comp, we could advise you better.

Jan 16, 2010

As of now I do not have any compensation - I am waiting on the offer and contract - and I have no idea what they would offer.

Jan 16, 2010

... however, i feel like I will not be able to make it in the city working >12hrs a day, with 35k/yr with no coverage

Jan 16, 2010

Whoa, 35K with no medical. That kind of sheds some light on things. Can you tell us a little bit more about the shop? 35K is WAY low and no medical is pretty dangerous. One serious illness or accident and you are bankrupt.

Jan 16, 2010

I am sorry if I miscommunicated. I do not have an offer yet (and a 35k offer would automatically mean I have to say no) - I wanted to hear about what sounds reasonable and maybe what would constitute a good coverage for the hours I work so I know how much I need to pay out of my pocket.

Jan 16, 2010

The lowest investment banking gig offer in the city I've ever heard is 50K, at some no name boutique. But at least they offer full coverage benefits, late night dinner and taxi etc.

35K without any other benefits sounds crazy.

Jan 16, 2010

Not even my desk attendant job in 8th grade paid 35k. He's not saying it's 35k you retards.

Here's some advice:

55k = minimum. Done.

Jan 16, 2010

Ok, so now I know what to expect - 35k is just how much my bare needs expenses are.

Jan 16, 2010

Yep, agreed, 55k min to start off in the city and still enjoy life somewhat. Could probably swing with 50k, but might be tight. This is assuming you're financially independent from your folks.

As far as negotiating - don't chuck your only chance. 35k with no coverage isn't reasonable. Have you asked what their range for first year bonuses is yet

Jan 16, 2010

Guys, he's not saying that his offer is 35K all-in. He is simply stating that such comp would force him to just say no, can't blame him.

Look:

Rent: $1,500 (you can get a room that is cheaper than this)
Utilities/Misc. housing stuff: $250 (likely it won't be this much)
Food: $1,000 ($32.97 per day; that's more than adequate from my experience)
Transportation (monthly unlimited pass): $90 (actually, it's few bucks less than this)
Amenities (shampoo, body wash, shaving cream, and etc.): $50
Haircut: $50 (to be honest, you can get a haircut for $20-$30 at decent places)
Phone: $55 (you can get a pay-as-you-go phone and charge for what you only need)
Misc: $250 (might not even need this much)

That's about $38,940 per year (AFTER TAX) or $748.85 per week (AFTER TAX). Whatever amount above that would be for your savings and coverage.

I inflated some numbers to be conservative. You can get better deals. Obviously, you won't be modeling and bottling. Nevertheless, you can always accumulate some work experience at the boutique and jump ship to a different bank for a better compensation. I know that many boutiques have unique compensation schemes where you get low base but a potentially substantial (or market rate) year-end bonus.

If you earn $60,000

You pay the following taxes:

Federal: $11,187
State: $3,713
City tax: $4,329
SS: $3,720
Medi: $870
Total tax: $23,819 (or 40%!!!! tax rate in this case)

So your AFTER TAX income would be around: $36,181.

I was never a tax guy so the number could be higher or lower depending on how much I screwed this one up.

"Whenever I'm about to do something, I think, 'Would an idiot do that?' And if they would, I do NOT do that thing."
-Dwight Schrute, "The Office"-

Jan 17, 2010

These numbers are way off. Tax is based off AGI not gross income.

BespokeAnalyst2010:

Guys, he's not saying that his offer is 35K all-in. He is simply stating that such comp would force him to just say no, can't blame him.

Look:

Rent: $1,500 (you can get a room that is cheaper than this)
Utilities/Misc. housing stuff: $250 (likely it won't be this much)
Food: $1,000 ($32.97 per day; that's more than adequate from my experience)
Transportation (monthly unlimited pass): $90 (actually, it's few bucks less than this)
Amenities (shampoo, body wash, shaving cream, and etc.): $50
Haircut: $50 (to be honest, you can get a haircut for $20-$30 at decent places)
Phone: $55 (you can get a pay-as-you-go phone and charge for what you only need)
Misc: $250 (might not even need this much)

That's about $38,940 per year (AFTER TAX) or $748.85 per week (AFTER TAX). Whatever amount above that would be for your savings and coverage.

I inflated some numbers to be conservative. You can get better deals. Obviously, you won't be modeling and bottling. Nevertheless, you can always accumulate some work experience at the boutique and jump ship to a different bank for a better compensation. I know that many boutiques have unique compensation schemes where you get low base but a potentially substantial (or market rate) year-end bonus.

If you earn $60,000

You pay the following taxes:

Federal: $11,187
State: $3,713
City tax: $4,329
SS: $3,720
Medi: $870
Total tax: $23,819 (or 40%!!!! tax rate in this case)

So your AFTER TAX income would be around: $36,181.

I was never a tax guy so the number could be higher or lower depending on how much I screwed this one up.

I rich, smarts, and totally in debt.

Jan 16, 2010

Dude... 39k is not enough to live in the city. I'm guessing you've never lived there...
Like I said, 50k would be tight. Unless you want to hole up in your room whenever you aren't working.

Jan 17, 2010
AssociateGuerilla:

Dude... 39k is not enough to live in the city. I'm guessing you've never lived there...
Like I said, 50k would be tight. Unless you want to hole up in your room whenever you aren't working.

dude! he was talking about 39k AFTER taxes. I'm guessing you've never learned to read.

Jan 17, 2010

39k after taxes ain't too bad. I think the threshold is about 25k after taxes

Jan 17, 2010

39k post tax= 3250/month

more than enough to live off of. 1400 per rent. 600 for food (whoever said he is spending 30/day of his own money on food is nutters)
400 for entertainment. 200 for misc. and that leaves over 600 dollars for savings.

i know people in marketing who started out in NYC at 40k/year before taxes and they made it work. if you cant make 3250/month work, you have no idea how to manage your own money and shouldn't be allowed to manage other peoples' money.

Jan 17, 2010

Certainly. That's why I said I inflated some numbers to be conservative and make my point that you can get by with low salaries. Again, you can find cheap alternatives (i.e. Jersey City, Hoboken, Brooklyn, Upper West Side for housing).

Rent: 1,200
Utilities: 100
Food: 750
Metro: 89
Amenities: 50
Haircut: 20
Phone: 50
Dry clean & press: 45
Misc.: 150
Monthly: 2,454
Yearly: 29,448

If you earn $50,000:

Taxes are:
Fed: 8,687
NY State: 3,028
NYC: 4,009
SS: 3,100
Medic: 725
Total tax: 19,549

Your after-tax income is: 30,451

These numbers are definitely doable. Like everyone says here, I think below 50,000 would be tough for you to live in NYC...unless you get an apartment in Jersey City/Hoboken/Brooklyn and cut down on other areas such as food...

"Whenever I'm about to do something, I think, 'Would an idiot do that?' And if they would, I do NOT do that thing."
-Dwight Schrute, "The Office"-

Jan 17, 2010

For an analyst position, it's hard to negotiate unless you have a backup offer. With that said, I don't think you'll get a 35K offer. They will most likely offer you at least 55K with a couple thousand signing bonus. Plus, I'm sure you'll also get performance bonus as well.

Jan 17, 2010

3 thoughts...

Most importantly, think of it in terms what's your next best alternative? If you really want to do banking, then you'll make the money work (as you have been on the unpaid internship). Think of how many actors/actresses are living in this city on less than $50k/yr. At $35k/yr your social life will suck, but if you're doing something you really want to do it won't matter, you'll get excellent experience (you won't be able to afford to do anything but work) and you'll be well positioned to compete for jobs at other firms as the economy turns.

Separately, as you're doing, have a solid idea of how low you're willing to go BEFORE you receive the offer

Lastly, when you get the offer and after you've heard all of the details, just ask, "do you have any flexibility on the offer?" This could mean a lot of things, so they're immediate response should be very telling. Be prepared to talk about salary as well as other components of the compensation if they matter to you (ie holidays, medical, bonus potential, etc). If there's no flexibility, they'll tell you and at that it point it's perfectly alright to ask at what point you could expect to receive base raise, medical insurance, etc, etc.

The third point can apply to all banks (but with the large firms you don't really need to b/c the offers are standard across the board and all the big banks talk). In your case I think it is especially applicable b/c it sounds like you're considering a smaller shop that does not have a standard analyst class type set-up.

Jan 17, 2010

60,000 base salary in NYC will yield you 3,330 dollars per month after taxes.

http://www.paycheckcity.com/NetPayCalc/netpayCalcR...
i've used this site before and it's pretty accurate

Jan 18, 2010
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Jan 26, 2010