In my article, "If You Don't Negotiate . . . . . You Lose! The Initial Loss - Part 1," you learned that when you choose not to negotiate, you leave $$$ and benefits on the table that could have been yours. And you learned why this is true. To sum it up, accepting the first offer handed to you means that the firm probably - not always but generally the case - could have offered a little-to-substantially more in the way of $$ and benefits or perks to you.
But there is a second way you lose and this loss is more costly because it is a long-term loss existing for the duration of your tenure with the company. Here's how the multiplier effect kicks in:
The Multiplier Effect - The Long Term Loss
Think back to previous raises you received. They were probably percentages of your annual salary. And, they were all based on your starting salary. In summary, each annual raise is based on last year's salary or rate of pay. The initial salary or pay rate that you agree to serves as the foundation for each increase as the years go by. So, when a client says, "What difference does it make if my hire-on salary is $1000 or $2000 less that it could have been?" I say it is a big difference, and in the long run could add up to thousand$ gained or lost, because it is not just Year 1's salary that is affected.
Here's an example, and for ease of mathematical computations, let's use a round figure of $50,000:
1. The firm offers an initial salary of $50,000.
2. Year 2, the firm offers a raise of 2%; that means the employee will be making a salary of $51,000.
3. However, had the employee negotiated and won an initial start salary of $55,000 in Year 1, after receiving their 2% increase in Year 2, their salary would be $56,100.
4. If raises are given in Year 3, the same multiplier effect kicks in. . . . and so on and so on . . .
You can see that over time, the multiplier effect results in a substantial amount of money gained or lost depending on whether the employee successfully negotiated their starting salary upwards of the initial offer.
It's your choice -- to negotiate or not to negotiate
Not everyone chooses to negotiate. It's a choice. Understanding the multiplier effect, affecting $$ that can be gained or lost, can help you make a more informed decision.
For additional information on marketing yourself and your capabilities, please refer to the many articles found under the Articles tabs of the AJC–Career Strategy website.
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