How to increase your salary and understand your market rate
An interview with compensation and negotiation expert Josh Doody
✨ Hey there this is a free edition of Next Play’s newsletter, where we share under-the-radar opportunities to help you figure out what’s next in your journey.
One of the most common topics we get emails about is Compensation. People want to know how much money they should be making (and also if they should consider switching careers in order to increase their salary).
We spent another several hours speaking with Josh Doody — professional compensation negotiator and founder of Fearless Salary Negotiation — to get you tactical answers to your questions and curiosities around this topic.
In the essay below, Josh gives you practical advice around questions like: "How do I know if I am being paid enough? Should I try to find a new job where maybe I could make more money? How should I approach asking for a raise?" And much more.
PS - If you are looking for more startup opportunities, you may like Friends of Next Play, our membership that gives you access to additional content, a private Slack community, and discounts to our favorite tools like Superhuman AI, Lovable, Zapier, and more. You can join Friends of Next Play here.
Everything you should know about increasing your salary
"How do I know if I am being paid enough? Should I try to find a new job where maybe I could make more money?"
Of course “enough” can mean many things in different contexts, but we’ll focus on “enough relative to my market value” here.
Which leads us straight to the first thing you should do if you’re wondering how you stack up against your market value: estimate your market value.
I think of this process as a series of concentric circles, starting from the outermost circle and working inward to the center circle.
Outermost circle—Industry-wide in your part of the world
First, you’ll want to figure out approximately what folks are being paid to do your job in your industry in your part of the world. This is where broad salary reporting sites are extremely useful. You can go really broad like Glassdoor, or you can go narrower and find industry-specific data like what they have at levels.fyi or even Blind.
It’s important that you focus on the industry you work in because looking outside your industry may skew the numbers. It’s possible you’ll find that other industries pay better, and that would mean you need to consider changing industries if pay is important to you.
This is your benchmark. As you move toward the center circle, you will refine this broad estimate as you get more information.
Next circle—pay in your geographic region
This applies slightly less in a remote-worker world, but with so many return-to-office pushes, and with so many companies moving away from remote, this will matter.
Using the data above, try to narrow your focus on pay in your geographic region. There’s a big difference between industry-wide pay when compared to, say, Orlando, Florida, as opposed to someplace like San Francisco or New York. It costs more to live in those places, so similar jobs will pay more there.
Again, if you include high cost of living places in your numbers, but you live in a low cost of living place, you may have a skewed perspective on what your market rate is. So this is an important adjustment.
Center circle—pay in your company or very similar companies
This can be challenging to get, but not impossible. If you go to conferences in your industry, you could talk with others to see what their comp looks like.
This can feel invasive, so here’s a nice hack: Don’t ask them what their comp is; ask them what hypothetical comp might be for a hypothetical person that is very similar to them.
“If your company were to hire someone like you today, do you have any idea what their starting pay might be?” or even more vague like “If your company were to hire someone like me today, do you have any idea what the comp would look like?”
And you can use similar tactics if you have colleagues you can talk to about things like this.
From those three data points, you should be able to estimate your market value pretty well. When possible, look at “total comp”. That’s the number I tend to focus on when I work with folks to negotiate job offers, and it’s the number most companies are focused on when they’re constructing pay ranges for roles in their companies. The reason for this is that they ultimately need to be able to answer, “What does it cost for us to employ this person every year?” The first major input to answer that question is what you would think of as “total comp”. From there, they do some math to include things like payroll taxes, benefits, etc. But the root of that answer is total comp.
I also like total comp because that’s what you’ll use to pay your bills and it takes care of “should I include equity?” and other questions implicitly. If the equity shows up in your total comp—if it actually costs the company that money to provide the equity for you—then you will probably want to include it. If the equity shows up as a potential payout later on, but can’t be quantified today, then it won’t show up in total comp math (at least not the version you’re doing) and you might just ignore it.
If your comp is pretty close to your market value, then you are probably paid enough or close to it. If there’s a big gap between your market value and your pay, then you may not be paid enough, and the question is what to do about it.
Should you switch jobs if you’re not paid enough?
Maybe! First, it’s important to decide how important it is that you make more money. This may sound strange, but some people will consciously make a tradeoff that looks like, “I know I am underpaid, but I don’t care because my quality of life is so high and I don’t really need more money.”
If that’s you, then you might ask for a raise or just … do nothing.
But if that’s not you—if you want to be paid what you’re worth and you’re willing to make difficult choices to get that pay—then you have two primary options:
Ask for a raise.
Change jobs.
How do you choose? The path of least resistance is usually to ask for a raise, so you might start there. The most important input to a raise request is your target salary, and you basically have that with your market value. You might tweak the number a bit in some situations, but most of the heavy lifting is done.
If you aren’t particularly keen on your job, or if you have already broached the raise topic and gotten nowhere, then you will probably need to change jobs to get paid at or close to your market value.
How do you ask for a raise?
If you want to stay put and see about getting your comp up to your market value, then you’ll want to at least take a shot at asking for a raise.
How do you do that? The short answer is that you want to go to your manager with everything they’ll need to get you a raise, handed to them on a silver platter. You want to minimize the work they need to do to get you a raise because they’re busy people and you don’t want to give them a big task to do. If you do that, it will just keep tumbling down their priority list.
Before we talk about what’s on that silver platter, let’s take a step back.
When you ask for a raise, here’s what you’re really communicating:
“My comp was set at some point in the past and reflects some set of responsibilities that I would take on. Since the time when we set my comp, I have taken on more responsibilities and am adding more value than was anticipated when we set that comp. So I would like to increase my comp to account for the additional value I’m creating.”
If that sounds good to you, and if your market value is higher than your pay, you can build a very strong case for a raise. That doesn’t mean you’ll get a raise, but you’ll be able to build a strong case and that’s all you can do.
So what’s on the silver platter? Three things:
Target comp (see above).
Accomplishments
Accolades
When documenting your accomplishments, focus on the monetary value of them. I like to use the following format:
I accomplished X, which created Y of value.
You need three or four solid ones, and the more value they generate for the company, the better.
In some roles (sales, for example) this is pretty easy. In others, it may not be obvious how your work creates value. Here are the three main ways companies think about “additional value”—maybe these will help you come up with some ideas:
Generate more revenue (this is the one everyone thinks of)
Reduce costs
Reduce cycle time (ship stuff faster)
Once you can write up a few bullets points with specific quantities of value you’ve created, then you’re pretty much ready to make your case.
You may also want to write up some accolades, which would be awards, kudos, or other recognition you have gotten from other managers, peers, or clients and customers. The idea with accolades is that managers are busy and they may not be directly aware of how impactful your work has been.
Once you have all those things—target salary, accomplishments, accolades—you have everything for your silver platter. Then you’re ready to schedule a conversation with your manager to ask about your comp and ask them to help you get a raise (which you have earned and you can demonstrate that clearly).
After you ask your manager for a raise, I recommend following up with an email summary of your case so they have something to circulate internally for easy, rubber-stamp approvals.
You asked for a raise, now what?
If you get your raise, that’s great! There you go!
If you don’t, there will be two responses, “Not yet” and “No.”
If the answer is no and you feel you are more valuable than your comp, then it’s time to start searching for your next job.
If the answer is “not yet”, then you’ll want to ask specifically what you need to accomplish to ear the raise you’ve asked for, and what the timeline is for that process. Then you’ll have a roadmap to follow and you’ll either eventually get your raise, or you’ll realize that “not yet” was actually just “no” on a delay.
Should you switch jobs to make more money? If so, how often?
The best way to get yourself to market rate is to switch jobs. There’s a sort of implicit rule of compensation which is that the longer you stay at one company, the more you’ll fall behind market value for your skillset.
I honestly don’t know why this is true, but it is. And that means that if you want to make a big pay jump, you’re going to have to change jobs.
If you do change jobs, and don’t want to fall behind, how often should you change jobs?
There’s no great answer to this, but my general guidance is that you should change jobs no more than every two years or so.
The issue is that if you “job hop”, that will show up on your resume and will be pretty obvious (unless you’re swiftly moving up the responsibility ladder or changing industries). Hiring managers will get nervous that you’ll only be there for a short time, negating much of the investment they’ll need to make in onboarding and training you.
So be careful how often you change jobs, but you don’t need to stick around each place for five years or anything like that.
If you do change jobs, how much more do big tech companies pay than, say, startups?
Short answer? A lot. Big tech pays really, really well. For example, if you climb high enough on the Amazon career ladder, you could be making seven figures eventually. Startups usually don’t pay anywhere near that.
Now, some startups will pay … pretty well. Not amazing, but not terrible. But most startups are pretty constrained by budgets, investors, runway, and other things that simply prevent them from paying “market value” for a lot of employees.
One reason they struggle to pay “market value” is they’re not really part of that market yet. They’re trying to be part of that market, but they’re a startup, not an established company.
Startups have other benefits for some people—the opportunity to do something big, a potential big payday on exit, etc.—but most of those benefits are non-monetary. If comp matters to you, and if you can choose, big tech will likely pay you far better than most startups if you can land a big tech job (which is hard).
If you do decide to change jobs, how many applications should you put out there?
As many as you can stand. Getting a job is a numbers game, and if you apply to more places, you’ll find more opportunities.
Now, there are caveats here. First, I don’t recommend applying for jobs you don’t want. That isn’t going to help anyone. You’ll be frustrated and spend a lot of time on a pretty tedious task (interviewing) and the companies will be frustrated that they spent valuable resources on a dead end.
Second, once you start getting traction on a few key opportunities, I recommend slowing down your applications and focusing your energy on those opportunities. Interviewing is hard and you’ll want to be able to really focus on it.
Third, once you start getting offers, prioritize them. Focus on your top two or three opportunities and try to close them. Don’t keep interviewing or negotiating offers you don’t plan to accept.
If I had to pick a number, I would say to apply to 10 companies and see how it goes. Ten is enough that you’ll get a sense of how interested the types of companies you’re applying to are in bringing you on. Once you get data from those 10 applications, you can figure out where to focus and, hopefully, get better results with fewer applications.
But if you have the tolerance for it, even more applications could be useful because why not?
So how do you know if you’re paid enough? Estimate your market value.
What do you do if you’re not paid enough? First, ask for a raise. If you get it, great! If not, then it might be time to go looking for a new job where you can get paid what you’re worth.
Josh, who would never say this about himself because he is far too humble, is perhaps the single most knowledgeable person on earth when it comes to all things compensation negotiation.
He’s a Salary Negotiation Coach. On average, people he works with improve their first-year compensation by $47,273. Beyond helping you make sure you are not leaving any money on the table, he also teaches clients everything he knows about compensation and negotiation.
Josh has hundreds of testimonials you could read in detail here but TL;DR we think he’s the best at what he does. If _everyone_ in the next play community could work with Josh, we think people would be a whole lot happier :).
And so if you are in the midst of negotiating a new job and would like to get some help, you can explore working with Josh here.
As always, if you have any questions please feel free to email us - hi@nextplay.so - hope you enjoy and talk soon! (And if you’re thinking about what’s next, be sure to check out some of our other essays).