Training for Translators

Classes for translators and interpreters

Money


Corinne McKay

Putting 40 cents a word in context

Well, it seems that something about money and income always hits people’s urge to discuss! At 65 comments and counting, “How much do freelance translators earn? Is it enough?” is far and away the most-discussed post in three years of Thoughts on Translation and everyone’s comments have provided me with lots of food for more posts. Here’s one: that elusive 40+ cents per word, which I would consider the top of the freelance translation market. I know at least two thriving freelance who’ve told me they charge that much, plus several more translators who I suspect/assume charge that much, and Chris Durban noted in her comment that her base rates are between 40 and 50 euro cents per word. I should say for the purposes of this post that I don’t earn 40 cents a word (for reasons I’ll go into…). I do publish my rates, and on official document translations I do sometimes make up to a dollar a word when the project is priced per page.

First, let’s give this number some context. If you produce, let’s say 500 finished words an hour, 40 cents a word translates (so to speak) into $200 an hour. No question, that’s good money. However, even here in Colorado (where professional services generally cost a lot less than in New York, LA, Chicago, etc.), my accountant makes $200 an hour and my business attorney makes $250. The Wall Street Journal recently ran an article about the growing contingent of attorneys who charge over $1,000 an hour (yes, that’s three zeros after the one). The article concludes with a prediction that within five to seven years, the gold standard for attorneys’ fees will be $2,000 an hour. So I think that part of the high rates issue is that if you want to charge 40 cents a word, you have to position yourself as a professional service provider on the level of an attorney, accountant, business strategy consultant etc. Realistically, most translators either cannot or are not willing to do that. Note that the WSJ article includes some excellent advice from an attorney who charges $1,100 an hour: “Some clients do focus on the hourly rate, but in the end what really matters is their total cost and whether they got a fair price.” Good tip for any professional service provider!

Second, I would hazard a guess that many translators who charge very high rates work very slowly, or at least more slowly than translators who charge 10 cents a word. At 10 cents a word, you don’t have the luxury of waiting for inspiration: you churn it out and send it in. At 40 cents per word, you have more of that luxury, and your clients also expect much more from your work. So maybe you produce 300, even 200 finished words an hour.

Third, as luscious as 40 cents a word might look, there are some reasons you might not want to charge that much:

  • As Chris and others commented in relation to my previous post, clients who pay 40-50 cents per word expect you to have their backs, all the time and with no exceptions. You cannot get huffy when there’s a problem with your translation. You cannot shut off your phone and go hiking when that client is having a business meltdown. You must be cheerful, helpful and positive all the time. You must follow the news in that client’s industry and spend your own money to go to their industry conferences whether or not they have a job in the pipeline for you. You must get out of your sweats and put on a suit and take that client to lunch a few times a year, shut up about yourself and invite them to talk about themselves. You must either take very short vacations or have someone you really, really trust who will fill in when you go away for more than a couple of days. In short, that $200 per hour is not going to come in exchange for only a modicum of effort on your part. And not to rant, but if some translators will not even spend $25 on business cards that don’t have the “Get your free business cards!” text on the back, they are not going to do what’s required to find and retain $200 an hour clients.
  • Some specializations just don’t pay that much (or at least this is what I tell myself!). For example, my preferred specialization is international development. I translate a lot of legal documents and I enjoy that work, but development is my real passion. And realistically, even high-level direct clients in those specializations probably do not have the budget to pay 40-50 cents a word on a regular basis. Realistically, even at the rates I charge now, I am probably paid more than a lot of the in-house employees at the companies I work for. However I love the work, and I love translating documents that are, for lack of a less hackneyed way to put it, meaningful. So there’s that aspect too.

None of this is to say that a) high income is a bad thing or b) 40-50 cents a word isn’t worth striving for. Mostly, I wanted to raise the possibility that 40-50 cents a word is doable; it’s out there if you want it! Readers, any thoughts?


Corinne McKay

How much do freelance translators earn? Is it enough?

Beginning freelance translators often want to know (understandably) how much they can expect to earn in our industry. Experienced freelance translators often want to know (understandably) whether they are earning enough for the effort they put into their businesses. So, what do freelance translators earn?

  • The American Translators Association does a compensation survey every few years: you can purchase the entire report here or read the executive summary for free. The dates here are a little confusing: the data tables in the summary say that they are from 2006, the file itself is named 2007 and the executive summary appeared in the ATA Chronicle in February 2008. According to this survey, the average full-time freelancer makes a little over $60,000; but US-based respondents reported a large income disparity according to whether or not they are ATA-certified (average income of $72,000 for certified translators and $53,000 for non-certified).
  • The US Bureau of Labor Statistics has some information too, and it’s even more disparate. The BLS reports that in May 2008, the average salary for translators and interpreters was about $38,000 (yikes), with the highest 10 percent earning over $69,000 and the average federal government language specialist earning an average of $79,000.
  • PayScale.com has some snapshot info about translators and interpreters, and it’s also broken down by years of experience.

I think that the issue with most of these surveys is that they are not specific enough to individual situations. For example, is someone who works 35 hours a week and takes 6 weeks of vacation full time or part time? Is someone who works at a client’s office 2 days a week and works for freelance clients 3 days a week self-employed or in-house? Should translation volume be taken into account? If you earned $130,000 last year but you worked 70 hours a week with no vacation, should your income be pro rated to a 40 hour work week with 4 weeks off? You get the picture!

Anecdotally, I think that most of the above-referenced surveys are slanted toward the low end of the market. Back in 2008, I wrote a blog post on Secrets of Six-Figure Translators, and since then I’ve talked to many more freelancers who’ve either stated or conveyed that they earn over $100,000 a year. I think that if you’re very good at what you do and you market yourself fairly assertively, there is enough work out there to earn at least $75,000 a year as a freelance translator even if you work with a mix of agencies and direct clients. I’d say that at this point, all of the translators I know who work exclusively with direct clients earn at least $100,000 a year.

But the real question when it comes to income is: is it enough? The “is it enough” question involves a lot of subjective factors, because it ties into the subsidiary question of whether you’d be doing better if you had a different job. Here’s where the subjectivity comes in. For example in my case:

  • I’m reasonably happy with my income as compared to how much I work. I earn more than the ATA average and my sense is that I work less (maybe even a lot less) than most freelancers do, partly because of my family and non-work commitments and partly because I think I’m more productive at 30ish hours per week. However when I look at how the benefits of my husband’s in-house job (company-funded retirement plan, insurance, paid vacation, and so on) add up, it’s a reality check. If I deduct 15.3% self-employment tax (which I only pay on about half my income since I have an S-Corp), 4-6 weeks unpaid vacation and my self-funded retirement plan from what I make, the bottom line is decidedly different.
  • But, then there are the subjective factors. I love where we live, and there are very, very few in-house jobs in our area for what I do. The only reasonable option, working for a government agency, would involve driving over an hour each way and a relatively inflexible schedule. It’s very important to me to have a work schedule that meshes with my daughter’s school schedule at least until she is old enough to be home alone. Realistically, if I wanted an in-house job that was close to my house and that would offer a similar level of flexibility to freelancing, I would probably be looking at earning less than half what I make now.

“Enough” also depends on where and how you live. $75,000 sounds like a decent chunk of money, but if you are not incorporated and thus pay self-employment tax on that entire amount, live in a nice apartment in a major city, have a car loan or student loan or credit card payment and fund your own health insurance and retirement, that amount goes pretty quickly. On the other hand if you live in a fairly rural area, are debt-free or close to it and practice freelance frugality, you could probably be saving 50% of your after-tax income if you gross $75,000 or more.

Readers, over to you…thoughts on the income issue?


Corinne McKay

Webinar question: Should I incorporate?

This is post #2 in my ongoing series of questions from the webinar on “Getting started as a freelance translator” that I presented for the American Translators Association earlier this month.

A participant asks: As a self-employed freelance translator, should I operate as an LLC, an S-corp or a sole proprietorship?
Short answer: If you freelance full-time, I think it’s worth incorporating. As long as you don’t mind the extra paperwork, incorporating has some significant tax and liability advantages.

Longer answer: First, I’m not an accountant or an attorney. Second, I have an S-corp so I’m more informed about S-corps than about LLCs and C-corps. Third, I can’t speak to tax issues in countries other than the U.S. That being said:

  • Running your freelance business as a sole proprietor is really simple; just report your freelance income on IRS Schedule C, pay self-employment tax on it and you’re pretty much set. Running a corporation is a little more complicated: you may have to file monthly or quarterly payroll taxes and a separate end-of-year corporate tax return. You will have to pay to register your corporation every year and the IRS may be less lenient with you than with a sole proprietor if you mess up your taxes. If you don’t want to be bothered with any extra paperwork or filing requirements, stick with sole proprietorship.
  • The hassle factor of incorporating depends on the state in which you live, since corporations are registered at the state level. Here in Colorado, incorporating is very simple and cheap but you do have to renew your corporate registration every year. Check your state’s Secretary of State website for the requirements where you live.
  • The tax advantages of incorporating can be significant. When you work as a sole proprietor, you pay self-employment tax (currently 15.30%) on everything you earn, minus your business expenses. This is in addition to the normal Federal rate that you would pay if you worked for an employer, so it’s a big hit. Some corporate structures allow you to take some of your earnings as “wages” which are subject to self-employment tax and some of your earnings as “profit” which is not subject to self-employment tax. My understanding is that this applies to S-corps and C-corps but not LLCs unless the LLC files taxes as an S-corp. So for example if you gross $70,000 and take $40,000 as wages and $30,000 as profit, you have the potential to save $4,590 in self-employment tax (15.3% x 30,000). Even if you do quarterly payroll taxes (mine take about an hour per quarter) and pay an accountant to file your corporate tax return, this is a big win.
  • Liability: I have never heard of a lawsuit against a freelance translator, but the U.S. is the most litigious country in the world so it’s certainly not out of the question. Incorporating separates your business and personal assets; if you’re sued, the plaintiff can only go after your business’ assets and not your house, car or personal bank accounts. If you’re a sole proprietor, your personal assets are theoretically fair game if you are sued for a business issue.
  • Incorporating seems to make you less likely to be audited by the IRS. It’s a bit hard to pin down the exact statistics, but articles such as this one by respected tax professional Barbara Weltman suggest that audit rates for S-corps are dramatically lower than those for sole proprietors. Weltman states that the total S-corp audit rate is 0.4% and the audit rate for Schedule C filers earning between $100,000 and $200,000 per year is 3.9%.


Corinne McKay

Thoughts on 2011

If you’re a freelancer, it’s time to start thinking about your business-related tasks for wrapping up 2010 and starting 2011 on a positive note. A few thoughts:

  • Are you going to raise your rates? If so, think about how to raise them effectively. Are you going to raise your rates for new clients and keep existing clients at the same rate, or raise them across the board? Are you going to approach your regular clients in advance of the rate raise and see if they’re amenable, or inform them of the rate raise and see what happens? Keep in mind: it’s easier to raise your rates a little bit each year rather than trying to impose a drastic increase every few years; some agency clients may have a rate ceiling and it’s up to you if you want to work for that rate or not; in my opinion, the more objective you are about rates (by using a rate sheet or similar tool), the better.
  • What are your tax prep plans? Are you going to prepare your taxes yourself, stick with your current accountant or use a new accountant? Whichever option you choose, start early. My accountant has gotten me in the habit of closing out my books as soon as the year ends and preparing my taxes as soon as possible after that. This saves a lot of sleepless nights and hand-wringing in April!
  • How about year-end retirement (or other) contributions? Depending on the financial instrument, you may have until April 15 to make these contributions; but plan them now! Making a year-end contribution to your 401K or similar account can be a great way to save on taxes (make sure to check with a tax professional to make sure you’re doing this legally!), but make sure you budget accordingly.
  • And as for your goals? Force yourself to cast an objective eye on 2010. Be honest with yourself. What goals did you meet, exceed or fall short of? Most importantly, how can you make a step-by-step plan for reaching your goals in 2011?


Corinne McKay

Making translation easy versus making translation cheap

When you’re inquiring about a professional service, let’s say taxes, computer help or marketing consulting, which is more attractive to you: a service provider who seems ultra-competent and gives the impression that the process will be easy for you, or a service provider who charges low rates and gives the impression that the process will be cheap? While few clients are completely price-insensitive, I think that it’s important to always be looking for ways to make your clients’ lives easier and avoid bogging them down in the complexity of what you do.

For example, let’s say that you need a really good small business accountant. You know that accountants charge fairly high rates; upwards of $100 an hour and maybe as much as $200 an hour, so you have a ballpark figure in mind. You call CPA #1 and explain your situation. His/her response: “Well, switching accountants at this time of year is complicated. If only you had called me in January. I need your personal and business returns for the past 3 years, don’t give me the originals, you’ll have to copy them and drop them off. I’m only here 10-4 outside of tax season so you have to come during those hours” and so on. At that point, do you even care how little this person charges? Even if this accountant’s rates were below what I expected to pay, I would be turned off. I hate accounting, I hire an accountant to make my life easier, and this person has already bogged me down with too many details and too many hoops through which I have to jump.

But how about this: you call CPA #2 and explain your situation. His/her response: “No problem at all, thanks for calling. If you’re interested in switching to us, you’ll just need to sign a release form and then I’ll call your current accountant and ask them to fax us your past returns. Our hours are shorter outside of tax season but we do everything electronically with password-protected files so you can scan and submit your documents whenever you want. Also if you’re interested we could review your previous returns for errors or missed deductions and there’s no cost to you unless we find something.” At that point, I would be willing to pay the high end of the rate range I was expecting, because this person conveys the impression that my life will be immeasurably easier and I will save time (and therefore be able to work more and earn more money) by using his/her services.

Think about applying these types of scenarios to your own business:

  • When you receive an inquiry from a client, assume that the client wants you to solve their problem, not give them a deal.
  • Don’t get pedantic. Think: do you really care about the minute details of your service providers’ jobs? Right. Stick to the information that your client really needs.
  • Think of simple ways to streamline things for your clients. If you always translate their quarterly newsletter, can you contact them on a predetermined date to talk about the next issue? Can you set up a secure file transfer site so that your clients can access their translations whenever they want? Can you send them a short survey to ask how you can better meet their needs?
  • Try to frame things positively. Not “I can’t finish it by Thursday morning unless you can get it to me by Wednesday noon,” but “If you can get that to me by Wednesday noon, I could definitely have it back to you by the time you get into the office on Thursday.”
  • Don’t make translation sound easy (we know: it’s not!), make the client feel that you will make things easy for them.