When I last posted about how to ask for a raise, I put some tough concepts out there. Some concepts that probably are offensive to a lot of people who work hard and just want to make a little more money. So I felt compelled to explain a little further some of the concepts on the business side, so that you can understand where your employer is coming from. It has been said of war, “know thy enemy”. The same is true in working any business relationship. It isn’t a war/hate relationship, but if you know what your employer is thinking, then you can structure your approach to cater to that line of thinking.

Why Businesses Pay Low

Businesses don’t like to pay their employees for several different reasons. The first is that they only make a certain amount of money, so if they pay their employees more, then they get to keep less. When looking at it from your side, you continue to work harder, getting more done for the company, and therefore expect to get a raise. Another reason companies don’t want to give raises is the fact that if they give you a raise, you might tell others, and then they could have many employees wanting to get the same raise. You might not ever tell anyone, but the employer can’t bank on that. On the same note, if the employer gives in to your request for a raise, they might think you will just come back in a few months and ask for another raise.

Understanding the Need for the Company to Get a Return on Investment

Just like you investing in the stock market, your employer is looking for a return on investment. That is true of its employees as well. The company needs to make money from the work that you do. If you are not generating more money than they are paying you, you are in the danger zone. Think about this simple example:

If you run an ice cream truck, and you are making enough sales to run a second ice cream truck, and you hire someone else to run the other truck, will you pay them more than they are generating in profits? Absolutely not. You aren’t going to lose money on running the second truck, it would be better just to run one truck than to lose money running a second truck. Simple business principle.

The same is true of a company that employs you. They must get a return on your work, otherwise it is better for them not to have you on staff.

A Delicate Game

That is why the task of how to ask for a raise is delicate, and you need to have an employer’s / entrepreneur’s mindset in order to be successful. Think about when you go shopping, and are interested in purchasing a particular item. What are you looking for? Well you are probably looking for one or more benefits you will receive by purchasing the product. Let’s take a new car for an example:

Let’s say that you are married, have 2 kids and are on a tight budget (and who isn’t these days). So when you go shopping for a car, you aren’t as interested in make, model, miles, tire sizes, rims, etc. These things may have some importance to you, but what you are really trying to buy is a car that gets good gas mileage to meet your tight budget, enough seats for your whole family, and reliability so you can feel safe and secure about transporting your most precious cargo - your family.

These are the benefits you are hoping to receive, and in exchange you will pay a certain amount for them. If you are able to receive more benefits, you might be willing to pay a little more. By the same token, your employer is buying benefits that you provide to the company, not your smiling face, bright attitude or work ethic. Having a good work ethic and attitude is important, but your employer is really buying the end result, your production.

So if you are producing more than you did in the past, and if you are producing more than your peers (people in the same or similar job as you), then you are probably making the company more money and therefore justifying your case for a raise. So when you go in to talk to your boss about getting a raise, you really want to focus on these things.

  • How your production and responsibility has increased over time.
  • How you produce more than your peers do.
  • How the company is better because of your employment.
  • How you have worked to help the company make (or save) more money.

That last point is probably the most crucial point. If you can show how you are creating more profit for the company, and back it up with empirical evidence, than your chances of getting that raise have just increased exponentially. But you must be sure to show how you will still be making the company money, even after the raise you are asking for, or it isn’t worth it for the company to give you the raise.

This may be a tough article to soak up, so if you have comments or questions, please leave them below and I will respond personally to them.

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