American Translators Association (ATA): Calculating Earnings

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American Translators Association (ATA): Calculating Earnings

Calculating Earnings

Rising costs and inflation can be sources of concern to small business owners, especially when the economy is not doing well. This column looks at ways to assess a freelancer’s financial situation and recommends specific approaches to financial evaluation.

Dear Business Smarts:

Looking at translation prices in online forums and surveys these days drives me to despair. In spite of high inflation and price increases almost everywhere you look, the earnings of translators have remained stagnant. In my language combination, English-to-Spanish, prices are even lower than they used to be. If this keeps up, translators will not be able to support themselves with their earnings! — Worried

Dear Worried:

There is no denying that competitors who live and work in countries where the cost of living is lower will be able to undercut U.S. rates. This trend is by no means limited to our industry, and affects our economy as a whole. But the lowest price on offer—based, for example, on translation projects posted at online auction sites—is not necessarily a true reflection of current market rates, and is not the best guide for determining the prices you need to charge for your own work.

Instead, set aside an hour or an afternoon and carefully analyze your own business situation. Pull out your tax records from past years and look at your actual net business earnings for each period. As a translator who charges by the word, you can calculate your annual gross (pre-tax) earnings on the basis of your daily output and current rate. To help you with these calculations, ATA has set up a new gross earnings calculator on its website. Enter the average number of words you can translate in a typical day, your rate, and the number of days you work in a month. Be sure to enter realistic data so that you get useful results.

The calculator will show only potential gross earnings: you will need to deduct your business expenses, such as the cost of equipment, software, insurance, rent, and office upkeep, from that figure in order to arrive at the actual profit your business makes. Nevertheless, this calculation is an excellent starting point for evaluating your financial position.

The calculator also is a useful tool for playing out different scenarios. For example, if you decide to increase your rates you may see a temporary drop in the number of assignments, which in turn would be reflected in a lower daily output.

Your past tax records also provide information about your business expenses. If you determine that you are not making enough money to cover your costs, you need to consider both sides of the equation: how to cut your expenses and how to increase your income. Use your accounting software to analyze where your money goes, and look for ways to decrease costs. At the same time, go through your list of clients and determine your most profitable accounts. As always, consider eliminating clients who are unwilling to pay for the quality you provide, which will give you the capacity you need to earn better profits elsewhere.


Reprinted from The ATA Chronicle: October 2008, p 42