20 Jan How much is my time worth?
Translators and interpreters are a very creative bunch, and creative folk usually do not make good administrators. Yes, it is a generalization, so take it with the duly recommended grain of salt.
We have all heard of ROI (Return on Investment). That is what you get back for the money you are investing in your business – the cost of equipment, marketing, training, education, etc. The latest technological developments in our industry have turned this concept upside down: we are investing more and more in training, software and faster equipment to improve the quality of our product, and our clients want us to charge less.
How can we find the happy medium? That comes from knowing what our time is worth and adding a cushion to our rates so we can accommodate our clients’ needs without hurting our bottom line. Our main weapon is, as always, knowledge: of basic accounting, contract language, time management, office administration and negotiation tactics.
Let’s start with some basic accounting concepts.
A colleague of mine once said that the right price for your services is by nature different from the right price for my services. And that is so because we have different financial needs and our pricing structure should be based on that.
Basically, what I pay for paper, ink cartridges, software, internet service, power, etc. may be different from what you pay. To these and other quantifiable tangibles we add quality, dependability, knowledge and other quantifiable intangibles. Since our operating expenses are different, then it is only logical that the final product will also be priced differently.
Step one in determining the value of my time is to identify my operating expenses and determine how much they cost me. Examples of these expenses are taxes, ink cartridges, paper, power, cell phone, software (new and upgrades), books, health insurance, Social Security contributions, travel expenses, registration at conferences, membership dues, marketing, etc.
Step two is determining how much I want to earn a year and how much time I want to toil to reach that amount. The easy calculation is: you pick a dollar amount (desired income-DI) and divide it by 52 (the number of weeks in a year.) Then, divide that result by the number of hours you want to work in a week.
a) [DI]/ = $ per week
b) [$/Week]/[ h/week] = $ per hour
Now my operating expenses come into play. I have to take that value into consideration to ensure that [ $/hour] covers my cost of doing business, my salary and also includes a cushion (profit).
That cushion is very important. That is the amount I can use to negotiate rates with customers.
To make it easy, let’s say that my expenses equal 50% of my hourly wages – that is the portion of my earnings I cannot negotiate. The balance should cover my wage and profit. In my case, I’d say that ¼ of that balance represents my profit – and I can play with that number to meet my clients’ needs.
Remember that values will vary from market to market – both based on geographical and industry variables, as well as from professional to professional. Your cost of doing business may represent less than 50% of your hourly wage; your profit margin may be greater than 25%. Regardless of the values, your profit margin is the number you can reduce as you see fit to guarantee that you get the job.
So, we have roughly covered Basic Accounting. Next time, Basic Accounting II.