Guides
A translation rate formula built from your own records
A translation agency rate formula term by term: payouts, internal hours, your own hourly cost, fixed load, financing uplift and risk load, then a stress test.
A defensible rate begins with evidence from your own work, not a competitor's price or an amount that merely feels familiar. Compare a weak approach with a better one at each decision point: keep the calculation tied to real projects, then express the result in the unit a buyer expects.
Start with records, not a familiar price
The stronger starting point is a calculation whose inputs can be traced to project records, invoices, time entries, or figures derived from your own terms. A market comparison can provide context, but it cannot show whether your agency's delivery costs are covered.
| Weak version | Better version |
|---|---|
| Begin with a competitor's number or a per-word rate, then adjust until the quote seems acceptable. That shortcut does not reveal whether payouts, internal work, overhead, financing, or rework are covered. | Calculate: (external payouts + internal hours × own hourly cost + share of fixed load) × (1 + financing uplift) × (1 + risk load) ÷ units in the project. Use that result to set the buyer's rate. |
| Copy a financing percentage from another agency and apply it to every account. | Calculate financing uplift as annual cost of borrowing × days between paying linguists and being paid ÷ 365. Apply it to accounts with long payment terms. |
| Keep a rate without a record of how its amount was formed. | Keep the analysis with the relevant invoices and time entries so each input can be checked against the work and actual costs. |
Count the work that gets a project delivered
A useful rate includes external payouts and the internal effort needed to move a project through delivery and payment. Count preparation, coordination, and follow-up rather than treating the owner's time as free or estimating effort from optimism.
| Weak version | Better version |
|---|---|
| Count only the linguist invoice, or enter no cost for project management because the owner performed it. Guess the hours for a typical job without checking what happened on a real assignment. | Include linguist, reviser, and specialist invoices per delivered unit. Record internal hours for preparation, analysis, briefing, queries, checking, packaging, delivery, invoicing, and payment follow-up. |
| Use an imagined labor cost for the owner's contribution. | Reconstruct the hours from one real project, then time the next projects. Cost the owner's hour at what a competent project manager would earn for that work, plus employer costs. |
The BLS Employer Costs for Employee Compensation series reports average employer cost per employee hour worked for total compensation, wages and salaries, and benefits. Use your own records for the project calculation, and compare the labor estimate with pay rates and labor costs as a separate check.
Give overhead and delayed payment a place in the calculation
Fixed expenses and the cost of waiting for a client payment should be visible in the rate. Allocate costs using the volume delivered in a normal month, and account for the gap between paying linguists and collecting from clients rather than relying on an ambitious forecast.
| Weak version | Better version |
|---|---|
| Divide tooling, subscriptions, insurance, accounting, and premises by hoped-for sales volume. Treat them as business expenses only in a general budget, not in the project calculation. | Allocate fixed costs across the volume delivered in a normal month. Compare the approach with the agency break-even point, and keep cash flow records alongside the calculations. |
| Treat late payment as an administrative matter with no effect on the rate. | Work out the borrowing cost over the period between paying linguists and receiving client payment. Use that financing uplift for accounts with long payment terms instead of borrowing a standard percentage. |
The SBA's break-even formula sets fixed costs against sales price and variable cost per unit. Use it to check the allocation, not to replace your own monthly volume or financing calculation. Keep recordkeeping close to the rate analysis.
Let service history shape the risk allowance
A risk allowance should reflect rework in the relevant service line. A single percentage cannot describe every type of work, so use your own history where it exists and mark an untested allowance as provisional until it can be reviewed.
| Weak version | Better version |
|---|---|
| Apply one percentage to every service, regardless of its rework history. Ignore occasional projects that go wrong or revision rounds that were not billed. | Set a separate load using the rework history for each service line. Multimedia and certified work carry more risk than plain document translation in this comparison. Include unbilled rework and revision rounds in the record. |
| Treat an untested service line as if its risk were already established. | Mark the allowance as provisional in the project file and record when to revisit it. That makes clear which part of the rate rests on measured experience and which part still needs evidence. |
A worked example with illustrative figures
The figures below are invented to show the arithmetic. Replace each with your own records.
Fixed-cost share. Divide the monthly fixed costs by the units you normally deliver in a month, then multiply by the project's units. If fixed costs are $4,200 a month and you normally deliver 140,000 words, a 12,000-word project carries $4,200 × 12,000 ÷ 140,000 = $360.
Risk load. Divide the unbilled rework cost on past projects in the same service line by their total direct cost. If 20 past certified projects cost $18,000 in all, and unbilled rework made up $1,800 of that, the load is 10 percent. A plain document line with $540 of rework on $18,000 of cost gets 3 percent.
Financing uplift. At a 9 percent annual borrowing cost and 45 days between paying linguists and being paid, the uplift is 0.09 × 45 ÷ 365 = 1.11 percent.
The project. A 12,000-word plain document.
- External payoutstranslator $960 plus reviser $240 = $1,200.
- Internal hours6 hours at an own hourly cost of $38 = $228.
- Fixed-cost share$360.
- Subtotal$1,788.
- With the 1.11 percent financing uplift$1,807.84.
- With the 3 percent risk load$1,862.07.
- Per word$1,862.07 ÷ 12,000 = $0.155.
The quote is about $1,862, or $0.155 a word. To earn a margin above cost, add a target profit percentage as one more multiplier.
Calculate first, then choose the buyer's unit
The unit changes how the completed project price is presented, not how its costs are found. Build the amount from project costs first; only then divide by the project's units to express the result in the format requested by the buyer.
| Weak version | Better version |
|---|---|
| Start with a per-word, per-page, hourly, video-minute, or project rate and work backward without checking the total. Let the familiar unit determine which costs count. | Build the project price from payouts, internal hours, hourly cost, fixed-load share, financing uplift, and risk load. Divide by the number of units in that project to express the result in the buyer's requested unit. |
Test the result against difficult past work
Use difficult projects from last year to check whether the calculated rate and project boundaries hold up. If a project still loses money, examine what the work required before raising the price across cleaner assignments.
| Weak version | Better version |
|---|---|
| Publish a rate without testing it against difficult work, then raise it to cover every problem that could have been prevented. | Test the rate against a project with changing source material, one with a reviewer arriving after delivery, and one supplied as scans. If one still loses money, consider a freeze point, named review window, or separate preparation charge. |
Stress-test the new rate
Does the worst project still lose money?
add a boundary, not a higher rate
publish the rate
Make the offer match the calculation
A competitor's price and a permanent discount are weak substitutes for a cost-based calculation. Present what the price includes, and keep the analysis, quote, scope note, and subcontractor invoices together so the account can be assessed later.
| Weak version | Better version |
|---|---|
| Match a competitor without knowing its costs, language-pair mix, payment terms, or whether its published price is real. | Use a market comparison only as context. Your own invoices and time records determine the rate. |
| Offer a discount to win the first project without stating when it ends. | If a concession is needed, define a fixed number of units at an introductory rate in writing, and name the standard rate in the same sentence. |
| Leave file preparation unpriced and unexplained. | Charge for preparation separately or include it in the rate and say so. Otherwise, clients with difficult files can receive the best deal while clients with clean files subsidize the work. |
Use the quote with pricing examples to present the amount clearly, and use the project handoff to acceptance to inform the hours you record. Compare service-line earnings per internal hour, and review pricing and profit details for units, match policy, and margin leakage.
The project delivery checklist can help keep recorded handoffs consistent. State whether preparation is included, and attach any conditions that depend on a boundary, such as a review window or preparation charge.
Two pricing mistakes
Matching a competitor
- What you see
- A visible number
- What you miss
- Their cost base and terms
- The fix
- Price from your own costs
Discounting to win
- What you see
- A first-project concession
- What you miss
- It becomes permanent
- The fix
- Use a concession with an end
A fair margin should survive the month that hurt most, rather than depend on every project going smoothly. If hours are not recorded yet, reconstruct them from a recent real project and begin tracking the next one. Treat the first result as provisional until several projects have been timed.
A clear offer gives the buyer the rate and its conditions together, while leaving a usable record for the next review. Keep the standard rate beside any introductory concession, and make preparation charges or review boundaries explicit rather than letting difficult work disappear into the price.
