Red, yellow and green zone rates: What are they, and why do they matter?

Greetings, Training for Translators readers!  A lot of new people have joined the T4T mailing list lately, so I thought it would be good to revisit a time-honored but important topic: Red, yellow, and green zone rates, what they are and why they are important!

AI for marketing: Master class on Thursday

This month’s master class, Turn AI into your freelance marketing assistant, is coming up on Thursday! Registration is $75 and includes the recording. Guest instructor Nora Díaz presents a two-hour class on how to use AI for repetitive and tedious marketing tasks, while maintaining your human voice and presence. 

New on the podcast: Before you quit freelancing, try these strategies! 

Episode #18 of the Training for Translators podcast is out! I’ve heard from more than a handful of freelance translators who are considering quitting and finding another career. If that’s the right decision for you, go for it. But if you enjoy freelancing and are just feeling frustrated, I have a few ideas for you. Subscribe to Training for Translators in Apple Podcasts or Spotify, or listen on the T4T website. 

This week’s topic: Red, yellow, and green zone rates

“How much do you charge?” is a question that strikes fear in the hearts of beginning and experienced freelancers alike. I actually enjoy talking about money, and it’s still stressful. As freelancers, we run into situations such as:

• “I raised my rate by a very small amount with my biggest client, they seemed fine with it, and now they’re not sending me any work” (heard this from three students this week!)
• “I sent a quote to a new direct client; they immediately said yes, making me wonder if I could/should have charged more!” (this one is me!) 
• “A client negotiated me down to a rate that I now regret accepting. But was I really going to lose this project over one cent per word?? ” 

Sound familiar?? Part of this is just the reality of freelancing (if you want a guaranteed income, get a salaried job!) but I think that some of the stress can be alleviated by knowing your rate zones. 

First, you need to know how much income you need to generate, how many hours per week, how many weeks per year, in order to reach your target income. To do that, you could read Austin Church’s book Free Money, or buy JT Hine’s booklet I Am Worth It, or use my Deciding what to charge spreadsheet. Start there. A lot of freelancers have never really thought about billable versus non-billable hours, billable hours per month or per year, etc. I recommend running your financial calculations for three scenarios: bare bones (the minimum you can live off; you’re either not spending anything on “extra” expenses like meals out or travel, or you’re dipping into savings to cover those), middle of the road (you’re neither dipping into savings nor putting more money into savings, you’re essentially breaking even), and ideal (similar level of financial security to someone with a well-paying salaried job). 

The all-important red zone 

The Red zone is the rate below which you do not go. Just: no. Why is this important? Because a lot of freelancers have no red zone, which is how you end up like the example above (said yes to a rate, now regretting it). It doesn’t really matter what your red zone is: it could be two cents a word, 25 cents a word, $15 an hour, or $125 an hour. The point is that you must have a red zone to free you from the emotional angst that comes with deciding whether to take a project or not. 

Sometimes, I find it easier to tie my red zone to a client I’m already working for. For interpreting, my red zone is that I don’t work for any clients who pay less than the Colorado state court interpreting rates (currently $65/hr with a two-hour minimum). Why? Because they’re easy and enjoyable to work for, and they’re my lowest-paying interpreting client, so why would I work for less than that. Most of my clients, and particularly my conference interpreting clients, pay a lot more than that. But when a potential client comes to me and asks whether I will accept (let’s say) $45 an hour with a one-hour minimum, it’s painless to say no. 

The yellow zone: Not great, not horrible 

The yellow zone is your “not great/not horrible” work, or work that has non-economic advantages. For example, my work for the Colorado courts is a lot like a regular job. There’s no marketing, there’s very little preparation (the preparation was the year and a half it took me to study for the certification exam), they pay me by direct deposit, on time, and they offer work to me rather than me chasing after them. Additionally, probably 75% of my work for them is remote assignments lasting 30 minutes or less. So although $65 per hour is a lot less than my target hourly rate ($110-$130), they are a good yellow zone client. 

The key to the yellow zone: don’t get stuck there. If all of your work is yellow zone, you won’t reach your target income. And make sure that there is a business or personal case for taking yellow zone work. These include:

• Work that you particularly enjoy
• Work that is particularly flexible
• Work with a really long deadline (this is how I can afford to translate non-fiction books)
• Work that feels meaningful
• Work that furthers a goal of yours (breaking into a new specialization or service, etc.)

“The client is nice, I just can’t say no to them” is, in my opinion, not a valid reason to accept yellow-zone rates (and a lot of freelancers are doing this). If the client is nice, be friends with them outside of work. Ask yourself whether the client would give you a raise, or pay you more than their other freelancers, because you’re nice? 

The green zone: Ideal! 

The green zone is your ideal rate. This is where you want to be working most of the time: the rate that gives you the same level of financial security as someone with a well-paying salaried job. I don’t allocate an actual percentage of my work time to the green zone, but you could (i.e. 80% green, 20% yellow). 

An appeal of the green zone: When you’re working in the green zone, you know that you’re happy with what you’re making. So, when you end up in a situation where you have to be the first one to say a number (as in the example above), you use your green zone rate. That way, even if the client immediately says yes and you sense that you could have charged more (as happened to me recently), it’s OK, because you’re earning what you want to be earning. 

Rates are stressful, and rate zones really help me dial down the stress and focus on the business realities of what I’m charging each client and what I’m earning overall. To wrap up, here are a few other stats that I track in my business:

• Total income for this year to date versus last year to date (this is one click in QuickBooks, but you could also calculate it manually) 
• Income by client (so that I know who my top clients are, and what percentage of my income is coming from each one)
• Income by month (one of my goals for this year is to smooth out my income (as described in my 2024 year-end wrapup) and so far that’s going well) 

I hope these tips are helpful! 

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