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What is the standard profit margin of an agency on a project outsourced to a freelancer?
Thread poster: Lagom
Lagom  Identity Verified
United Kingdom
Local time: 19:37
Swedish to English
Feb 21, 2006

What is the standard profit margin of an agency on a project outsourced to a freelancer.

Thanks, Ben


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Rebecca Lowery  Identity Verified
United Kingdom
Local time: 19:37
French to English
At least 40% Feb 21, 2006

Hello!

I used to work as a project manager for a translation agency in Birmingham. Basically an agency is aiming for at least 40% profit margin and it can be up to 50 or 60%.


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Lagom  Identity Verified
United Kingdom
Local time: 19:37
Swedish to English
TOPIC STARTER
Thanks Feb 21, 2006

Rebecca Lowery wrote:

Hello!

I used to work as a project manager for a translation agency in Birmingham. Basically an agency is aiming for at least 40% profit margin and it can be up to 50 or 60%.


Hi Rebecca,

So a rough idea of the price invoiced by an agency direct to the client is around 40% more than the price they pay a freelancer for the same project.

Do you know whether there are any uptodate examples of agency rates published online anywhere as there are surveys of freelancers?

Many thanks,

Ben


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Egmont
Spain
Local time: 20:37
Afrikaans to Spanish
+ ...
Spain profit margin Feb 21, 2006

Benjamin Love wrote:

Rebecca Lowery wrote:

Hello!

I used to work as a project manager for a translation agency in Birmingham. Basically an agency is aiming for at least 40% profit margin and it can be up to 50 or 60%.


Hi Rebecca,

So a rough idea of the price invoiced by an agency direct to the client is around 40% more than the price they pay a freelancer for the same project.

Do you know whether there are any uptodate examples of agency rates published online anywhere as there are surveys of freelancers?

Many thanks,

Ben
Up to 100% usually...


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Alison Schwitzgebel
France
Local time: 20:37
Member (2002)
German to English
+ ...
Profit margin or mark up? Feb 21, 2006

Rebecca Lowery wrote:

Hello!

I used to work as a project manager for a translation agency in Birmingham. Basically an agency is aiming for at least 40% profit margin and it can be up to 50 or 60%.


Don't forget that although a translation from an agency may cost the agency's customer 40% more than the translator's rate, the agency also has to cover its costs with this percentage. Those include office space, telephone costs, project managers' salaries, and also - more importantly for the translator - the risk that the end customer doesn't pay the agency's invoice.

So that 40% mark-up may turn out to be a true profit margin of just 5-10% (at a rough guess).

FWIW

Alison


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Lagom  Identity Verified
United Kingdom
Local time: 19:37
Swedish to English
TOPIC STARTER
Mark up not profit margin... Feb 21, 2006

Alison Riddell-Kachur wrote:

Rebecca Lowery wrote:

Hello!

I used to work as a project manager for a translation agency in Birmingham. Basically an agency is aiming for at least 40% profit margin and it can be up to 50 or 60%.


Don't forget that although a translation from an agency may cost the agency's customer 40% more than the translator's rate, the agency also has to cover its costs with this percentage. Those include office space, telephone costs, project managers' salaries, and also - more importantly for the translator - the risk that the end customer doesn't pay the agency's invoice.

So that 40% mark-up may turn out to be a true profit margin of just 5-10% (at a rough guess).

FWIW

Alison


Hi Alison,

You are absolutely correct with your comments. My reason for asking is having worked for some years as a freelancer I know what to charge agencies but I need an equation for working out how much to charge a direct client when I outsource work. This of course has to produce a competitive rate in line with the current industry average.

Of course the appropriate costs need to be taken into consideration but I would prefer to 'work backwards' with my calculation knowing the mark-up and then incorporating the costs to find the profit margin.

I trust that this makes sense!

Ben


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Rebecca Lowery  Identity Verified
United Kingdom
Local time: 19:37
French to English
Some translation agencies actually post their rates on their website Feb 21, 2006

I can't think of any agencies that do this off-hand but have come across rates quite a few times. Another option would be to actually call a couple and pretend to be a client - very sneaky but agencies do this to one another all the time! If it's any help the agency I used to work for charged £110 for French into English translation - I used to work as a translation manager for a company too and this rate was actually quite standard for French - English combinations.


Benjamin Love wrote:

Rebecca Lowery wrote:

Hello!

I used to work as a project manager for a translation agency in Birmingham. Basically an agency is aiming for at least 40% profit margin and it can be up to 50 or 60%.


Hi Rebecca,

So a rough idea of the price invoiced by an agency direct to the client is around 40% more than the price they pay a freelancer for the same project.

Do you know whether there are any uptodate examples of agency rates published online anywhere as there are surveys of freelancers?

Many thanks,

Ben


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Philippe Etienne  Identity Verified
Spain
Local time: 20:37
Member
English to French
Twice the translator's fee billed to end customer Feb 21, 2006

A few accidental communications from decent european agencies I work for revealed that they charge about twice the price they pay me.
I would think that a 40% markup is very low considering their costs (reviewing, marketing, project management, visibility...). I suppose Rebecca meant profit margin, i.e. costs deducted.
I don't work for end customers, but doubling up the price I charge for agencies would seem appropriate, because the costs would increase (because of time involved in CRM, customer blahblah, formatting, after-sales and securing new customers, reviewing costs, etc.)
Remember, when you drink a bottle of wine or water at a decent restaurant, it costs you about 3 times the price you buy it for in supermarkets... Restaurants add value to the bottle, just as agencies should do to the translations they provide.
Have fun,
Philippe


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Lagom  Identity Verified
United Kingdom
Local time: 19:37
Swedish to English
TOPIC STARTER
Thanks Philippe Feb 21, 2006

Philippe Etienne wrote:

A few accidental communications from decent european agencies I work for revealed that they charge about twice the price they pay me.
I would think that a 40% markup is very low considering their costs (reviewing, marketing, project management, visibility...). I suppose Rebecca meant profit margin, i.e. costs deducted.
I don't work for end customers, but doubling up the price I charge for agencies would seem appropriate, because the costs would increase (because of time involved in CRM, customer blahblah, formatting, after-sales and securing new customers, reviewing costs, etc.)
Remember, when you drink a bottle of wine or water at a decent restaurant, it costs you about 3 times the price you buy it for in supermarkets... Restaurants add value to the bottle, just as agencies should do to the translations they provide.
Have fun,
Philippe


Thanks!
Ben


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xxxIreneN
United States
Local time: 13:37
English to Russian
+ ...
General answer Feb 21, 2006

As many of us know, only 3% of newly opened small businesses in the US survive through the 1st year. According to the US statistics, s small business should have a minimum profit margin of 37% to break even and stay affloat for the next year. This is fully applicable to translation agencies.

An agency paying 10 cents to a translator must charge at least 14 to the client. If the "agency" consists of 1 freelancer and his beloved notebook, then the margin it's not bad at all. I remember times with 12/21 ratio (15/24 up to 30 rush)respectively, in the US market for the agencies with rented office, some staff etc. Still, this is no way to make serious money so normally the budget for the translation project includes formatting/DTP and proofreading/editing. Total billed to the client is calculated based on averaged pages per hour rate, and this is where agencies make real money - by building a team, working with known people and giving work into the right hands they can save a lot on those. Well, sometimes they lose but this only happens when the agency is overloaded and attracts "unknown self-proclaimed geniouses" for thousands of words without proper checkouts in whatever way - testing, references etc., and then they are not only forced to actually pay all the budget money but add a few cents from their own pocket. Each business has it's own way of going belly-up, this would be the one for the translation agency:-).

Mark-up can be infinite if you can find a "victim" on the market - the better businessman you are, the more money you make:-).
Good luck with that!
Irene


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Lagom  Identity Verified
United Kingdom
Local time: 19:37
Swedish to English
TOPIC STARTER
Thanks Feb 21, 2006

IreneN wrote:

As many of us know, only 3% of newly opened small businesses in the US survive through the 1st year. According to the US statistics, s small business should have a minimum profit margin of 37% to break even and stay affloat for the next year. This is fully applicable to translation agencies.

An agency paying 10 cents to a translator must charge at least 14 to the client. If the "agency" consists of 1 freelancer and his beloved notebook, then the margin it's not bad at all. I remember times with 12/21 ratio (15/24 up to 30 rush)respectively, in the US market for the agencies with rented office, some staff etc. Still, this is no way to make serious money so normally the budget for the translation project includes formatting/DTP and proofreading/editing. Total billed to the client is calculated based on averaged pages per hour rate, and this is where agencies make real money - by building a team, working with known people and giving work into the right hands they can save a lot on those. Well, sometimes they lose but this only happens when the agency is overloaded and attracts "unknown self-proclaimed geniouses" for thousands of words without proper checkouts in whatever way - testing, references etc., and then they are not only forced to actually pay all the budget money but add a few cents from their own pocket. Each business has it's own way of going belly-up, this would be the one for the translation agency:-).

Mark-up can be infinite if you can find a "victim" on the market - the better businessman you are, the more money you make:-).
Good luck with that!
Irene


Thanks Irene


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Eleftherios Kritikakis  Identity Verified
United States
Local time: 13:37
Member (2003)
Greek to English
+ ...
"Standard profit margin"?? Feb 23, 2006

"Standard"??? Wow! Now I've heard it all.

a. There is NO "standard" profit margin. I think the question itself is a little funny.

b. Agencies are profitable businesses. Thus, they will: i) Charge the client as much as they can ii) Pay the translator the lowest possible

SO, it's not unusual for the translator to get $0.08/word for a translation that the agency charges $0.25/word.

Smart agencies will pay their translators more, because well paid translators ensure quality...


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Konstantin Kisin  Identity Verified
United Kingdom
Local time: 19:37
Member (2004)
Russian to English
+ ...
standard - no, common - yes Feb 24, 2006

Eleftherios Kritikakis wrote:

"Standard"??? Wow! Now I've heard it all.

a. There is NO "standard" profit margin. I think the question itself is a little funny.

b. Agencies are profitable businesses. Thus, they will: i) Charge the client as much as they can ii) Pay the translator the lowest possible

SO, it's not unusual for the translator to get $0.08/word for a translation that the agency charges $0.25/word.

Smart agencies will pay their translators more, because well paid translators ensure quality...




Just because agencies will charge a client as much as they can and pay the translator as little as they can doesn't mean to say that there isn't a common markup on the market.

The reason there IS a common markup, which is more or less the same throughout a county, is that only agencies that don't charge too much (uncompetetive) and those that don't charge too little (unprofitable) are able to survive in the long-run. That isn't to say that you may come across an agency that charges 200% on top of the translator's fee and across one that gets $20 for itself from a $1000 job (one-man agencies may sometimes do this) but the general trend is likely to be that only companies within a certain pricing segment survive.

It seems to me that somewhere around 40% is likely but it would depend on the amount of post-translation work a company provides - serious DTP is likely to be profitable for the agency.


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Patricia Lane  Identity Verified
France
Local time: 20:37
French to English
+ ...
50 is frequent Feb 24, 2006

i spoke to a well regarded agency recently that gave me the max they could bill clients to get the project and the max they ever pay translators. don't know if the info is true, but the rest of the converation was so pleasant, straightforward, cards on table that I tend to think they weren' t giving me a line. and the ratio was 50 percent...

Patricia


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xxxIreneN
United States
Local time: 13:37
English to Russian
+ ...
Not quite "standard" Feb 27, 2006

Eleftherios Kritikakis wrote:

"Standard"???


Life sets standards and gives us averages, there are no orders to set standard margins but there are facts one should not ignore when going into a business. All the statistics is out there.

Sincerely,
Irene

[Edited at 2006-02-27 20:22]


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