How to manage salary expectations when moving to a smaller company?

Question

I (senior software dev) have been contracting for a small tech company for the past couple of months and was recently extended an offer for the position of CTO. I was told to come back to them with a quote for my desired salary.

I am not sure how to approach this, given:

• the company is small; I suspect they can't match median salaries for such a position in my city
• this is a remote position; I am based in a more expensive city than where the company is based
• I don't want to come off as greedy! It may sound silly but it sounds a bit crazy, even to me, to just double/triple/whatever my current contract fee

Ultimately, I'd like to take the offer because I like the people and what they do. I prefer smaller companies too.

It's nice to get paid more but I wouldn't say I am money-driven. I am aware that my salary won't be as high as the "norm"

How do I approach the evaluation of the quote I need to give, or the one I will receive?

Answer 1

You go into the salary negotiation like always. You estimate a salary which matches your skillset and experience. All in all the salary you would be happy with, which pays your bills and where you feel good going to work for.

It shouldn't matter to you if the small company "normally" pays less, or if the salary you demand is higher than they can pay. That is not in your control.

If the company is a "once in a lifetime" opportunity, and you would be very excited to work for them because of some other non-monetary factors, let them know. If you are really concerned that they will turn you down immediately after hearing your salary expectation, you should give them the number in a face to face. This way you can gauge their reaction and maybe follow up with some further negotiation. But don't sell yourself below value.

Answer 2

That's a tricky one.

Job definitions for "C-suite" titles is very squishy. CTO at a large tech company with dozens of reports and multi-million dollar budget is different than a CTO at a small startup which has no reports and occasionally cleans the bathrooms as well.

1. Figure out the scope of the role (budget, number of reports (if any), strategic decision making, etc.) and look at competitive salaries for normal work titles with the same scope (engineering manager or director perhaps).
2. Quantify the cost of living differences. There are plenty of websites for this type of thing. Keep in mind that if the job is in Oklahoma and you are in Silicon Valley this is unlikely to work out.
3. Assess what you need to be "happy". That's the minimum bar, below which this doesn't work.
4. Understand the cost structure of an contractor and employee (which are different). Let's say an employee makes $100k/year. That translates into an hourly rate of $48. However the true cost to the company (benefits, vacation, insurances, IT, overhead hours, etc.) is probably closer to $250k. A contractors rate would sit somewhere on between depending who pays which overhead items (contractor, agency, client). If there is an agency involved, they will take a significant chunk too.
5. Understand "deferred compensation" and different ways to structure a compensation package. Besides base salary, there can be bonuses, stock options, stock grants, profit sharing, etc. For many "C" positions, the base salary is only a minor component.

I assume that as the CTO you will be reporting directly to the CEO and be part of a collaborative leadership team. That's why I would suggest taking all the information that you have collected and sit down with the CEO and have an open discussion.

Answer 3

The answer my differ on your country and your relationship with the company but I'll give you my experience based in being a UK Data Scientist/Software engineer.

I've worked in both big and small companies (smallest being 10 largest being thousands). In my experience small companies don't always mean smaller salaries so don't go in assuming they can't afford a good fee. That being said, I appreciate you don't want to lose the opportunity over money. I would have a frank and honest conversation with them about your expectations. Tell them what you would expect from any other company but say that you would be willing to negotiate for a more fulfilling job.

Consider other benefits too though, big companies may have better private health and dental, maternally and paternity leave etc, small companies may be able to offer shares/equity.

All in all in your situation I would give the same figure you'd give somewhere else but make it clear that you are willing to work with them to come to a salary/benefits package that both sides are happy with.

Answer 4

Your value as an employee has nothing to do with a company's ability, or inability, to compensate you for said value. Or to put it more bluntly, the size of the company and your location should have no bearing on the salary you expect to be paid. Further, the CTO role is a very large step up from a senior developer in terms of responsibilities and stresses, and should be compensated accordingly.

The only thing to take into account is that this company is willing to give you a chance at the CTO role with no prior experience - an opportunity that a larger and/or more established employer most likely would not offer. That's a very valuable way to build up that CTO experience for future roles.

You need to decide how much that opportunity is worth to you in terms of cash, subtract that amount from the median salary of a CTO in your location, and there's your offer.

Answer 5

You should ask them how they will interpret your answer. Will they consider it to be an initial negotiating position, or your best and final offer? Feel them out on what they expect and what happens after you quote.

Also, they probably expect to pay you less, lots less, than your contracting fee, unless you'd have much more responsibility. In the United States, a contractor costs two and a half times as much as a full-time employee. If you're in a different country the fringe benefits are probably quite different so that rule-of-thumb wouldn't apply.