Tuesday, May 27, 2014
Why I Have a Minimum Charge in my Rate Structure
I was contacted some months ago by a vendor management person from one of the agencies with whom I do a reasonable volume of work. She asked me whether I would consider dropping my requirement for a minimum charge from my rate structure, since if I were to do so, I would receive many more project inquiries from them. Presumably, these project inquiries would involve small word counts, and the agency could save money on my fee if I were to bill strictly according to word count.
I felt this was a good teachable moment, so I put together an analysis of why I employ a minimum charge. I thought this might prove interesting to other members of the Science and Technology Division, so I put this in blog form to share with the group.
In my actual message I used figures in dollars. Since the same message can be conveyed by using proportional figures and not dollars, I have made a conversion to simoleans (from a favorite computer game in my past, Sim City®), where one simolean is equal to my hourly rate = my minimum charge. Other than that and a few minor editorial changes for clarity, the following is my verbatim response to this vendor management representative.
Thank you for contacting me regarding my rate structure.
Let me say first that I understand the downward pressures on rates in the industry, and how end clients somehow believe that translation prices should uniformly go downward despite the fact that costs for nearly everything else in the world go upward. I understand that to remain competitive, an agency like yours must look for ways to cut costs.
Regarding the minimum rate, I'm going to keep it in place. The reasoning is that any project requires a certain amount of "non-billable time", i.e., time not directly reflected in a per-word rate. This includes the time to receive and process the files, set up a project, do some initial research, carry out communications with the project manager, and preparing and submitting an invoice, plus any after-service needed (questions or requests for clarification from the PM). The amount of non-billable time per project is about the same. Thus, with a small job of 50–100 words, the cumulative non-billable time for each such project becomes a significant factor in my day's schedule, while the relative impact is less significant for larger jobs.
If my work day were to include eight 100-word jobs, each requiring a total time of ~1 hour including the non-billable time, I would bill 2–2.7 simoleans (depending on the language pair) for the day's work if I use a strictly per-word rate. If my work day includes 2500 words in a single project, I would bill 6.25–8.33 simoleans/day, with roughly the same amount of non-billable time as one 100-word project.
Between these two work schedule structures, if I am to run my translation work as a business rather than a hobby, it's clear that I should seek to structure my day more along the lines of the second schedule.
The minimum rate is my response to make it feasible for me to accept some smaller jobs, and obviously is only viable when the PM or end client find that rate to be acceptable.
I realize that this is probably not the response you wanted to hear, but I have taken the time to explain so that you might have a better idea about what's going on out here "in the trenches".